ir.zaobao.comir.zaobao.com/osim/pages/osim_ar2011.pdf · REVIEW PERFORMANCE OF THE GROUP Record Proﬁt in FY 2011 We have now achieved positive growth in proﬁtability for 12 consecutive

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REVIEW PERFORMANCE OF THE GROUP

Record Profit in FY 2011We have now achieved positive growth in profitability for 12 consecutive quarters.

Revenue increased by S$45 million to S$554 million. The increase in sales was driven by the launch of new innovative products.

Profit before tax reached a high of S$98 million. The better performance is due mainly to increase in sales and better margins. We are

pleased that the positive growth above is broad-based.

Profit after the tax for the year was S$69 million. This is a record in the company’s history.

Q4 sales grew to S$143 million. We launched uPhoria during the quarter and the uDivine chairs continued to perform well.

Q4 profit before tax at S$24 million and profit after tax at S$17 million were better than the corresponding quarter of last year.

Revenue by Region

For the 12 months ended 31 December 2011, we had sales growth with better product mix of massage chairs, massage sofas, foot

massagers, head massagers, neck and shoulder massagers and nutritional supplements.

Sales momentum of uDivine, uSoffa, uPapa Music Sync, uVenus, uCrown Pro, Taut, Zhi and other key products is strong in our key North

& South Asia markets.

The GNC Australia conversion to franchised outlets resulted in better profit in our Australian subsidiary but lower sales recognition (we

now book franchise sales instead of retail sales).

Region

North Asia

South Asia

America/Africa/Europe/

Middle East/Oceania

Total

S$m

318

205

31

554

S$m

298

169

42

509

%

57%

37%

6%

100%

%

59%

33%

8%

100%

FY2011 FY2010

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REVIEW OF PERFORMANCE OF THE GROUP (CASH FLOW)

Record Growth in Cash Flow EBITDA grew 42% to a record S$112 million due to better product mix and higher productivity per man per outlet.

12 months net cash flow from operating activities increased to S$99 million. Net proceeds of S$118 million were raised through

convertible bonds in July 2011.

During the year, we bought S$27 million of treasury shares (S$21 million in Q4 FY11) and paid dividends amounting to S$22 million.

In April, we acquired a 35% stake in TWG for S$31 million.

We invested S$13 million to open new outlets and upgrade existing outlets.

At 31 December 2011, the cash and cash equivalents of the Group stood at S$194 million (31 December 2010: S$73 million)

Global Network of outlets

During the year, we rationalised the number of OSIM outlets and increased profitability within existing outlets.

Total capital expenditure for the 12 months was S$13 million.

Region

North Asia

South Asia


Middle East/Oceania

Total OSIM Outlets

GNC/RichLife Outlets

Brookstone Outlets

TWG Outlets

Total

385

177

30

592

270

296

10

1,168

386

183

39

608

251

310

0

1,169

31-Dec-11 31-Dec-10

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08

10

EXECUTIVE DIRECTORS

Ron Sim, aged 53

Founder, Chairman and Chief Executive Officer

Our illustrious founder, Mr Sim has been instrumental in

building OSIM into the global brand it is today and

continues to be an inspiration to the OSIM team and other

entrepreneurs in Singapore.

A multi-awarded businessman, Mr Sim continues to lead

the OSIM group to greater milestones in realising its

vision, mission, goals and direction. Besides his corporate

role, Mr Sim continues to participate actively in public

service.

Mr Charlie Teo Chay Lee, aged 53

Executive Director and Chief Operating Officer

(HQ)

With a mastery of over 20 years experience spearheading

OSIM sales, marketing and operations, Mr Teo achieves

our business goals and handles his responsibilities with

composed execution. Crossing boundaries and leaving

footprints across Southeast Asia (Malaysia, Thailand,

Indonesia, and the Singapore headquarters), his

leadership and insight make him a key figure in OSIM. Mr

Teo joined OSIM in 1989 and was appointed to the Board

in 2000. Mr Teo is a council member of Singapore

Retailers Association.

DIRECTORS & MANAGEMENT PROFILE

Mr Peter Lee Hwai Kiat, aged 48

Executive Director, Chief Financial Officer

and Company Secretary

Mr Lee takes charge of OSIM’s financial strategy and

control, investor relations, talent management, human

resources, administration and management information

system. A certified public accountant, Mr Lee graduated

from the National University of Singapore with a

Bachelor’s degree in Accounting and obtained his MBA

from Manchester Business School in 2005. Mr Lee was

appointed to the Board in 2005, and is an Advisory

member of Spring SEEDS (Startup Enterprise Development

Scheme) and Republic Polytechnic CIE (Centre for

Innovation and Enterprise).

Mr Richard Leow Lian Soon, aged 52

Executive Director and Chief Operating Officer

(China)

With extensive experience in handling the Greater China

operations, Mr Leow effectively tackles the challenges

and looks after OSIM’s China business spanning 48 cities.

He has spent most of his time outside Singapore on the

Group’s business since he joined the Group in 1987 and

was appointed to the Board in 2000. Mr Leow is based in

Shanghai, China. His energy and dedication to OSIM is

noteworthy.

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NON- EXECUTIVE DIRECTORS

Ms Teo Sway Heong, aged 49

Non-Executive Director

During OSIM’s formative years, Ms Teo played a crucial

role as an Executive Director as well as the Group’s Head

of Administration and Human Resources. Appointed to the

Board in March 2000, Ms Teo has been a long-time valued

member of OSIM, consistently contributing to various

endeavours of the company.


INDEPENDENT DIRECTORS

Mr Sin Boon Ann, aged 53

Independent Director

A member of the Board since 1 February 2010, Mr Sin

taught at the Faculty of Law of National University of

Singapore from 1987 to 1992. Mr Sin has been the Deputy

Managing Director of the Corporate & Finance

Department at Drew & Napier LLC since 2009. He

practices mainly in the areas of Corporate Finance,

Cross-Border Investments, Mergers and Acquisitions, as

well as Banking and Finance. Mr Sin was a Member of

Parliament for Tampines GRC from 1996 to 2011. He was

also a member of the Government Parliamentary

Committee for Health and Defence and Foreign Affairs

from 2009 to 2011.

Mr Sin holds a Bachelor of Arts and Bachelor of Law

(Honours) degrees from the National University of

Singapore, and obtained his Master of Law from the

University of London.

INDEPENDENT DIRECTORS

Mr Colin Low, aged 49


Mr Tan Soo Nan, aged 63

14

MANAGEMENT TEAM

Mr Tan Kia Tong, aged 56

Ms Celine Cha, aged 44

Mr Jackson Tai, aged 60

Ms Cynthia Poa Kheng Bee, aged 58


16

18

202020

2222

24

OSIM INTERNATIONAL LTD ANNUAL REPORT 201125

CORPORATE HIGHLIGHTS

5-Year Financial Highlights 26

Corporate Governance Report 32

Corporate Information 39

OSIM Global Network 40


Turnover ($’M) Profit Before Tax ($’M)

(excluding Brookstone results)

2007 524 2007 15

2008 457 2008 22

2009 477 2009 38

2010 509 2010 68

2011 554 2011 98

Summarised Profit & Loss Accounts

Year ended 2007 2008 2009 2010 2011

$’m $’m $’m $’m $’m

Turnover 524 457 477 509 554

Profit before tax (excluding Brookstone results) 15 22 38 68 98

Net profit after tax (excluding Brookstone results) 12 15 23 50 69

Net profit after tax (including Brookstone results) 3 (99) 23 50 69

5-YEAR FINANCIAL HIGHLIGHTS


5-YEAR FINANCIAL HIGHLIGHTS (CONT’D)

Summarised Cash Flows

Year ended 2007 2008 2009 2010 2011

$’m $’m $’m $’m $’m

Operating cash flows before working capital changes 44 42 64 79 122

Net cash flows generated from operating activities 51 23 65 94 99

Net cash flows used in investing activities (8) (8) (4) (19) (78)

Net cash flows used in financing activities (43) (15) (23) (62) 97

Net (decrease)/increase in cash and cash equivalents (0) 0 38 13 118

Cash and cash equivalents at beginning of year 30 28 26 63 73

Net effect of exchange rate changes (2) (2) (1) (3) 3

Cash and cash equivalents at end of year 28 26 63 73 194

Net Cash Flows Generated from Cash and Cash Equivalents ($’M)

Operating Activities ($’M) at end of year

2007 51 2007 28

2008 23 2008 26

2009 65 2009 63

2010 94 2010 73

2011 99 2011 194



Summarised Balance Sheets

Year ended 2007 2008 2009 2010 2011

$’m $’m $’m $’m $’m

Restated

Shareholders’ equity 159 70 97 108 165

Non-controlling interests 7 6 7 2 3

166 76 104 110 168

Represented by:

Fixed assets 39 30 20 19 20

Associates and a Joint Venture 128 13 12 12 44

Goodwill on consolidation 20 20 10 10 10

Intangible assets 15 14 12 7 7

Other non-current assets 20 15 10 22 27

222 92 64 70 108

Current assets 143 122 167 169 322

Current liabilities (151) (112) (123) (127) (140)

Net current assets/(liabilities) (8) 10 44 42 182

Less: Non-current liabilities

Term loans (44) (23) (0) - -

Deferred taxation (3) (3) (3) (2) (4)

Others (1) (0) (1) (0) (118)

(48) (26) (4) (2) (122)

166 76 104 110 168

Other ratio:

Net asset value per share (cents) 30 13 15 15 22

Shareholders’ Equity ($’M) Net Asset Value Per Share (Cents)

2007 159 2007 30

2008 70 2008 13

2009 97 2009 15

2010 108 2010 15

2011 165 2011 22



Number of Outlets

Year ended 2007 2008 2009 2010 2011

North Asia 322 329 301 386 385

South Asia 291 227 194 183 177

America/Africa/Europe/Middle East/Oceania 36 36 39 39 30

OSIM 649 592 534 608 592

TWG Tea - - - - 10

RichLife / GNC 133 153 188 251 270

Brookstone 322 315 314 310 296

1,104 1,160 1,036 1,169 1,168

Number of Outlets

OSIM RichLife/GNC Brookstone

2007 649 2007 133 2007 322

2008 592 2008 153 2008 315

2009 534 2009 188 2009 314

2010 608 2010 251 2010 310

2011 592 2011 270 2011 296



Turnover by Geographical Segments

Year ended 2007 2008 2009 2010 2011

$’m $’m $’m $’m $’m

North Asia 252 225 259 298 318

South Asia 180 163 160 169 205

America/Africa/Europe/Middle East/Oceania 92 69 58 42 31

524 457 477 509 554

Turnover by Geographical Segments ($’M)

North Asia South Asia America/Africa/Europe/Middle East/Oceania

2007 252 2007 180 2007 92

2008 225 2008 163 2008 69

2009 259 2009 160 2009 58

2010 298 2010 169 2010 42

2011 318 2011 205 2011 31


RISK FACTORS

COMPANY SPECIFIC RISKS

1. Changes in consumer tastes

As with all other consumer products, sales of our products are dependent

on consumers’ demand for our products and are susceptible to changes in

consumer tastes. There is no assurance that our intensive efforts in niche

marketing, brand management and product innovation will continue to

enable us to satisfy the evolving consumer tastes.

2. Susceptibility to downturns in economic cycles

The nature of our healthy lifestyle products makes us more susceptible

to reduced demand in times of economic downturn than other kinds of

business because our products may not be considered as essential health

products.

3. Health epidemics, terror alerts, terror attacks and other acts of

violence or war may adversely affect sales.

A large part of our outlets are located at high traffic malls and airports. Any

of the above events will lead to a decrease in consumer traffic in malls and

consequently may have a material adverse effect on sales.

4. Inferior quality and unsubstantiated product performance claims by

imitators may lead to adverse media publicity and negative market

segments.

A number of our products have always attracted imitation product traders.

Their inferior quality and unsubstantiated product performance claims may

lead to adverse media publicity and negative market sentiments and may

have a material adverse effect on sales.

COMPANY SPECIFIC RISKS

5. Foreign exchange risks

While our sales are mainly denominated in the respective local currencies

in which the sales arise, namely the S$, RM, HK$, RMB, NT$, A$ and US$,

our costs of procurement of products from our contract manufacturers are

incurred mainly in US$. There is therefore an exchange transaction risk.

6. Expansion of business and franchisee network

We plan to open stores in existing and new geographical markets and

sign on new franchisees. There are risks that these initiatives may not be

successful.



OSIM International Ltd (“OSIM” or the “Company”) is committed to

ensuring a high standard of corporate governance within the Group to protect

the interests of its shareholders and maximise long term shareholders’ value.

This report is in compliance with the continuing obligations stipulated under

Chapter 7 of the Singapore Exchange Securities Trading Limited (“SGX-

ST”) Listing Manual. This report describes the Group’s corporate governance

practices and structures that were in place during the financial year ended 31

December 2011, with specific reference to the principles and guidelines of

the Code of Corporate Governance 2005 (“Code”), and where applicable, the

Listing Manual of the SGX-ST and the Singapore Companies Act.

OSIM has complied substantially with the requirements of the Code and

will continue to review its practices on an ongoing basis. It has provided an

explanation for any deviation from the Code, where applicable.

BOARD OF DIRECTORS

Principle 1: Board’s Conduct of its Affairs

The principal functions of the Board are:

1) Approving the broad policies, strategies and financial objectives of the

Company and monitoring the performance of management;

2) Overseeing the processes for evaluating the adequacy of internal controls,

risk management, financial reporting and compliance;

3) Approving the nominations of board directors and appointment of key

personnel;

4) Approving annual budgets, major funding proposals, investment and

divestment proposals; and

5) Assuming responsibility for corporate governance.

Matters which are specifically reserved to the full Board for decision are those

involving a conflict of interest for a substantial shareholder or a director, material

acquisitions and disposal of assets, corporate or financial restructuring and

share issuances, dividends and other returns to shareholders and matters which

require Board approval as specified under the Company’s interested person

transaction policy.

The Board conducts regular scheduled meetings on a quarterly basis. When

circumstances require, ad-hoc meetings are arranged. Board meetings are

conducted in Singapore and attendance by Directors are regular. There is

therefore no requirement to conduct meetings by way of a tele-conference or

video-conference. The attendance of the directors at meetings of the Board

and Board committees, as well as the frequency of such meetings held during

the financial year ended 31 December 2011, is disclosed in the “Directors’

Attendance at Board and Committee Meetings” section of this Report.

The Company worked closely with a professional corporate secretarial firm,

SAMAS Management Consultants Pte Ltd., to provide its Directors with regular

updates on the latest corporate governance and listing policies. All Directors are

also updated regularly concerning any changes in the Company policies.

The Company also has an on-going training budget for the existing Directors

to fund the Directors’ participation at industry conferences and seminars, and

to fund Directors’ attendance at any course of instruction/training programme

in connection with their duties as Directors, if such participation or attendance

is required. This budget may be utilised by each Director subject to approval by

the Chairman.

The Company has adopted a policy that Directors are also welcome to request

further explanations, briefings or informal discussions on any aspects of the

Company’s operations or business issues from the management. The Chairman

and CEO will make the necessary arrangements for the briefings, informal

discussions or explanations required by the Directors.

Principle 2: Board Composition and Balance

The Board consists of three Independent Non-Executive Directors, one Non-

Executive Director and four Executive Directors. The independence of each

Director is reviewed annually by the Nominating Committee (“NC”), which was

constituted on 27 December 2002. The NC adopts the Code’s definition of

CORPORATE GOVERNANCE REPORT


what constitutes an Independent Director in its review. As a result of the NC’s

review of the independence of the Independent Directors, the NC is of the view

that the Independent Directors of OSIM are independent and further, that no

individual or small group of individuals dominates the Board’s decision making

process. Key information regarding the Directors is given in the “Directors and

Chief Officers” section of this annual report. The NC is of the view that the

current Board comprises persons who, as a group, provide core competencies

necessary to meet the Company’s targets.

The NC is of the view that the current size of its Board of Directors is appropriate,

taking into account the nature and scope of the Company’s operations.

Principle 3: Role of Chairman and Chief Executive Officer (“CEO”)

The Company has the same Chairman and CEO, Mr Ron Sim Chye Hock and he

is an Executive Director.

OSIM believes that the Independent Directors have demonstrated high

commitment in their role as Directors and have ensured that there is a good

balance of power and authority. As the respective Independent Directors

are well known personages in their fields of expertise, the appointment of a

lead independent director for ease of contact by shareholders is therefore

unnecessary.

The Chairman and CEO is the most senior executive in the Company

and bears executive responsibility for the Company’s business, as well as

the responsibility for the workings of the Board. The Chairman and CEO

ensures that board meetings are held when necessary and sets the board

meeting agenda in consultation with the Directors. The Chairman and CEO

reviews most board papers before they are presented to the Board and

ensures that board members are provided with complete, adequate and

timely information. As a general rule, board papers are sent to Directors in

advance in order for Directors to be adequately prepared for the meeting.

Management staff who have prepared the papers, or who can provide

additional insight into the matters to be discussed, are invited to present

the paper or attend at the relevant time during the board meeting. The

Chairman assists to ensure that procedures are introduced to comply with

the Code.

Principle 6: Access to Information

In order to ensure that the Board is able to fulfill its responsibilities, management

provides the board members with regular updates of the financial position of

the Company. A quarterly report of the Company’s activities is also provided to

the Board. Analysts’ reports on the Company are forwarded to the Directors on

an on-going basis as and when received. The Directors have also been provided

with the phone numbers and email particulars of the Company’s senior

management and company secretary to facilitate independent access.

Should Directors, whether as a group or individually, need independent

professional advice, the company secretary will, upon direction by the Board,

appoint a professional advisor selected by the group or the individual, and

approved by the Chairman and CEO, to render the advice. The cost of such

professional advice will be borne by the Company.

The company secretary attends all board meetings and is responsible to ensure that

board procedures are followed. It is the company secretary’s responsibility to ensure

that the Company complies with the requirements of the Companies Act. Together

with the other management staff of OSIM, the company secretary is responsible for

compliance with all other rules and regulations which are applicable to the Company.

Please refer to the “Corporate Information” section of the annual report for the

composition of the Company’s Board of Directors, and Board Committees.

BOARD COMMITTEES

NOMINATING COMMITTEE (“NC”)

Principle 4: Board Membership

The Chairman of the NC, Mr Sin Boon Ann, is an Independent Non-Executive

Director. There are five members in the NC, three of whom are independent

non-executive Directors.

The NC’s principal functions are:

1) To identify candidates and review all nominations for the appointment or re-

appointment of members of the Board of Directors; the CEO of the Company;

CORPORATE GOVERNANCE REPORT (CONT’D)


and the members of the various Board Committees, for the purpose of proposing

such nominations to the Board for its approval;

2) To determine the criteria for identifying candidates and reviewing

nominations for the appointments referred to in paragraph 1. One of the

criteria for the appointment of a Director is the independent status of the

candidate;

3) To decide how the Board’s performance may be evaluated and propose

objective performance criteria for the Board’s approval; and

4) To assess the effectiveness of the Board as a whole, and the contribution by

each individual Director to the effectiveness of the Board.

5) To evaluate whether or not a Director is able to and has been adequately

carrying out his/her duties as Director of the company, when he/she has

multiple board representations.

6) To assess Independent Directors and confirm their independence.

New Directors are at present appointed by way of a board resolution, after the

NC approves their appointment. Such new directors must submit themselves for

re-election at the next AGM of the Company. Article 92 of the Articles requires

one third of the Board to retire by rotation at every AGM.

Principle 5: Board Performance

The NC, in considering the re-appointment of any Director, evaluates the

performance of the director. The Chairman & CEO will assess each director’s

contribution to the Board, and discuss the results with the chairman of the

NC. The assessment parameters include attendance record at meetings of the

Board and Board committees, intensity of participation at meetings, the quality

of interventions and special contributions.

The NC will evaluate the Board’s performance as a whole. The assessment

process adopted both quantitative and qualitative criteria, such as return on

equity, the success of the strategic and long-term objectives set by the Board,

and the effectiveness of the Board in monitoring management’s performance

against the goals that have been set by the Board. The NC will be working with

an external professional firm on the evaluation criteria.

AUDIT COMMITTEE (“AC”)

Principle 11: Audit Committee

Principle 12: Internal Controls

The AC comprises three members, all of whom are independent non-executive

directors. The chairman of the AC, Mr Tan Soo Nan, and the other members

of the AC bring together a wealth of many years of experience in business

management, finance and legal services. The NC is of the view that the members

of the AC have sufficient financial management expertise and experience to

discharge the AC’s functions.

The AC performs the following functions:

1) Reviews the audit plans of the internal and external auditors of the Company

and ensures the adequacy of the company’s system of accounting controls

and the co-operation given by the Company’s management to the external

and internal auditors;

2) Reviews the quarterly and annual financial statements and the auditors’

report on the annual financial statements of the Group and the Company

before their submission to the Board of Directors;

3) Reviews effectiveness of the Group and the Company’s material internal

controls, including financial, operational and compliance controls and risk

management via reviews carried out by the internal auditors;

4) Meets with the external auditors, other committees, and management in

separate executive sessions to discuss any matters that these groups believe

should be discussed privately with the AC;

5) Reviews legal and regulatory matters that may have a material impact on

the financial statements, related compliance policies and programmes and

any reports received from regulators;

6) Reviews the cost effectiveness and the independence and objectivity of the

external auditors;

7) Reviews the nature and extent of non-audit services provided by the external

auditors;



8) Recommends to the Board of Directors the external auditors to be nominated,

approves the compensation of the external auditors, and reviews the scope

and results of the audit;

9) Reports actions and minutes of the AC to the Board of Directors with such

recommendations as the AC considers appropriate; and

10) Reviews interested person transactions in accordance with the requirements

of the Singapore Exchange Securities Trading Limited (SGX-ST)’s Listing

Manual.

The AC has the express power to conduct or authorise investigations into any

matters within its terms of reference. Minutes of the AC meetings are regularly

submitted to the Board for its information and review.

The AC, having reviewed all non-audit services provided by the external auditors

to the Group, is satisfied that the nature and extent of such services would not

affect the independence of the external auditors. The AC has also conducted a

review of interested person transactions.

The AC also conducts a review to ensure that there are no improper activities of

the Company (if any).

The AC convened four meetings during the year with full attendance from all

members. The AC has also met with internal and external auditors, without the

presence of the Company’s management, at least once a year.

The Group has complied with Rules 712 and Rule 715 or 716 of the Listing

Manual issued by Singapore Exchange Securities Trading Limited in relation to

its auditors.

The Company’s external auditors, Ernst & Young LLP (“EY”), carry out, in the

course of their statutory audit annually to the extent of their scope as laid out

in their audit plan. Internal control weaknesses noted during their audit, and the

auditors’ recommendations, are reported to the AC. The Internal Audit follows

up on EY’s recommendations as part of its role in the review of the Company’s

internal control systems.

The AC has reviewed the Company’s risk assessment, and based on the IA

audit reports and management controls in place, it is satisfied that there are

adequate internal controls in the Company. The AC expects the risk assessment

process to be a continuing process.

The Company has implemented a whistle blowing policy which provides the

mechanisms for which staff of the Company may in confidence, raise concerns

about possible improprieties in matters of financial reporting or other matters.

It is the opinion of the Board that, in the absence of evidence to the contrary, the

system of internal controls maintained by the Company and in place throughout

the financial year 2011, provides reasonable, but not absolute, assurance

against material financial misstatements or loss, and includes the safeguarding

of assets, the maintenance of proper accounting records, the reliability of

financial information, compliance with appropriate legislation, regulations and

best practices, and the identification and containment of financial, business and

compliance risks. The AC notes 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 judgment in decision-making,

human error, losses, fraud or other irregularities.

Principle 13: Internal Audits

The Internal Audit (“IA”) function is currently performed by an Audit &

Risk Management (“A&RM”) team. The A&RM team reports directly to the

chairman of the AC on audit matters, and to the Chief Financial Officer

on administrative matters. The AC reviews A&RM team’s reports on a

quarterly basis. The AC also reviews and approves the annual audit plans

and resources to ensure that the A&RM team has the necessary resources

to adequately perform its functions. The A&RM team has adopted the

Standards for Professional Practice of Internal Auditing set by The Institute

of Internal Auditors.

To ensure the adequacy of the internal audit function, the AC reviews the

A&RM team’s activities on a half yearly basis. In 2002, the team, together with

PriceWaterhouseCoopers and the supervision of the AC, has completed the

development of the Minimum Acceptable Controls and Control Self-Assessment

programmes for the Company. The assessment exercises are done on an

ongoing basis.

In 2006, the Audit & Risk Management team, together with KPMG, has

developed the Enterprise Risk Management framework in the Company for

better assessment and management of the company risks.



The Company has implemented Control Self-Assessment and reviewed

Enterprise Risk Management programmes for the Group.

Remuneration Committee (“RC”)

Principle 7: Procedures for Developing Remuneration Policies

Principle 8: Level and Mix of Remuneration

Principle 9: Disclosure on Remuneration

The RC was formed on 27 December 2002 by combining the previous

Compensation Committee and OSIM Share Option Scheme Committee.

The RC consists of five Directors, of whom three are Independent Non-Executive

directors. The RC is chaired by Mr Sin Boon Ann, an Independent Non-Executive

Director.

The RC’s principal responsibilities are to:

1) Approve the structure of the compensation programme for Directors and

senior management to ensure that the programme is competitive and

sufficient to attract, retain and motivate senior management of the required

quality to run the Company successfully;

2) Review Directors’ and senior management’s compensation annually and

determine appropriate adjustments; and

3) Administer the OSIM Employee Share Option Scheme (the “OSIM ESOS”).

Any matter pertaining or pursuant to the OSIM ESOS and any dispute and

uncertainty as to the interpretation of the OSIM ESOS, any rule, regulation

or procedure thereunder or any rights under the OSIM ESOS shall be

determined by the RC.

The CEO and Executive Directors’ remuneration packages include a variable

bonus element which is performance-related.

Directors’ fees are set in accordance with a remuneration framework comprising

basic fees. Executive Directors do not receive directors’ fees. Non-Executive

Directors are paid directors’ fees, subject to shareholders’ approval at the AGM.

For competitive reasons, the Company is not disclosing each individual

Director’s remuneration. Instead, we are disclosing the band of remuneration

for the Board.

Number of Directors of the Company in remuneration bands:

2011 2010

$500,000 and above 2 1

$250,000 to $499,000 2 3

Below $250,000 4 4

8 8

The Company adopts a remuneration policy for staff comprising a fixed

component and a variable component. The fixed component is in the form

of a base salary. The variable component is in the form of a variable bonus

that is linked to the Company and individual performance. Staff appraisals are

conducted twice in a year.

Two of the Top Key Executives (excluding Directors) of the Company received

remuneration within S$250,000 to S$500,000.

No employee of the Company was an immediate family member of a

Director or the CEO and whose remuneration exceeded S$150,000 during

the financial year.

Communication with Shareholders

Principle 10: Accountability and Audit

Principle 14: Communication with Shareholders

Principle 15: Greater Shareholder Participation

The Company has adopted quarterly results reporting since the third quarter of

2001. OSIM holds a media and analysts briefing of its quarterly, half-year and

full-year results. The results are published through the SGXNET, news releases

and the Company’s website and investor relations sites Zaobao.com, AsiaOne.

com and Shareinvestor. All information on the Company’s new initiatives are

first disseminated via SGXNET followed by a news release, which is also available

on the website.



Price sensitive information is first publicly released, either before the

Company meets with any group of investors or analysts or simultaneously

with such meetings. Results and annual reports are announced or issued

within the mandatory period and are available on the Company’s website.

The Company does not practise selective disclosure. The Company

communicates with its investors on a regular basis and attends to their

queries. The Company also retained a Public & Investor Relations firm. All

shareholders of the Company receive the annual report and notice of AGM.

The notice is also advertised in newspapers and made available on the

SGXNET. At AGMs, shareholders are given the opportunity to air their views

and ask Directors or management questions regarding the Company.

The Articles allow a member of the Company to appoint one or two proxies

to attend and vote instead of the member.

Dealings in Securities

In compliance with Listing Rule 1207 sub-Rule (19) of the SGX –ST

Listing Manual, the Group issues quarterly reminders to its Directors,

officers and employees on the restrictions in dealings in listed securities

of the Group during the period commencing (i) two weeks prior to the

announcement of financial results of each of the first three quarters of

the financial year, and (ii) one month before the announcement of full

year results, and ending on the date of such announcements. Directors,

officers and employees are also reminded not to trade in listed securities

of the Group at any time while in possession of unpublished price

sensitive information and to refrain from dealing in the listed securities of

the Group at anytime while in possession of unpublished price sensitive

information and to refrain from dealing in the Group’s securities on

short-term considerations.

Interested Person Transactions

The Company has adopted an internal policy in respect of any transactions

with interested persons and has set out the procedures for review and

approval of the Company’s interested person transactions.

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

Aggregate value of all IPT during

the financial year under review

(excluding transactions < $100,000

& transactions conducted under

shareholders’ mandate pursuant to

Rule 920)

Aggregate value of all IPT

conducted under shareholders’

mandate pursuant to Rule 920

(excluding transactions < $100,000)

12 months ended 31 Dec 12 months ended 31 Dec

2011

$’000

2010

$’000

2011

$’000

2010

$’000

Sales:

OSIM (Guangzhou) Co., Ltd – – 451(1) 1,123

OSIM (Langfang) Co., Ltd – – 705(1) 2,109

FK Marketing – – 634 561

– – 1,789 3,793

(1) Transactions with OSIM (Guangzhou) Co., Ltd and OSIM (Langfang) Co., Ltd shall continue to reduce as the Company incorporates subsidiaries in PRC to cater

to logistic and distribution functions for major cities directly.




Material Contracts

No material contracts to which the Company or its subsidiary, is a party and which involve interests of the Chief Executive Officers, each Director or controlling

shareholders subsisted at the end of the financial year or have been entered into since the end of the previous financial year.

Directors’ Attendance at Board and Committee Meetings

Meeting of Board Audit Committee Nominating Committee Remuneration Committee

Total held in FY2011 11 4 1 1

Ron Sim Chye Hock 11 N.A. 1 1

Charlie Teo Chay Lee 11 N.A. 1 1

Richard Leow Lian Soon 11 N.A. N.A. N.A.

Peter Lee Hwai Kiat 11 N.A. N.A. N.A.

Teo Sway Heong 11 N.A. N.A. N.A.

Sin Boon Ann 11 4 1 1

Tan Soo Nan 11 4 1 1

Colin Low 11 4 1 1

N.A. = Not applicable

Peter Lee Hwai Kiat

Company Secretary


CORPORATE INFORMATION

BOARD OF DIRECTORS

Executive ChairmanMr Ron Sim Chye Hock

Executive DirectorsMr Charlie Teo Chay Lee

Mr Richard Leow Lian Soon

Mr Peter Lee Hwai Kiat

Non-Executive DirectorMs Teo Sway Heong

Independent Non-Executive DirectorsMr Colin Low Tock Cheong

Mr Sin Boon Ann

Mr Tan Soo Nan

CHIEF OFFICERS

ChairmanMr Ron Sim Chye Hock

Mr Charlie Teo Chay Lee

Mr Richard Leow Lian Soon


Mr Tan Kia Tong

Ms Celine Cha

AUDIT COMMITTEE

ChairmanMr Tan Soo Nan

Mr Colin Low Tock Cheong

Mr Sin Boon Ann

REMUNERATION COMMITTEE

ChairmanMr Sin Boon Ann

Mr Tan Soo Nan


Mr Ron Sim Chye Hock


NOMINATING COMMITTEE

ChairmanMr Sin Boon Ann

Mr Tan Soo Nan


Mr Ron Sim Chye Hock


REGISTERED OFFICE

65 Ubi Avenue 1

OSIM Headquarters

Singapore 408939

AUDITORS

Ernst & Young LLPPublic Accountants and Certified Public Accountants

1 Raffles Quay

North Tower, Level 18

Singapore 048583

Partner-in-charge

(Since financial year ended 31

December 2008)

Mr Philip Ling Soon Hwa

COMPANY SECRETARY


REGISTRAR AND SHARE

TRANSFER OFFICE

B.A.C.S. Private Limited

63 Cantonment Road

Singapore 089758

PRINCIPAL BANKERS

The Hongkong and Shanghai

Banking Corporation

The Royal Bank of Scotland PLC

United Overseas Bank Limited

RHB Bank Berhad


OSIM GLOBAL NETWORK

SINGAPORE

OSIM International Ltd

65 Ubi Avenue 1

OSIM Headquarters

Singapore 408939

Tel: 65-6-747-6866

Fax: 65-6-747-6769

ONI Global Pte Ltd

65 Ubi Avenue 1

OSIM Headquarters

Singapore 408939

Tel: 65-6-749-7206

Fax: 65-6-745-2623

OSIM-TWG Tea

(North Asia) Pte Ltd

65 Ubi Avenue 1

OSIM Headquarters

Singapore 408939

Tel: 65-6-747-6866

Fax: 65-6-747-6769

CHINAOSIM (CHINA) CO., LTD

Beijing Office

2F, Unit 3, Bldg.3, B Area, Zhaowei

Industry Park, No.14 Jiuxianqiao Road

Chaoyang District, Beijing 100015

China

Tel: 86-10-8456-5789

Fax: 86-10-8456-5810

OSIM (CHINA) CO., LTD

Shanghai Office

5F, No. 326 Yan Qiao Road Pudong

New Area Shanghai 200125

China

Tel: 86-21-5196-2828

Fax: 86-21-5196-2880


Guangzhou Office

4F, No.110-18, Jiangnan Da Dao

Zhong Road, Haizhu District

Guangzhou 510220

China

Tel: 86-20-8753-2421

Fax: 86-20-3400-1804


Shenzhen Office

A Block, 6F, TianJi Building, TianAn

Digital Town, Futian District

Shenzhen 518040

China

Tel: 86-755-8237-8094

Fax: 86-755-8237-8137

HONG KONG & MACAU

OSIM (HK) Co. Ltd.

Room 1812 - 22, 18/F

No. 1 Hung To Road

Kwun Tong, Kowloon, Hongkong

Tel: 852-2790-2300

Fax: 852-2342-8510

TWG Tea (HK) Company Limited

Unit 719, 7F, Block A

Corporation Park

11 On Lai Street

Shatin, Hong Kong

Tel: 852-2796-2828

MALAYSIA & BRUNEIOSIM (M) Sdn. Bhd.

No 4, Jalan 13/6, Section 13

46200 Petaling Jaya

Selangor, Malaysia

Tel: 603-7965-9898

Fax: 603-7965-9999

TAIWAN OSIM (Taiwan) Co., Ltd.

11F, No.176, Jian Yi Road

Far East Century Park

(Building G)

Chung Ho City 235, Taipei Hsien

Taiwan, R.O.C.

Tel: 886-2-8227-1589

Fax: 886-2-8227-1556

AUSTRALIA OSIM INTERNATIONAL

(AUSTRALIA) PTY LTD

Unit 8, 25 Gibbes Street

Chatswood

NSW 2067, Australia

Tel: 61-2-9411-8498

Fax: 61-2-9415-3166

BAHRAINELHAM AL HAYAT WLL

Building No. 616, Road No. 84

Block No. 413 Sehla

Kingdom of Bahrain

Bahrain

Tel/Fax: 973-17-40-811

CAMBODIAOSIM CAMBODIA

R. M C IMPEX CO., LTD.

No-37E3, Attwood Business Center

(3rd Floor)

Sangkat Teuk Thlar, Khan Russey Keo

Phnom Penh, Cambodia

Tel: 8550-12/16-853-000

CANADAXD Holdings Ltd.

160-2088 No. 5 Road

Richmond, B.C.

V6X 2T1

TEL: 1-778-297-6711

INDIA

OSIM INDIA

- A Division of PARAMOUNT

SURGIMED LTD

Okhla Industrial Area

Okhla Main Road

Okhla Phase II

New Delhi 110020

India

Tel: 91-11-4107-0000

Fax: 91-11-4161-6555

INDONESIA

PT METROX LIFESTYLE

Grand Kebon Sirih level 8th - 9th

Jl. Kebon Sirih No. 35

Jakarta Pusat 10340, Indonesia

Tel: +62-21-3911-540

Fax : +62-21-3911-541

IRANASAY AVARAN-E-ARIYA

No. 2359

Across from DAY hospital

TAVANIR STREET, VALI-E-ASR Ave

Tehran, Iran

Tel: 98-21-8820-5419

Fax: 98-21-8878-6065


OSIM GLOBAL NETWORK (CONT’D)

KUWAIT

ALI ALGHANIM & SONS (C)

Shuwaikh Industrial Area

Block #1 Building #100

PO Box 21540, Safat 13076

Kuwait

Tel: 965-223-0000

Fax: 965-483-4655

MAURITIUSWELLNESS AND FITNESS

EQUIPMENT CO. LTD

1 Koenig Lane, Phoenix

Mauritius

Tel: 230-698-7340

MONGOLIANARAN ELO CO. LTD

Naran Plaza 2nd Floor

#01 Peace Bridge

Sukhbaatar District

Ulaanbaatar – 29

Mongolia

Tel: 976-1131-5738

MYANMAROSIM MYANMAR

FMI Centre #501

380, Bogyoke Aung San Rd

Pabedan Township

Yangon, Myanmar

Tel/Fax: 951-240-289

NEW ZEALANDLC DISTRIBUTION LIMITED

PO Box 305-444

Triton Plaza

Albany, Auckland

New Zealand

Tel: 64-21-415-618

Fax: 64-9-573-5738

PAKISTANBEE ENTERPRISES LTD

59-K, Commercial Area

Phase-I, DHA, Lahore

Pakistan

Tel: 92-42-3589-7441

Fax 92-42-3572-6054

PHILIPPINES

ASIAN THERAPEUTICS INC

845 S. Laurel St. Addition Hills

Mandaluyong City

1550 Philippines

Tel: 63-2-723-6746

Fax: 63-2-721-5940

QATAR ALI BIN ALI MEDICAL

Doha, State of Qatar

Al Jelaiat St. #37

Behind Hamad Medical

Corporation

P. O. Box 75

Tel: 974- 4863-457 / 974-4868-441

Fax: 974- 4882-585

SOUTH KOREAOSIM KOREA INC

Byucksan Digital Valley, Suite 204

9 Mullae-dong 5-GA

Yeongdeungpo-gu

Seoul, 150-095

Korea

Tel: 822-6328-1022

Fax: 822-2236-4901

SRI LANKA64, Stratford Avenue

Colombo 6

Tel: 94-11-487-1127

THAILAND

OSIM (THAI) CO., LTD

No 17 Soi Pattanakarn 13

Pattanakarn Road, Kwang Suanluang

Khet Suanluang Bangkok 10250

Tel: 662-7174-648

Fax: 662-7174-650

UNITED ARAB EMIRATESRSH (MIDDLE EAST) LLC

Juma-Al-Majid (Top Floor)

Opp. Burjuman

Trade Centre Road, Bur Dubai

Dubai, U.A.E.

Tel : 971-4-396-6676

Fax : 971-4-396-6679

UNITED KINGDOM FK MARKETING LTD

The Weston Centre

Weston Road

Crewe Cheshire

CW1 6FL

Tel: 44-1270-253-377

Fax: 44-1270-253-399

VIETNAM DTL INTERNATIONAL TRADING

& SERVICE CORPORATION

24/7 Street of D3, Ward 25

Binh Thanh District

Ho Chi Minh City

Vietnam

Tel: 84-8-3512-5164

Fax: 84-8-3512-5467

USA BROOKSTONE INC

One Innovation Way

Merrimack, NH 03054, USA

Tel: 1800-846-3000

Fax : 1-603-577-8003


FINANCIAL REPORTS

Directors’ Report 43

Statement by Directors 50

Independent Auditors’ Report 51

Balance Sheets 53

Consolidated Statement

of Comprehensive Income 56

Statements of Changes in Equity 57

Consolidated Cash Flow Statement 62

Notes to the Financial Statements 64


DIRECTORS’ REPORT

for the year ended 31 December 2011

(Amounts in Singapore Dollars)

The directors are pleased to present their report to the members together with the audited consolidated financial statements of OSIM International Ltd (the

“Company”) and its subsidiaries (collectively, the “Group”) and the balance sheet and statement of changes in equity of the Company for the financial year ended

31 December 2011.

Directors

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

Ron Sim Chye Hock

Teo Sway Heong

Charlie Teo Chay Lee

Richard Leow Lian Soon

Peter Lee Hwai Kiat

Tan Soo Nan

Sin Boon Ann

Colin Low Tock Cheong

Arrangements to enable directors to acquire shares and debentures

Except as described below, neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or

one of whose object is, to enable directors of the Company to acquire benefits by means of the acquisition of shares or debentures of the Company or any other

body corporate.

Directors’ interests in shares, warrants and debentures

The following directors, who held office at the end of the financial year, had, according to the register of directors’ shareholdings required to be kept under section

164 of the Singapore Companies Act, Cap. 50, an interest in shares, warrants and share options of the Company and related corporations (other than wholly-

owned subsidiaries), as stated below:

Held by director

Other shareholdings in which the director

is deemed to have an interest

At the beginning of

financial year

At the end of

financial year

At the beginning of

financial year

At the end of

financial year

OSIM International LtdOrdinary shares

Ron Sim Chye Hock 220,757,978 334,817,815 183,820,157 176,777,719

Teo Sway Heong 5,661,547 6,692,020 398,916,588 504,903,514

Charlie Teo Chay Lee 2,296,540 2,915,162 300,000 300,000

Richard Leow Lian Soon 2,950,000 3,104,614 – –

Peter Lee Hwai Kiat 2,004,000 2,804,000 496,000 496,000

Tan Soo Nan – 10,000 – –


DIRECTORS’ REPORT (CONT’D)

Directors’ interests in shares, warrants and debentures (cont’d)

Held by director

Other shareholdings in which the director

is deemed to have an interest

At the beginning of

financial year

At the end of

financial year

At the beginning of

financial year

At the end of

financial year

OSIM International LtdWarrants to subscribe for ordinary shares

Ron Sim Chye Hock 75,410,926 – 1,030,473 –

Teo Sway Heong 1,030,473 – 75,410,926 –

Charlie Teo Chay Lee 371,122 – – –

Richard Leow Lian Soon 304,614 – – –

Peter Lee Hwai Kiat 76 – – –

At 1 January

2011

At 31 December

2011

Exercise price

$

Expiry

dateOSIM International LtdOptions to subscribe for ordinary shares

Charlie Teo Chay Lee 247,500 – 0.236 14.01.2012

198,000 198,000 0.442 26.12.2012

Richard Leow Lian Soon 40 40 0.917 15.02.2014

Peter Lee Hwai Kiat 120 120 0.917 15.02.2014

By virtue of Section 7 of the Singapore Companies Act, Cap. 50, both Ron Sim Chye Hock and Teo Sway Heong are deemed to have interests in the shares held by the Company in its subsidiaries.

There was no change in any of the above-mentioned interests in the Company between the end of the financial year and 21 January 2012.



Directors’ interests in shares, warrants and debentures (cont’d)Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, share options, warrants or debentures of the

Company, or of related corporations, either at the beginning or at the end of the financial year.

Directors’ contractual benefitsExcept as disclosed in the financial statements, since the end of the previous financial year, no director of the Company has received or become entitled to receive

a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which the director is a member, or with a

company in which the director has a substantial financial interest.

Share optionsThe OSIM Share Option Scheme (the “Option Scheme”) is administered by the Remuneration Committee comprising the following members:

Sin Boon Ann (Chairman)

Colin Low Tock Cheong

Tan Soo Nan

Ron Sim Chye Hock

Charlie Teo Chay Lee

Only confirmed full-time employees as well as directors of the Group (other than Ron Sim Chye Hock and Teo Sway Heong) who are not controlling shareholders

and their associates are eligible to receive options granted under the Option Scheme.

The aggregate number of ordinary shares subject to outstanding options granted under the Option Scheme will not at any time exceed 15% of the issued share

capital of the Company. The exercise price of the options shall be determined by the Remuneration Committee and fixed at:

(i) a price (the “Market Price”) equal to the average of the last dealt prices of the Company’s share, as determined by reference to the Financial News or other

publication published by the Singapore Exchange Securities Trading Limited (SGX-ST) for the 3 consecutive trading days immediately preceding the date

of grant, rounded up to the nearest whole cent in the event of fractional prices; or

(ii) a price which is set at a discount to the Market Price, provided that:

(a) the maximum discount shall not exceed 20% of the Market Price (or such other percentage or amount as may be determined by the Remuneration

Committee and permitted by the SGX-ST); and

(b) the shareholders of the Company in general meeting shall have authorised the making of offers and grants of options under the Option Scheme

at a discount not exceeding the maximum discount as aforesaid.



Share options (cont’d)

Where the exercise price as determined above is less than $0.05, the exercise price shall be $0.05.

The exercise period of options with exercise price at Market Price commences on the first anniversary of the date of grant while the exercise period of options

with exercise price at a discount to the Market Price commences on the second anniversary of the date of grant. Options granted to executive directors and

employees expire on the tenth anniversary of the date of grant while options granted to non-executive directors and employees of associates expire on the fifth

anniversary of the date of grant.

The movement in share options during the financial year is as follows:

Group and Company

2011 2010

At beginning of year 1,909,865 4,170,845

Forfeited/lapsed during the year (29,600) (561,840)

Exercised during the year (716,300) (1,699,140)

At the end of year 1,163,965 1,909,865

During the financial year ended 31 December 2011, 716,300 (2010: 1,699,140) ordinary shares were issued pursuant to the Option Scheme.

Details of all the options to subscribe for ordinary shares of the Company pursuant to the Option Scheme as at 31 December are as follows:

Exercise price Number of options

Expiry date 2011 2010 2011 2010 $ $

14.01.2012 0.236 0.236 565 248,065

26.12.2012 0.442 0.442 429,480 453,480

18.06.2013 0.488 0.488 800 29,600

15.02.2014 0.917 0.917 733,120 1,178,720

1,163,965 1,909,865

Since the commencement of the Option Scheme till the end of the financial year:



Share options (cont’d)

Details of the options to subscribe for ordinary shares of the Company granted to directors and employees of the Group and associates pursuant to the Option

Scheme are as follows: Aggregate options Aggregate Aggregate granted (including options options bonus issue) since exercised since lapsed since Aggregate commencement commencement commencement options of the Option of the Option of the Option outstanding Scheme to end Scheme to end Scheme to end as at end of ExerciseName of directors Exercise period of financial year of financial year of financial year financial year price ($)

Charlie Teo Chay Lee 15.01.2002 - 14.01.2011 247,500 (247,500) – – –

15.01.2003 - 14.01.2012 247,500 (247,500) – – –

27.12.2003 - 26.12.2012 198,000 – – 198,000 0.442

16.02.2005 - 15.02.2014 95,040 (95,040) – – –

Richard Leow Lian 15.01.2002 - 14.01.2011 247,500 (247,500) – – –

Soon 15.01.2003 - 14.01.2012 247,500 (247,500) – – –

27.12.2003 - 26.12.2012 198,000 (198,000) – – –

16.02.2005 - 15.02.2014 95,040 (95,000) – 40 0.917

Peter Lee Hwai Kiat 15.01.2002 - 14.01.2011 135,000 (135,000) – – –

15.01.2003 - 14.01.2012 135,000 (135,000) – – –

27.12.2003 - 26.12.2012 144,000 (144,000) – – –

16.02.2005 - 15.02.2014 69,120 (69,000) – 120 0.917

Staff/former directors 15.01.2002 - 14.01.2006 115,939 (115,939) – – –

15.01.2002 - 14.01.2011 1,649,057 (1,497,182) (151,875) – –

30.08.2002 - 29.08.2011 412,186 (348,436) (63,750) – –

15.01.2003 - 14.01.2007 132,814 (132,814) – – –

15.01.2003 - 14.01.2012 2,424,620 (2,189,680) (234,375) 565 0.236

16.08.2003 - 15.08.2012 1,048,200 (838,600) (209,600) – –

27.12.2003 - 26.12.2007 130,250 (130,250) – – –

27.12.2003 - 26.12.2012 2,720,830 (2,070,450) (418,900) 231,480 0.442

19.06.2004 - 18.06.2013 1,215,000 (955,200) (259,000) 800 0.488

16.02.2005 - 15.02.2011 93,600 (28,800) (64,800) – –

16.02.2005 - 15.02.2014 4,140,200 (1,834,060) (1,573,180) 732,960 0.917

16,141,896 (12,002,451) (2,975,480) 1,163,965



Warrants

On 28 March 2008, the Company announced a proposed renounceable non-underwritten rights issue of warrants to shareholders of the Company to subscribe for

new ordinary shares at $0.35 each in the capital of the Company. 135,459,476 warrants were allotted and issued by the Company pursuant to the Warrants Issue.

These warrants were listed and quoted on the SGX-ST on 26 June 2008.

On 20 March 2009, the Company announced 2,083,351 additional warrants to be issued and allotted to the warrant holders as a consequence of the issuance of

Rights Shares. These warrants were listed and quoted on SGX-ST on 23 March 2009.

For the year ended 31 December 2011, 86,505,887 (2010: 50,700,943) warrants were exercised and converted into ordinary shares. The remaining 335,997

warrants lapsed on 23 June 2011.

Audit committee

The Audit Committee (the “AC”) comprises three independent non-executive directors. The members of the AC are:

Tan Soo Nan (Chairman)

Sin Boon Ann (Non-executive Director)

Colin Low Tock Cheong (Non-executive Director)

The AC performs the functions in accordance with Section 201B(5) of the Singapore Companies Act, Cap. 50, including the following:

system of internal accounting controls and the assistance given by the Company’s management to the external and internal auditors;

submission to the board of directors;

via reviews carried out by the internal auditors;

discussed privately with the AC;

received from regulators;

results of the audit;



Audit committee (cont’d)

The AC, having reviewed all non-audit services provided by the external auditors to the Group, is satisfied that the nature and extent of such services would not

affect the independence of the external auditors. The AC has also conducted a review of interested person transactions.

The AC convened four meetings during the year with full attendance from all members. The AC has also met with internal and external auditors, without the

presence of the Company’s management, at least once a year.

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

Auditors

Ernst & Young LLP have expressed their willingness to accept re-appointment as auditors.

On behalf of the board of directors,

Ron Sim Chye Hock

Director

Peter Lee Hwai Kiat

Director

Singapore

24 February 2012


STATEMENT BY DIRECTORS

Pursuant to Section 201(15)

We, Ron Sim Chye Hock and Peter Lee Hwai Kiat, being two of the directors of OSIM International Ltd, do hereby state that, in the opinion of the directors,

(i) the accompanying balance sheets, consolidated statement of comprehensive income, statements of changes in equity and consolidated cash flow statement

together with notes thereto, are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2011 and

the results of the business, changes in equity and cash flows of the Group and the changes in equity of the Company for the year ended on that date; and

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

On behalf of the board of directors,

Ron Sim Chye Hock

Director

Peter Lee Hwai Kiat

Director

Singapore

24 February 2012


INDEPENDENT AUDITORS’ REPORT

to the Members of OSIM International Ltd

Report on the Financial Statements

We have audited the accompanying financial statements of OSIM International Ltd (the “Company”) and its subsidiaries (collectively, the “Group”) set out on

pages 53 to 159, which comprise the balance sheets of the Group and the Company as at 31 December 2011, the statements of changes in equity of the Group

and the Company and the consolidated statement of comprehensive income and consolidated cash flow statement of the Group for the 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.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on

Auditing. Those standards require that we comply with ethical 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 judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making

those risk assessments, the auditor considers internal control relevant to the entity’s preparation of the 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.


INDEPENDENT AUDITORS’ REPORT to the Members of OSIM International Ltd (cont’d)

Opinion

In our opinion, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn

up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group

and of the Company as at 31 December 2011 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year

ended on that date.

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.

Ernst & Young LLP

Public Accountants and

Certified Public Accountants

Singapore

24 February 2012


BALANCE SHEETS

as at 31 December 2011

Note Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Equity attributable to equity holders of the Company

Share capital 3a 63,983 72,410 63,983 72,410

Treasury shares 3b (14,277) (37,662) (14,277) (37,662)

Equity component of convertible bonds 21 3,773 – 3,773 –

Accumulated profits 144,810 98,018 56,340 45,233

Enterprise expansion funds 4 545 545 – –

Capital reserves 5 5,477 4,863 1,073 860

Warrant reserve 6 – 7,699 – 7,699

Revaluation reserve 7 2,724 2,724 – –

Premium on purchase of non-controlling interests’ (NCIs’) shares 8 (14,544) (10,171) – –

Foreign currency translation reserve 9 (27,033) (30,302) – –

165,458 108,124 110,892 88,540

Non-controlling interests 3,049 1,808 – –

Total equity 168,507 109,932 110,892 88,540

Non-current assets

Fixed assets 10 19,872 18,635 1,746 2,374

Subsidiaries 11 – – 102,159 96,381

Associates and a joint venture 12 44,344 12,592 32,681 1,321

Intangible assets 13 16,543 16,648 – –

Long-term investments 14 17,459 13,428 17,459 13,428

Long-term receivables 15 7,941 7,480 846 855

Deferred tax assets 34 2,358 1,624 – –

108,517 70,407 154,891 114,359

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


BALANCE SHEETS as at 31 December 2011 (cont’d)

Note Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Current assets

Loan to an associate 16 12,800 – 12,800 –

Stocks 17 52,303 46,735 5,726 3,604

Trade debtors 18 40,974 38,003 5,166 4,067

Other debtors, deposits and prepaid operating expenses 19 10,483 8,551 1,997 1,847

Due from subsidiaries (trade) 20 – – 2,825 2,283

Due from subsidiaries (non-trade) 20 – – 1,110 1,556

Due from related parties (trade) 20 – 467 – –

Due from related parties (non-trade) 20 – 13 – –

Due from associates (trade) 20 1,016 – 1,016 –

Due from associates (non-trade) 20 260 1 260 1

Due from a joint venture (trade) 20 – 1,828 – 1,828

Short term investments 14 10,910 – 10,910 –

Fixed deposits 22 117,351 16,793 80,778 5,000

Cash and bank balances 22 76,462 56,364 20,200 26,503

322,559 168,755 142,788 46,689



BALANCE SHEETS as at 31 December 2011 (cont’d)

Note Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Current liabilities

Trade creditors 23 21,025 19,039 5,910 7,503

Other creditors and accruals 24 57,472 55,918 21,582 20,708

Provisions 25 5,860 5,682 3,126 2,802

Due to subsidiaries (trade) 20 – – 4,039 33

Due to subsidiaries (non-trade) 20 – – 1,318 11,425

Due to related parties (non-trade) 20 38 79 – –

Due to associates (trade) 20 22,448 19,433 14,349 12,446

Due to associates (non-trade) 20 292 218 292 218

Due to a joint venture (trade) 20 – 99 – 99

Short-term bank loan 26 – 1,251 – –

Provision for income tax 17,121 10,998 2,691 3,424

Bank loan 27 – 357 – –

Obligations under finance leases – current portion 28 40 58 – –

Bills payable to banks (unsecured) 16,260 13,670 16,260 13,670

140,556 126,802 69,567 72,328

Net current assets/(liabilities) 182,003 41,953 73,221 (25,639)

Non-current liabilities

Liability component of convertible bonds 21 117,040 – 117,040 –

Obligations under finance leases – non-current portion 28 77 119 – –

Provision for pension benefits 29b 513 445 – –

Deferred tax liabilities 34 4,383 1,864 180 180

122,013 2,428 117,220 180

Net assets 168,507 109,932 110,892 88,540



CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME


Note Group

2011 2010$’000 $’000

Revenue 30 553,740 508,738Other operating income 31 13,082 15,415Changes in inventories of finished goods 5,568 (10,866)Finished goods purchased (177,533) (165,462)Employee benefits expense 29 (88,264) (79,404)Depreciation and amortisation expenses (11,472) (11,276)Other operating expenses (186,785) (186,732)Impairment loss on intangible assets 13 – (2,934)Impairment losses on quoted and unquoted equity shares 14 (8,896) –Reversal of impairment loss on unquoted equity shares 14 930 –Interest expenses 33a (3,108) (961)Interest income 33b 1,238 197Share of (losses)/profits of associates (451) 975

Profit before taxation 32 98,049 67,690Taxation 34 (28,110) (17,881)

Profit for the year 69,939 49,809

Other comprehensive income:Revaluation reserve – (2,513)Foreign currency translation 3,393 (3,824)

Other comprehensive income for the year, net of tax 3,393 (6,337)

Total comprehensive income for the year 73,332 43,472

Profit attributable to:Equity holders of the Company 69,063 50,069Non-controlling interests 876 (260)

69,939 49,809Total comprehensive income attributable to:Equity holders of the Company 72,332 43,384Non-controlling interests 1,000 88

73,332 43,472Earnings per share (cents)

Basic 35 10.18 7.38Diluted 35 9.36 6.60



STATEMENTS OF CHANGES IN EQUITY


Attributable to equity holders of the Company

2011

Group

Share

capital

(Note 3a)

Treasury

shares

(Note 3b)

Equity

component

of

convertible

bonds

(Note 21)

Accumulated

profits

Enterprise

expansion

funds

(Note 4)

Capital

reserves

(Note 5)

Warrant

reserve

(Note 6)

Revaluation

reserve

(Note 7)

Premium

on purchase

of NCI’s

shares

(Note 8)

Foreign

currency

translation

reserve

(Note 9) Total

Non-

controlling

interests

Total

equity

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

At 1 January 2011 72,410 (37,662) – 98,018 545 4,863 7,699 2,724 (10,171) (30,302) 108,124 1,808 109,932

Profit for the year – – – 69,063 – – – – – – 69,063 876 69,939

Other comprehensive

income

Foreign currency

translation – – – – – – – – – 3,269 3,269 124 3,393

Other comprehensive

income for the year – – – – – – – – – 3,269 3,269 124 3,393

Total comprehensive

income for the year – – – 69,063 – – – – – 3,269 72,332 1,000 73,332

Contributions by and

distributions to

equity holders

Transfer to capital

reserves – – – (401) – 401 – – – – – – –

Exercise of employees’

share options 602 – – – – (138) – – – – 464 – 464

Lapse of employees’

share options – – – 8 – (8) – – – – – – –

Exercise of warrants 37,941 – – – – – (7,664) – – – 30,277 – 30,277

Lapse of warrants – – – 35 – – (35) – – – – – –

Purchase of treasury

shares – (26,511) – – – – – – – – (26,511) – (26,511)

Treasury shares reissued

pursuant to purchase

of NCIs’ shares – 2,926 – – – 359 – – – – 3,285 – 3,285

Cancellation of

treasury shares (46,970) 46,970 – – – – – – – – – – –

Dividends on ordinary

shares (Note 36) – – – (21,913) – – – – – – (21,913) – (21,913)

Issue of convertible

bonds – – 3,773 – – – – – – – 3,773 – 3,773

Total contributions

by and distributions

to equity holders (8,427) 23,385 3,773 (22,271) – 614 (7,699) – – – (10,625) – (10,625)


STATEMENTS OF CHANGES IN EQUITY for the year ended 31 December 2011 (cont’d)


2011

Group (cont’d)

Share

capital

(Note 3a)

Treasury

shares

(Note 3b)

Equity

component

of

convertible

bonds

(Note 21)

Accumulated

profits

Enterprise

expansion

funds

(Note 4)

Capital

reserves

(Note 5)

Warrant

reserve

(Note 6)

Revaluation

reserve

(Note 7)

Premium

on purchase

of NCI’s

shares

(Note 8)

Foreign

currency

translation

reserve

(Note 9) Total

Non-

controlling

interests

Total

equity

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

Changes in ownership

interests in subsidiaries

that do not result in

a loss of control

Premium on purchase

of NCIs’ shares

(Note 11c) – – – – – – – – (4,373) – (4,373) (90) (4,463)

Acquisition of NCI – – – – – – – – – – – (1,207) (1,207)

Capital injection by

a NCI – – – – – – – – – – – 1,538 1,538

Total changes in

ownership interests in

subsidiaries that do

not result in a loss

of control – – – – – – – – (4,373) – (4,373) 241 (4,132)

Total transactions with

equity holders

in their capacity as

equity holders (8,427) 23,385 3,773 (22,271) – 614 (7,699) – (4,373) – (14,998) 241 (14,757)

At 31 December 2011 63,983 (14,277) 3,773 144,810 545 5,477 – 2,724 (14,544) (27,033) 165,458 3,049 168,507





2010

Group

Share

capital

(Note 3a)

Treasury

shares

(Note 3b)Accumulated

profits

Enterprise

expansion

funds

(Note 4)

Capital

reserves

(Note 5)

Warrant

reserve

(Note 6)

Revaluation

reserve

(Note 7)

Premium on

purchase of

NCI’s shares

(Note 8)

Foreign

currency

translation

reserve

(Note 9) Total

Non-

controlling

interests

Total

equity

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

At 1 January 2010 49,252 (2,289) 63,395 545 2,340 12,191 5,237 (7,862) (26,130) 96,679 7,659 104,338

Profit for the year – – 50,069 – – – – – – 50,069 (260) 49,809

Other comprehensive

income

Revaluation reserve – – – – – – (2,513) – – (2,513) – (2,513)

Foreign currency

translation – – – – – – – – (4,172) (4,172) 348 (3,824)

Other comprehensive

income for the year – – – – – – (2,513) – (4,172) (6,685) 348 (6,337)

Total comprehensive

income for the year – – 50,069 – – – (2,513) – (4,172) 43,384 88 43,472

Contributions by and

distributions to

equity holders

Transfer to capital

reserves – – (2,363) – 2,363 – – – – – – –

Exercise of employees’

share options 921 – – – (142) – – – – 779 – 779

Lapse of employees’

share options – – 178 – (178) – – – – – – –

Exercise of warrants 22,237 – – – – (4,492) – – – 17,745 – 17,745

Purchase of treasury

shares – (41,608) – – – – – – – (41,608) – (41,608)

Treasury shares reissued

pursuant to purchase

of NCI’s shares – 6,235 – – 480 – – – – 6,715 – 6,715

Dividends on ordinary

shares (Note 36) – – (13,261) – – – – – – (13,261) – (13,261)

Total contributions by

and distributions to

equity holders 23,158 (35,373) (15,446) – 2,523 (4,492) – – – (29,630) – (29,630)




2010

Group (cont’d)

Share

capital

(Note 3a)

Treasury

shares

(Note 3b)Accumulated

profits

Enterprise

expansion

funds

(Note 4)

Capital

reserves

(Note 5)

Warrant

reserve

(Note 6)

Revaluation

reserve

(Note 7)

Premium on

purchase of

NCI’s shares

(Note 8)

Foreign

currency

translation

reserve

(Note 9) Total

Non-

controlling

interests

Total

equity

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000Changes in ownership

interests in subsidiaries

that do not result in

a loss of control

Premium on purchase

of NCI’s shares

(Note 11d) – – – – – – – (2,309) – (2,309) – (2,309)

Acquisition of

NCI’s – – – – – – – – – – (5,939) (5,939)

Total changes in

ownership interests in

subsidiaries that do

not result in a loss

of control – – – – – – – (2,309) – (2,309) (5,939) (8,248)

Total transactions

with equity holders

in their capacity as

equity holders 23,158 (35,373) (15,446) – 2,523 (4,492) – (2,309) – (31,939) (5,939) (37,878)

At 31 December 2010 72,410 (37,662) 98,018 545 4,863 7,699 2,724 (10,171) (30,302) 108,124 1,808 109,932




2011

Company

Share

capital

(Note 3a)

Treasury

shares

(Note 3b)

Equity

component

of bonds

(Note 21)

Accumulated

profits

Capital

reserves

(Note 5)

Warrant

reserve

(Note 6)

Total

equity

$’000 $’000 $’000 $’000 $’000 $’000 $’000At 1 January 2011 72,410 (37,662) – 45,233 860 7,699 88,540

Profit and total comprehensive income for the year – – – 32,977 – – 32,977

Contributions by and distributions to equity holders

Exercise of employees’ share options 602 – – – (138) – 464

Lapse of employees’ share options – – – 8 (8) – –

Exercise of warrants 37,941 – – – – (7,664) 30,277

Lapse of warrants – – – 35 – (35) –

Purchase of treasury shares – (26,511) – – – – (26,511)

Treasury shares reissued pursuant to

purchase of NCI’s shares – 2,926 – – 359 – 3,285

Cancellation of treasury shares (46,970) 46,970 – – – – –

Dividends on ordinary shares (Note 36) – – – (21,913) – – (21,913)

Issue of convertible bonds – – 3,773 – – – 3,773

Total transactions with equity holders

in their capacity as equity holders (8,427) 23,385 3,773 (21,870) 213 (7,699) (10,625)

At 31 December 2011 63,983 (14,277) 3,773 56,340 1,073 – 110,892

2010

Company

Share

capital

(Note 3a)

Treasury

shares

(Note 3b)

Accumulated

profits

Capital reserves

(Note 5)

Warrant

reserve

(Note 6)

Total

equity

$’000 $’000 $’000 $’000 $’000 $’000At 1 January 2010 49,252 (2,289) 20,637 700 12,191 80,491

Profit and total comprehensive income for the year – – 37,679 – – 37,679

Contributions by and distributions to equity holders

Exercise of employees’ share options 921 – – (142) – 779

Lapse of employees’ share options – – 178 (178) – –

Exercise of warrants 22,237 – – – (4,492) 17,745

Purchase of treasury shares – (41,608) – – – (41,608)

Treasury shares reissued pursuant

to purchase of NCI’s shares – 6,235 – 480 – 6,715

Dividends on ordinary shares (Note 36) – – (13,261) – – (13,261)

Total transactions with equity holders

in their capacity as equity holders 23,158 (35,373) (13,083) 160 (4,492) (29,630)

At 31 December 2010 72,410 (37,662) 45,233 860 7,699 88,540



CONSOLIDATED CASH FLOW STATEMENT


Note Group

2011 2010

$’000 $’000Cash flows from operating activitiesProfit before taxation 98,049 67,690Adjustments for:

Share of losses /(profits) of associates 451 (975)Depreciation of fixed assets 10 10,958 10,047Gain on disposal of unquoted equity shares 31 (7) –Loss/(gain) on disposal of fixed assets 32,31 187 (4,962)Gain on disposal of properties held-for-sale 31 – (78)Fair value gain on short term investments 31 (82) –Amortisation of intangible assets 13 514 1,229Impairment loss on intangible assets 13 – 2,934Impairment losses on quoted and unquoted equity shares 14 8,896 –Reversal of impairment loss on unquoted equity shares 14 (930) –Write-off of fixed assets 32 282 2,122Write-off of intangible assets 32 23 192Interest income 33b (1,238) (197)Interest expenses 33a 3,108 961Provisions 25 1,526 1,934

Operating cash flows before working capital changes 121,737 80,897(Increase)/decrease in:

Stocks (5,568) 10,866Trade debtors (2,971) (5,433)Other debtors, deposits and prepaid operating expenses (3,878) (697)Due from related parties (trade) 467 623

Due from related parties (non-trade) 13 (9) Due from associates (non-trade) (259) 31 Due from associates (trade) (1,016) – Due from a joint venture (trade) 1,828 (1,422)(Decrease)/increase in:

Trade creditors 1,986 (2,172)Other creditors and accruals (1,554) 20,251Due to related parties (non-trade) (41) (35)Due to associates (trade) 3,015 3,088Due to associates (non-trade) 74 (88)Due to joint venture (trade) (99) (124)Bills payable to banks 2,590 4,897

Cash flows generated from operations 116,324 110,673Income tax paid, net of refund (17,089) (16,170)

Net cash flows generated from operating activities 99,235 94,503



CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 December 2011 (cont’d)

Note Group

2011 2010

$’000 $’000

Cash flows from investing activitiesPurchase of fixed assets A (12,193) (11,842)

Proceeds from disposal of fixed assets 51 6,039

Proceeds from disposal of properties held-for-sale – 3,368

Interest received 1,015 197

Loan to an associate (12,800) –

Acquisition of intangible assets 13 (449) (552)

Repayment of loan from an associate – 176

Purchase of interests in an associate (31,360) (408)

Purchase of unquoted debt securities 14 – (12,498)

Purchase of quoted equity shares and debt securitites (23,755) –

Proceed from disposal of unquoted equity shares 937 –

Net cash flows used in investing activities (78,554) (15,520)

Cash flows from financing activitiesAcquisition of non-controlling interests 11c,11d (2,386) (1,856)

Capital contribution from a non-controlling interest 1,538 –

Receipts from new bank loans 12,800 –

Repayment of bank loans (14,382) (24,890)

Repayment of finance lease obligations (57) (90)

Purchase of treasury shares 3b (26,511) (41,608)

Proceeds from exercise of warrants 30,277 17,745

Proceeds from issuance of convertible bonds (net) 118,300 –

Proceeds from exercise of employee’ share options 464 779

Dividends paid on ordinary shares 36 (21,913) (13,261)

Interest paid (594) (967)

Net cash flows generated from/(used in) financing activities 97,536 (64,148)

Net increase in cash and cash equivalents 118,217 14,835

Net effect of exchange rates changes 2,439 (4,912)

Cash and cash equivalents at beginning of year 73,157 63,234

Cash and cash equivalents at end of year (Note 22) 193,813 73,157

Note A: Fixed assetsDuring the financial year, the Group acquired fixed assets with an aggregate cost of $12,612,000 (2010: $12,574,000) of which $Nil (2010: $157,000) were

acquired by means of finance leases. Cash payments of $12,193,000 (2010: $11,842,000) were made to purchase fixed assets. The Group has provided for

additional restoration cost of $419,000 (2010: $575,000) for shop renovations.



NOTES TO THE FINANCIAL STATEMENTS

31 December 2011

1. Corporate information

OSIM International Ltd (the “Company”) is a limited liability company, which is domiciled and incorporated in Singapore and listed on the Singapore

Exchange Securities Trading Limited (“SGX-ST”).

The registered office and principal place of business of the Company is located at 65 Ubi Avenue 1, OSIM Headquarters, Singapore 408939.

The principal activities of the Company are those of marketing, distributing and franchising of healthy lifestyle products. The principal activities of its

subsidiaries are as shown in Note 11 to the financial statements.

2. Summary of significant accounting policies

2.1 Basis of preparation

The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company have been

prepared in accordance with Singapore Financial Reporting Standards (“FRS”).

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

The financial statements are presented in Singapore dollars (SGD or $) and all values in the tables are rounded to the nearest thousand ($’000) as indicated.

2.2 Changes in accounting policies

The accounting policies adopted are consistent with those of the previous financial year except in the current financial year, the Group has adopted all the new and revised standards and interpretations of FRS (‘INT FRS’) that are effective for annual periods beginning on or after 1 January 2011. The adoption of these standards and interpretations did not have any effect on the financial performance or position of the Group or the Company.


NOTES TO THE FINANCIAL STATEMENTS – 31 December 2011 (cont’d)

2. Summary of significant accounting policies (cont’d)

2.3 Standards issued but not yet effective

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

DescriptionEffective for annual periods

beginning on or after

Amendments to FRS 107 Disclosures – Transfers of Financial Assets 1 July 2011

Amendments to FRS 12 Deferred Tax: Recovery of Underlying Assets 1 January 2012

Amendments to FRS 1 Presentation of Items of other Comprehensive Income 1 July 2012

Revised FRS 19 Employee Benefits 1 January 2013

Revised FRS 27 Separate Financial Statements 1 January 2013

Revised FRS 28 Investments in Associates and Joint Ventures 1 January 2013

FRS 110 Consolidated Financial Statements 1 January 2013

FRS 111 Joint Arrangements 1 January 2013

FRS 112 Disclosure of Interests in Other Entities 1 January 2013

FRS 113 Fair Value Measurements 1 January 2013

Except for the Amendments to FRS 1, FRS 110, revised FRS 27, FRS 112 FRS 113, the directors expect that the adoption of the other standards

and interpretations above will have no material impact on the financial statements in the period of initial application. The nature of the impending

changes in accounting policy on adoption of the Amendments to FRS 1, FRS 110, revised FRS 27, FRS 112 and FRS 113 are described below.

Amendments to FRS 1 Presentation of Items of Other Comprehensive Income

The Amendments to FRS 1 Presentation of Items of Other Comprehensive Income (“OCI”) is effective for financial periods beginning on or after 1

July 2012.

The Amendments to FRS 1 changes the grouping of items presented in OCI. Items that could be reclassified to profit or loss at a future point in

time would be presented separately from items which will never be reclassified. As the Amendments only affect the presentations of items that are

already recognised in OCI, the Group does not expect any impact on its financial position or performance upon adoption of this standard.




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

FRS 110 Consolidated Financial Statements and Revised FRS 27 Separate Financial Statements

FRS 110 and the revised FRS 27 are effective for financial periods beginning on or after 1 January 2013.

FRS 110 establishes a single control model that applies to all entities (including special purpose entities). The changes introduced by FRS 110 will

require management to exercise significant judgement to determine which entities are controlled, and therefore are required to be consolidated

by the Group, compared with the requirements that were in FRS 27. Therefore, FRS110 may change which entities are consolidated within a group.

The revised FRS 27 was amended to address accounting for subsidiaries, joint ventures and associates in separate financial statements. The Group

is currently determining the impact of the changes to the concept of control and assess whether the adoption of this FRS 110 in 2013 will likely lead

to more entities being consolidated to the Group.

FRS 112 Disclosure of Interests in Other Entities

FRS 112 is effective for financial periods beginning on or after 1 January 2013.

FRS 112 is a new and comprehensive standard on disclosure requirements for all forms of interests in other entities, including joint arrangements,

associates, special purpose vehicles and other off balance sheet vehicles. FRS 112 requires an entity to disclose information that helps users of its

financial statements to evaluate the nature and risks associated with its interests in other entities and the effects of those interests on its financial

statements. The Group is currently determining the impact of the disclosure requirements. As this is a disclosure standard, it will have no impact to

the financial position and financial performance of the Group when implemented in 2013.

FRS 113 Fair Value Measurements

FRS 113 is effective for financial periods beginning on or after 1 January 2013.

FRS 113 provides a single source of guidance for all fair value measurements. FRS 113 does not change when an entity is required to use fair value,

but rather provides guidance on how to measure fair value under FRS when fair value is required or permitted by FRS. The Group does not expect the

adoption of this standard to have material impact to the financial statements.

2.4 Significant accounting estimates and judgements

The preparation of the Group’s consolidated financial statements requires management to make judgements, estimates and assumptions that

affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities at the end of each reporting

date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the

carrying amount of the asset or liability affected in the future.




2.4 Significant accounting estimates and judgements (cont’d)

a) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the end of each reporting period, that have a

significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed

below:

i) Impairment of goodwill

An impairment exists when the carrying value of an asset or cash generating unit exceeds its recoverable amount, which is the

higher of its fair value less costs to sell and its value in use. The fair value less costs to sell calculation is based on available data

from binding sales transactions in an arm’s length transaction of similar assets or observable market prices less incremental costs

for disposing the asset. The value in use calculation is based on a discounted cash flow model. The cash flows are derived from the

budget for the next five years and do not include restructuring activities that the Group is not yet committed to or significant future

investments that will enhance the asset’s performance of the cash generating unit being tested. The recoverable amount is most

sensitive to the discount rate used for the discounted cash flow model as well as the expected future cash inflows. Further details of

the key assumptions applied in the impairment assessment of goodwill are given in Note 13 to the financial statements.

ii) Taxes

Uncertainties exist with respect to the interpretation of complex tax regulations and the amount and timing of future taxable

income. Given the wide range of international business relationships and the long-term nature and complexity of existing

contractual agreements, differences arising between the actual results and the assumptions made, or future changes to such

assumptions, could necessitate future adjustments to tax provisions already recorded. The Group establishes provisions, based on

reasonable estimates, for possible consequences of audits by the tax authorities of the respective countries in which it operates.

The amount of such provisions is based on various factors, such as experience of previous tax audits and differing interpretations of

tax regulations by the taxable entity and the relevant tax authority. Such differences of interpretation may arise on a wide variety

of issues depending on the conditions prevailing in the respective Group company’s domicile.

Deferred tax assets are recognised for all unused tax losses to the extent that it is probable that taxable profit will be available

against which the losses can be utilised. Significant management judgement is required to determine the amount of deferred tax

assets that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning

strategies.

The carrying amount of the Group’s tax payables, deferred tax liabilities, deferred tax assets and income tax recoverable as at 31

December 2011 were summarised as follows:

Provision for income tax : $17,121,000 (2010: $10,998,000)

Deferred tax liabilities : $4,383,000 (2010: $1,864,000)

Deferred tax assets : $2,358,000 (2010: $1,624,000)

Income tax recoverable : $42,000 (2010: $397,000)





a) Key sources of estimation uncertainty (cont’d)

iii) Depreciation of fixed assets

Fixed assets are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of

these fixed assets, except for freehold and leasehold buildings and freehold land, to be within 1 to 10 years. The carrying amount of

the Group’s fixed assets excluding freehold and leasehold buildings at 31 December 2011 was $15,439,000 (2010: $14,080,000)

(Note 10). Changes in the expected level of usage and technological developments could impact the economic useful lives and the

residual values of these assets, therefore future depreciation charges could be revised.

iv) Provision for warranties

Provision for warranties is accrued based on the estimated costs of fulfilling the total obligation, including handling and transportation

costs. The amount of the provision for warranty is estimated based on sales volumes and past experience of the level of repairs

and return. The estimation basis is reviewed on an ongoing basis and revised where appropriate. The provision for warranties at

31 December 2011 was $2,142,000 (2010: $1,985,000) (Note 25).

v) Deferred revenue

The Group allocates the consideration received from the sale of goods to the goods sold and the points issued under one of

its subsidiary’s VIP card programme. The consideration allocated to the points issued is measured at their fair value. Fair value

is determined by applying statistical techniques, of which factors such as changing patterns in the redemption rates were

considered.

The carrying amount of deferred revenue allocated to the award credits at 31 December 2011 is $2,628,000 (2010: $1,946,000)

(Note 24).

vi) Provision for restoration costs

Provision for restoration costs is accrued based on the expected cost of restoring the leasehold premises, retail outlets and

warehouse to their state and condition as at the commencement of the lease and to the satisfaction of the landlord. The provision

for restoration costs at 31 December 2011 was $3,718,000 (2010: $3,697,000) (Note 25).

vii) Allowance for stocks obsolescence

Management makes allowance for stocks obsolescence based on historical obsolescence and slow-moving experiences.

An allowance for stocks obsolescence is made if stocks are deteriorated, damaged, obsolete or slow-moving. The allowance for

stocks obsolescence at 31 December 2011 was $4,221,000 (2010: $9,206,000).





b) Critical judgements made in applying accounting policies

The following are the judgements made by management in the process of applying the Group’s accounting policies that have the most

significant effect on the amounts recognised in the financial statements:

i) Impairment of financial assets

The Group follows the guidance of FRS 39 on determining when a financial asset is considered impaired. This determination

requires significant judgement. The Group evaluates, among other factors, the duration and extent to which the fair value of a

financial asset is less than its cost; and the financial health of and the near-term business outlook of the issuer of the instrument,

including factors such as industry performance, changes in technology and operational and financing cash flows.

ii) Impairment of non-financial assets

The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting date. Goodwill is

tested for impairment annually and at other times when such indicators exist. Other non-financial assets are tested for impairment

when there are indicators that the carrying amounts may not be recoverable.

iii) Determination of functional currency

The Group measures foreign currency transactions in the respective functional currencies of the Company and its subsidiaries. In

determining the functional currencies of the entities in the Group, judgement is required to determine the currency that mainly

influences sales prices for goods and services and of the country whose competitive forces and regulations mainly determines the

sales prices of its goods and services. The functional currencies of the entities in the Group are determined based on management’s

assessment of the economic environment in which the entities operate and the entities’ process of determining sales prices.

2.5 Functional and foreign currency The Group’s consolidated financial statements are presented in Singapore Dollars, which is also the parent company’s functional currency. Each

entity in the Group determines its own functional currency and items included in the financial statements of each entity are measured using that

functional currency.

a) Transactions and balances

Transactions in foreign currencies are measured in the respective functional currencies of the Company and its subsidiaries and are recorded

on initial recognition in the functional currencies at exchange rates approximating those ruling at the transaction dates. Monetary assets

and liabilities denominated in foreign currencies are translated at the rate of exchange ruling at the end of the reporting period. Non-

monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates

of the initial transactions.




2.5 Functional and foreign currency (cont’d)

a) Transactions and balances (cont’d)

Exchange differences arising on the settlement of monetary items or on translating monetary items at the end of the reporting period are

recognised in the profit or loss except for exchange differences arising on monetary items that form part of the Group’s net investment

in foreign subsidiaries, which are recognised initially in other comprehensive income and accumulated under foreign currency translation

reserve in the equity. The foreign currency translation reserve is reclassified from equity to profit or loss on disposal of the subsidiary.

b) Consolidated financial statements

For consolidation purpose, the assets and liabilities of foreign operations are translated into SGD at the rate of exchange ruling at the end

of the reporting period and their profit or loss are translated at the exchange rates prevailing at the date of the transactions. The exchange

differences arising on the translation are recognised in other comprehensive income. On disposal of a foreign operation, the component of

other comprehensive income relating to that particular foreign operation is recognised in profit or loss.

In the case of a partial disposal without loss of control of a subsidiary that includes a foreign operation, the proportionate share of the

cumulative amount of the exchange differences are re-attributed to non-controlling interest and are not recognised in profit or loss. For

partial disposals of associates or jointly controlled entities that are foreign operations, the proportionate share of the accumulated exchange

differences is reclassified to profit or loss.

2.6 Subsidiaries

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

The Group generally has such power when it, directly or indirectly, holds more than 50% of the issued share capital, or controls more than half of

the voting power, or controls the composition of the board of directors.

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




2.7 Basis of consolidation and business combinations

a) Basis of consolidation

Basis of consolidation from 1 January 2010

The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as at the end of the reporting

period. The financial statements of the subsidiaries used in the preparation of the consolidated financial statements are prepared for the

same reporting date as the Company. Consistent accounting policies are applied to like transactions and events in similar circumstances.

All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group transactions and dividends are

eliminated in full.

Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be

consolidated until the date that such control ceases.

Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.




2.7 Basis of consolidation and business combinations (cont’d)

a) Basis of consolidation (cont’d)

Basis of consolidation from 1 January 2010 (cont’d)

A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction. If the Group loses

control over a subsidiary, it:

- De-recognises the assets (including goodwill) and liabilities of the subsidiary at their carrying amounts at the date when control is

lost;

- De-recognises the carrying amount of any non-controlling interest;

- De-recognises the cumulative translation differences recorded in equity;

- Recognises the fair value of the consideration received;

- Recognises the fair value of any investment retained;

- Recognises any surplus or deficit in profit or loss; and

- Re-classifies the Group’s share of components previously recognised in other comprehensive income to profit or loss or retained

earnings, as appropriate.

Basis of consolidation before 1 January 2010

Certain of the above-mentioned requirements were applied on a prospective basis. The following differences, however, are carried forward

in certain instances from the previous basis of consolidation:

- Losses incurred by the Group were attributed to the non-controlling interest until the balance was reduced to nil. Any further losses

were attributed to the Group, unless the non-controlling interest had a binding obligation to cover these. Losses prior to 1 January

2010 were not reallocated between non-controlling interest and the owners of the Company.

- Upon loss of control, the Group accounted for the investment retained at its proportionate share of net asset value at the date

control was lost. The carrying value of such investments as at 1 January 2010 have not been restated.





b) Business combinations

Business combinations from 1 January 2010

Business combinations are accounted for by applying the acquisition method. Identifiable assets acquired and liabilities assumed in a

business combination are measured initially at their fair values at the acquisition date. Acquisition-related costs are recognised as expenses

in the periods in which the costs are incurred and the services are received.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation

in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. This includes the

separation of embedded derivatives in host contracts by the acquiree.

Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Subsequent changes

to the fair value of the contingent consideration which is deemed to be an asset or liability, will be recognised in accordance with FRS 39

either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified as equity, it is not be

remeasured until it is finally settled within equity.

In business combinations achieved in stages, previously held equity interests in the acquiree are remeasured to fair value at the acquisition

date and any corresponding gain or loss is recognised in profit or loss.

The Group elects for each individual business combination, whether non-controlling interest in the acquiree (if any) is recognised on the

acquisition date at fair value, or at the non-controlling interest’s proportionate share of the acquiree’s identifiable net assets.

Any excess of the sum of the fair value of the consideration transferred in the business combination, the amount of non-controlling interest

in the acquiree (if any), and the fair value of the Group’s previously held equity interest in the acquiree (if any), over the net fair value of the

acquiree’s identifiable assets and liabilities is recorded as goodwill. The accounting policy for goodwill is set out in Note 2.14(a). In instances

where the latter amount exceeds the former, the excess is recognised as gain on bargain purchase in profit or loss on the acquisition date.




b) Business combinations (cont’d)

Business combinations before 1 January 2010

In comparison to the above mentioned requirements, the following differences are applied:

Business combinations are accounted for by applying the purchase method. Transaction costs directly attributable to the acquisition formed part of

the acquisition costs. The non-controlling interest (formerly known as minority interest) was measured at the proportionate share of the acquiree’s

identifiable net assets.

Business combinations achieved in stages were accounted for as separate steps. Adjustments to those fair values relating to previously held interests

are treated as a revaluation and recognised in equity. Any additional acquired share of interest did not affect previously recognised goodwill.

When the Group acquired a business, embedded derivatives separated from the host contract by the acquiree were not reassessed on acquisition

unless the business combination results in a change in the terms of the contract that significantly modifies the cash flows that otherwise would have

been required under the contract.

Contingent consideration was recognised if, and only if, the Group had a present obligation, the economic outflow was more likely than not and a

reliable estimate was determinable. Subsequent adjustments to the contingent consideration were recognised as part of goodwill.

2.8 Transactions with non-controlling interests

Non-controlling interest represents the equity in subsidiaries not attributable, directly or indirectly, to equity holders of the Company, and are

presented separately in the consolidated statement of comprehensive income and within equity in the consolidated balance sheet, separately from

equity attributable to equity holders of the Company.

Changes in the Company owners’ ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions. In

such circumstances, the carrying amounts of the controlling and non-controlling interests are adjusted to reflect the changes in their relative interests

in the subsidiary. Any difference between the amount by which the non-controlling interest is adjusted and the fair value of the consideration paid or received

is recognised directly in equity and attributed to equity holders of the parent.




2.9 Associates

An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. The associate is equity accounted for

from the date the Group obtains significant influence until the date the Group ceases to have significant influence over the associate.

The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment in associate is carried

in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate. Goodwill relating to an associate is

included in the carrying amount of the investment and is neither amortised nor tested individually for impairment.

Any excess of the Group’s share of the net fair value of the associate’s identifiable assets, liabilities and contingent liabilities over the cost of the

investment is included as income in the determination of the results of the Group’s share of the associate in the period in which the investment is

acquired.

The profit or loss reflects the share of the results of operations of the associates. Where there has been a change recognised in other comprehensive

income by the associates, the Group recognises its share of such changes in other comprehensive income. Unrealised gains and losses resulting from

transactions between the Group and the associates are eliminated to the extent of the interest in the associates.

The Group’s share of the profit or loss of its associates is shown on the face of profit or loss, net of tax and non-controlling interests in the subsidiaries

of associates.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does not recognise further losses, unless

it has incurred obligations or made payments on behalf of the associate.

After application of the equity method, the Group determines whether it is necessary to recognise an additional impairment loss on the Group’s

investment in its associates. The Group determines at each balance sheet date whether there is any objective evidence that the investment in the

associate is impaired. If this is the case, the Group calculates the amount of impairment as the difference between the recoverable amount of the

associate and its carrying value and recognises the amount in the profit or loss.

The financial statements of the associates are prepared as of the same reporting date as the Company. Where necessary, adjustments are made to

bring the accounting policies in line with those of the Group.

Upon loss of significant influence over the associate, the Group measures and recognises any retained investment at its fair value. Any difference

between the carrying amount of the associate upon loss of significant influence and the fair value of the aggregate of the retained investment and

proceeds from disposal is recognised in profit or loss.

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




2.10 Joint venture

The Group’s investment in joint venture is accounted for using the equity method. Under the equity method, the investment in joint venture is

carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the joint venture. The joint venture is equity

accounted for from the date the Group obtains joint control until the date the Group ceases to have joint control over the joint venture.

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 incurred obligations or made payments on behalf of the joint venture.

The financial statements of the joint venture are prepared as of the same reporting date as the Company. Where necessary, adjustments are made

to bring the accounting policies in line with those of the Group.

Upon loss of joint control, the Group measures and recognises any retained investment at its fair value. Any difference between the carrying amount

of the former joint venture entity upon loss of joint venture control and the aggregate of the fair value of the retained investment and proceeds from

disposal is recognised in profit or loss.

In the Company’s separate financial statements, interest in joint venture is accounted for at cost less impairment losses.

2.11 Convertible bonds

Convertible bonds are separated into liability and equity components based on the terms of the contract.

On issuance of the convertible bonds, the fair value of the liability component is determined using a market rate for an equivalent non-convertible

bond. This amount is classified as a financial liability measured at amortised cost (net of transaction costs) until it is extinguished on the conversion

or redemption in accordance with the accounting policy set out in Note 2.20.

The remainder of the proceeds is allocated to the conversion option that is recognised and included in shareholders’ equity. Transaction costs are

deducted from equity. The carrying amount of the conversion option is not remeasured in subsequent years.

Transaction costs are apportioned between the liability and equity components of the convertible bonds based on the allocation of proceeds to the

liability and equity components when the instruments are initially recognised.




2.12 Fixed assets

All items of fixed assets are initially recorded at cost. Such cost includes the cost of replacing part of the fixed assets and borrowing costs that are

directly attributable to the acquisition, construction or production of a qualifying fixed asset. The cost of an item of fixed assets is recognised as

an asset if, and only if, it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be

measured reliably.

Subsequent to recognition, fixed assets are measured at cost less accumulated depreciation and accumulated impairment losses. When significant

parts of fixed assets are required to be replaced in intervals, the Group recognises such parts as individual assets with specific useful lives and

depreciation, respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amount of the fixed assets as a

replacement if the recognition criteria are satisfied. All other repair and maintenance costs are recognised in profit or loss as incurred.

Freehold land has an unlimited useful life and therefore is not depreciated. Depreciation is computed on a straight-line basis over the estimated

useful lives of the assets as follows:

Rate of depreciation

Freehold building 2% - 3%

Leasehold building 1.42% - 3%

Plant and machinery 10%

Computers 18% - 100%

Motor vehicles 18% - 40%

Shop renovations Shorter of lease terms or 331/3%

Furniture and fittings 10% - 331/3%

Office equipment 10% - 20%

The carrying values of fixed assets are reviewed for impairment when events or changes in circumstances indicate that the carrying value may not

be recoverable.




2.12 Fixed assets (cont’d)

The residual value, useful life and depreciation method are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

An item of fixed assets is derecognised upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on

derecognition of the asset is included in the profit or loss in the year the asset is derecognised.

2.13 Leases

The determination of whether an arrangement is, or contains a lease is based on the substance of the arrangement at inception date: whether

fulfilment of the arrangement is dependent on the use of a specific asset or assets or the arrangement conveys a right to use the asset, even if that

right is not explicity specified in an arrangement.

a) As lessee

Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of the leased item, are capitalised

at the inception of the lease at the fair value of the leased asset or, if lower, at the present value of the minimum lease payments. Any initial

direct costs are also added to the amount capitalised. Lease payments are apportioned between the finance charges and reduction of the

lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or

loss. Contingent rents, if any, are charged as expenses in the periods in which they are incurred.

Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the lease term, if there is no reasonable

certainty that the Group will obtain ownership by the end of the lease term.

Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term. The aggregate benefit

of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

b) As lessor

Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified as operating leases. Initial

direct costs incurred in negotiating an operating lease are added to the carrying amount of the leased asset and recognised over the lease

term on the same bases as rental income. The accounting policy for rental income is set out in Note 2.25(f). Contingent rents are recognised

as revenue in the period in which they are earned.




2.14 Intangible assets

a) Goodwill

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less accumulated impairment losses.

For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to each of the

Group’s cash-generating units that are expected to benefit from the synergies of the combination, irrespective of whether other assets or

liabilities of the acquiree are assigned to those units.

The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever there is an indication that

the cash-generating unit may be impaired. Impairment is determined for goodwill by assessing the recoverable amount of each cash-

generating unit (or group of cash-generating units) to which the goodwill relates. Where the recoverable amount of the cash-generating

unit is less than the carrying amount, an impairment loss is recognised in the profit or loss. Impairment losses recognised for goodwill are

not reversed in subsequent periods.

Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit is disposed of, the goodwill

associated with the operation disposed of is included in the carrying amount of the operation when determining the gain or loss on disposal

of the operation. Goodwill disposed of in this circumstance is measured based on the relative fair values of the operations disposed of and

the portion of the cash-generating unit retained.

Goodwill and fair value adjustments arising on the acquisition of foreign operation on or after 1 January 2005 are treated as assets and

liabilities of the foreign operations and are recorded in the functional currency of the foreign operations and translated in accordance with

the accounting policy set out in Note 2.5.

Goodwill and fair value adjustments which arose on acquisitions of foreign operation before 1 January 2005 are deemed to be assets and

liabilities of the Company and are recorded in SGD at the rates prevailing at the date of acquisition.

b) Other intangible assets

Intangible assets acquired separately are measured initially at cost. The cost of intangible assets acquired in a business combination is

their fair value as at the date of acquisition. Following initial acquisition, intangible assets are measured at cost less any accumulated

amortisation and accumulated impairment losses.

The useful lives of intangible assets are assessed as either finite or infinite.

Intangible assets with finite useful lives are amortised over the estimated useful lives and assessed for impairment whenever there is an

indication that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each

financial year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the

asset is accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.

The amortisation expense on intangible assets with finite lives is recognised in the profit or loss in the expense category consistent with the

function of the intangible asset.




2.14 Intangible assets (cont’d)

b) Other intangible assets (cont’d)

Intangible assets with indefinite useful lives or not yet available for use are tested for impairment annually, or more frequently if the events

and circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such intangible

assets are not amortised. The useful life of an intangible asset with an indefinite useful life is reviewed annually to determine whether the

useful life assessment continues to be supportable. If not, the change in useful life from indefinite to finite is made on a prospective basis.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the

carrying amount of the asset and are recognised in the profit or loss when the asset is derecognised.

The following classes of intangible assets are acquired by the Group through the acquisition of subsidiaries:

i) Franchise rights and trademarks

Franchise rights are paid to the franchisor, General Nutrition International, Inc. (“GNC”), in respect of every retail store opened by

the Group and entitle the Group the right to operate each retail store using the franchisor’s trademarks, trade names and operating

system. Franchise rights are amortised over 20 years on a straight-line basis.

Trademark registration costs relate to fees paid to register the “L.A.C” trademark and are amortised over 20 years on a straight-line

basis.

ii) Distribution rights

Distribution rights relate to fees paid to GNC for the exclusive rights to distribute GNC products to other retailers, distributors and

merchants in Singapore and rights granted to third parties to distribute certain products exclusively in a specified territory for a

limited period of time. The distribution fees paid to GNC are amortised over 20 years on a straight-line basis, and the third party

distribution rights are amortised over the agreement period ranging from 1 to 4 years.

iii) Product development costs

Product development costs arising from development expenditure on a product is recognised as an intangible asset when the

Group can demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its

intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the availability

of resources to complete and the ability to measure reliably the expenditure during the development. Product development costs

have a finite useful life and are amortised over the period of expected sales from the related product ranging from 2 to 3 years on

a straight line basis.




2.15 Impairment of non-financial assets

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when

annual impairment testing for an asset (i.e. an intangible asset with an indefinite useful life, an intangible asset not yet available for use, or goodwill

acquired in a business combination) is required, the Group makes an estimate of the asset’s recoverable amounts.

An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell and its value in use and is determined

for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or groups of assets.

Where the carrying amount of an asset or cash-generating unit exceeds its recoverable amount, the asset is considered impaired and is written down

to its recoverable amount. In assessing value in use, the estimated future cash flows expected to be generated by the asset are discounted to their

present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

In determining fair value less costs to sell, recent market transactions are taken into account, if available. If no such transactions are identified. an

appropriate valuation model is used. These calculations are corroborated by valuation multiples quoted share prices for publicly traded subsidiaries

or other available fair value indicators.

The Group bases its impairment calculation on detailed budgets and forecast calculations which are prepared separately for each of the Group’s

cash-generating units to which the individual assets are allocated. These budgets and forecast calculations are generally covering a period of five

years. For longer periods, a long-term growth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations are recognised in profit or loss in those expense categories consistent with the function of the impaired

asset, except for assets that are previously revalued where the revaluation was taken to other comprehensive income. In this case the impairment is

also recognised in other comprehensive income up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised

impairment losses recognised may no longer exist or may have decreased. If such indication exists, the Group estimates the asset’s or cash-generating

unit’s recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine

the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to

its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no

impairment loss been recognised previously. Such reversal is recognised in the profit or loss unless the asset is carried at revalued amount, in which

case the reversal is treated as a revaluation increase.

2.16 Financial assets

Initial recognition and measurement

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

Group determines the classification of its financial assets at initial recognition.

When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets not at fair value through profit or

loss, directly attributable transaction costs.




2.16 Financial assets (cont’d)

Subsequent measurement

The subsequent measurement of financial assets depends on their classification as follows:

a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financial assets designated upon initial

recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired for the purpose of

selling or repurchasing in the near term. This category includes derivative financial instruments entered into by the Group that are not

designated as hedging instruments in hedge relationships as defined by FRS 39. Derivatives, including separated embedded derivatives are

also classified as held for trading unless they are designated as effective hedging instruments.

Subsequent to initial recognition, financial assets at fair value through profit or loss are measured at fair value. Any gains or losses arising

from changes in fair value of the financial assets are recognised in profit or loss. Net gains or net losses on financial assets at fair value

through profit or loss include exchange differences, interest and dividend income.

Derivatives embedded in host contracts are accounted for as separate derivatives and recorded at fair value if their economic characteristics

and risks are not closely related to those of the host contracts and the host contracts are not held for trading or designated at fair value

through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in profit or loss.

Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise

be required.

b) Loan and receivables

Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market are classified as loans and

receivables. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method,

less impairment. Gains and losses are recognised in profit or loss when the loan and receivables are derecognised or impaired, as well as

through the amortisation process.

c) Available-for-sale financial assets

The Group classifies its long-term investments as available-for-sale financial assets.

Available-for-sale financial assets include equity and debt securities. Equity investments classified as available-for-sale are those which are

neither classified as held for trading nor designated at fair value through profit or loss. Debt securities in this category are those which are

intended to be held for an indefinite period of time and which may be sold in response to needs for liquidity or in response to changes in

the market conditions.




2.16 Financial assets (cont’d)

c) Available-for-sale financial assets (cont’d)

After initial recognition, available-for-sale financial assets are subsequently measured at fair value. Any gains or losses from changes in fair

value of the financial asset are recognised in other comprehensive income, except that impairment losses, foreign exchange gains and

losses on monetary instruments and interest calculated using the effective interest method are recognised in profit or loss. The cumulative

gain or loss previously recognised in other comprehensive income is reclassified from equity to profit or loss as a reclassification adjustment

when the financial asset is derecognised.

Investments in equity instruments whose fair value cannot be reliably measured are measured at cost less impairment losses.

Derecognition

A financial asset is derecognised where the contractual rights to receive cash flows from the asset have expired. On derecognition of a financial asset

in its entirety, the difference between the carrying amount and the sum of the consideration received and any cumulative gain or loss that had been

recognised in other comprehensive income is recognised in profit or loss.

All regular way purchases and sales of financial assets are recognised on the trade date (i.e. the date that the Group commits to purchase the asset).

Regular way purchases or sales are purchases or sales of financial assets that require delivery of assets within the period generally established by

regulation or convention in the marketplace concerned.

2.17 Impairment of financial assets

The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or group of financial assets is

impaired.

a) Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Group first assesses whether objective evidence of impairment exists individually for

financial assets that are individually significant, or collectively for financial assets that are not individually significant. If the Group determines

that no objective evidence of impairment exists for an individually assessed financial asset, whether significant or not, it includes the asset in

a group of financial assets with similar credit risk characteristics and collectively assesses them for impairment. Assets that are individually

assessed for impairment and for which an impairment loss is, or continues to be recognised are not included in a collective assessment of

impairment.

If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been incurred, the amount of the loss

is measured as the difference between the asset’s carrying amount and the present value of estimate future cash flows discounted at the

financial asset’s original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account. The

impairment loss is recognised in profit or loss.




2.17 Impairment of financial assets (cont’d)

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

When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly or if an amount was charged to

the allowance account, the amount charged to the allowance account is written off against the carrying value of the financial asset.

To determine whether there is objective evidence that an impairment loss on financial assets has been incurred, the Group considers factors

such as the probability of insolvency or significant financial difficulties of the debtor and default or significant delay in payments.

If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring

after the impairment was recognised, the previously recognised impairment loss is reversed. Any subsequent reversal of an impairment loss

is recognised in the profit or loss, to the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.

b) Financial assets carried at cost

If there is objective evidence that an impairment loss on a financial asset carried at cost has been incurred, the amount of the loss is

measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the

current market rate of return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.

c) Available-for-sale financial assets

In the case of equity investments classified as available-for-sale, objective evidence of impairment includes (i) significant financial difficulty

of the issuer or obligor, (ii) information about significant changes with an adverse effect that have taken place in the technological, market,

economic or legal environment in which the issuer operates, and indicates that the cost of the investment in equity instrument may not

be recovered; and (iii) a significant or prolonged decline in the fair value of the investment below its costs. ‘Significant’ is to be evaluated

against the original cost of the investment and ‘prolonged’ against the period in which the fair value has been below its original cost.

If an available-for-sale financial asset is impaired, an amount comprising the difference between its acquisition cost (net of any principal

repayment and amortisation) and its current fair value, less any impairment loss previously recognised in profit or loss, is transferred from

other comprehensive income and recognised in profit or loss. Reversals of impairment losses in respect of equity instruments are not

recognised in profit or loss; increase in their fair value after impairment are recognised directly in other comprehensive income.




2.17 Impairment of financial assets (cont’d)

c) Available-for-sale financial assets (cont’d)

In the case of debt instruments classified as available-for-sale, impairment is assessed based on the same criteria as financial assets

carried at amortised cost. However, the amount recorded for impairment is the cumulative loss measured as the difference between

the amortised cost and the current fair value, less any impairment loss on that investment previously recognised in profit or loss. If, in a

subsequent year, the fair value of a debt instrument increases and the increases can be objectively related to an event occurring after the

impairment loss was recognised in profit or loss, the impairment loss is reversed in profit or loss.

2.18 Stocks

Stocks are valued at the lower of cost (assigned on a weighted average basis) and net realisable value. Costs include expenses incurred in bringing

the stocks to their present location and condition.

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

Allowance is made for deteriorated, damaged, obsolete and slow-moving stocks.

2.19 Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits, and short-term, highly liquid investments that are readily convertible to known

amounts of cash and which are subject to an insignificant risk of changes in values. These also include bank overdrafts that form an integral part

of the Group’s cash management.

2.20 Financial liabilities

Initial recognition and measurement

Financial liabilities include trade and other amounts payable, which are normally settled on 30-90 day terms, and payables to subsidiaries, associates,

related parties and interest-bearing loans and borrowings. Financial liabilities are recognised when, and only when the Group becomes a party to the

contractual provisions of the financial instrument. The Group determines the classification of its financial liabilities at initial recognition.

All financial liabilities are recognised initially at fair value plus the case of other financial liabilities not at fair value through profit or loss, directly

attributable transaction costs.

Subsequent measurement

The measurement of financial liabilities depends on their classification as follows:




2.20 Financial liabilities (cont’d)

Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial liabilities designated upon initial recognition

at fair value through profit or loss. Financial liabilities are classified as held for trading if they are acquired for the purpose of selling in the near term. This

category includes derivative financial instruments entered into by the Group that are not designated as hedging instruments in hedge relationships.

Separated embedded derivatives are also classified as held for trading unless they are designated as effective hedging instruments.

Subsequent to initial recognition, financial liabilities at fair value through profit or loss are measured at fair value. Any gains or losses arising from changes

in fair value of the financial liabilities are recognised in profit or loss.

The Group has not designated any financial liabilities upon initial recognition at fair value through profit or loss.

Other financial liabilities

After initial recognition, other financial liabilities are subsequently measured at amortised cost using the effective interest rate method. Gains and

losses are recognised in profit or loss when the liabilities are derecognised, and through the amortisation process.

Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial liability

is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such

an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the

respective carrying amounts is recognised in profit or loss.

2.21 Financial guarantee

A financial guarantee contract is a contract that requires the issuer to make specified payments to reimburse the holder for a loss it incurs because

a specified debtor fails to make payment when due in accordance with the terms of a debt instrument.

Financial guarantees are recognised initially as a liability at fair value, adjusted for transaction costs that are directly attributable to the issuance of

the guarantee. Subsequent to initial recognition, financial guarantees are recognised as income in profit or loss over the period of the guarantee. If

it is probable that the liability will be higher than the amount initially recognised less amortisation, the liability is recorded at the higher amount with

the difference charged to the profit or loss.

2.22 Borrowing costs

Borrowing costs are capitalised as part of a qualifying asset if they are directly attributable to the acquisition, construction or production of a

qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its intended use or sale are in progress

and the expenditures and borrowing costs are incurred. Borrowing costs are capitalised until the assets are substantially completed for their intended

use or sale. All other borrowing costs are expensed in the period they occur. Borrowing costs consist of interest and other costs that an entity incurs

in connection with the borrowing of funds.




2.23 Provisions

Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event. It is probable that an outflow of

resources embodying economic benefits will be required to settle the obligation and the amount of the obligation can be estimated reliably.

Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no longer probable that an outflow of

resources embodying economic benefits will be required to settle the obligation, the provision is reversed. If the effect of the time value of money is

material, provisions are discounted using a current pre-tax rate that reflects, where appropriate, the risks specific to the liability. Where discounting

is used, the increase in the provision due to the passage of time is recognised as finance costs.

a) Provision for warranties

The Group and the Company provides free repair services and free replacement of major components of its products for a period of one

to two years after sales.

The costs of the warranty obligation under which the Group and the Company agree to remedy defects in its products are accrued at

the time the related sales are recognised. Provision for warranty is accrued based on the estimated costs of fulfilling the total obligation,

including handling and transportation costs. The costs are estimated by management based on historical experience. The assumptions

used to estimate warranty accruals are reviewed periodically in light of actual experience.

b) Provision for restoration cost

In accordance with the lease agreements, the Group and the Company has an obligation to restore the retail outlets, warehouses and

leasehold properties to their state and condition as at the expiry of the lease and to the satisfaction of the landlord. A provision is recognised

at the balance sheet date for expected restoration costs based on the past experience of sale outlets and warehouses closure.

2.24 Employee benefits

a) Defined contribution plans

The Group participates in the national pension schemes as defined by the laws of the countries in which it has operations. In particular,

the Singapore companies in the Group make contributions to the Central Provident Fund scheme in Singapore, a defined contribution

pension scheme. Contributions to national pension schemes are recognised as an expense in the period in which the related service is

performed.

b) Employee leave entitlement

Employee entitlements to annual leave are recognised as a liability when they accrue to employees. The estimated liability for leave is

recognised for services rendered by employees up to balance sheet date.




2.24 Employee benefits (cont’d)

c) Defined benefit plans

The cost of providing benefits under defined benefit plan is determined separately for each plan using the projected unit credit method.

Actuarial gains and losses are recognised as income or expense when the net cumulative unrecognised actuarial gains or losses for each

individual plan at the end of the previous reporting period exceed 10% of the higher of the defined benefit obligation and the fair value

of the plan assets at that date. These gains or losses are recognised over the expected average remaining working lives of the employees

participating in the plans.

The past service costs are recognised as an expense on a straight-line basis over the average period until the benefits become vested. If

the benefits are already vested, immediately following the introduction of, or changes to, a pension plan, past service costs are recognised

immediately.

The defined benefit asset or liability is the aggregate of the present value of the defined benefit obligation (derived using a discount

rate based on high quality corporate bonds) at the end of the reporting period plus any actuarial gains (less any actuarial losses) not

recognised, reduced by past service costs not yet recognised and the fair value of plan assets out of which the obligations are to be settled

directly. If such aggregate is negative, the asset is measured at the lower of such aggregate or the aggregate of cumulative unrecognised

actuarial losses and past service costs and the present value of any economic benefits available in the form of refunds from the plan or

reductions in the future contributions to the plan.

If the asset is measured at the aggregate of cumulative unrecognised net actuarial losses and past service costs and the present value of

any economic benefits available in the form of refunds from the plan or reductions in the future contributions to the plan:

- Net actuarial losses of the current period and past service costs of the current period are recognised immediately to the extent

that they exceed any reduction in the present value of those economic benefits. If there is no change or an increase in the present

value of the economic benefits, the entire net actuarial losses of the current period and past service costs of the current period are

recognised immediately.

- Net actuarial gains of the current period after the deduction of past service costs of the current period exceeding any increase in

the present value of the economic benefits stated above are recognised immediately. If there is no change or a decrease in the

present value of the economic benefits, the entire net actuarial gains of the current period after the deduction of past service

costs of the current period are recognised immediately.

Plan assets are assets that are held by a long-term employee benefit fund or qualifying insurance policies. Plan assets are not available to

the creditors of the Group, nor can they be paid directly to the Group. Fair value of plan assets is based on market price information and

in the case of quoted securities, it is based on the published bid price.

The Group’s right to be reimbursed of some or all of the expenditure required to settle a defined benefit obligation is recognised as a

separate asset at fair value when and only when reimbursement is virtually certain.




2.24 Employee benefits (cont’d)

d) Employee share option plans

Employees of the Group receive remuneration in the form of share options as consideration for services rendered (‘equity-settled

transactions’).

The cost of equity-settled share-based payment transactions with employees for awards granted after 22 November 2002 is measured

by reference to the fair value of the share options at the date on which the share options are granted, which takes into account market

conditions and non-vesting conditions.

The cost of equity-settled transactions is recognised in profit or loss with a corresponding increase in the employee share option reserve,

over the vesting period. The cumulative expenses recognised for equity-settled transactions at each reporting date until the vesting date

reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity instruments that will

ultimately vest. The charge or credit to profit or loss for a period represents the movement in cumulative expense recognised as at the

beginning and end of that period and is recognised in the employee benefits expense.

No expense is recognised for awards that does not ultimately vest, except for awards where vesting is conditional upon a market condition

or non-vestiing condition, which are treated as vested irrespective of whether or not the market condition is satisfied, provided that all

other performance conditions are satisfied. In the case where the share option does not vest as the result of a failure to meet a non-vesting

condition that is within the control of the Group or the employee, it is accounted for as a cancellation. In such case, the amount of the

compensation cost that otherwise would be recognised over the remainder of the vesting period is recognised immediately in profit or

loss upon cancellation. The employee share option reserve is transferred to retained earnings upon expiry of the share options. When the

options are exercised, the employee share option reserve is transferred to share capital if new shares are issued, or to treasury shares if the

options are satisfied by the reissuance of treasury shares.




2.25 Revenue

Revenue is recognised to the extent that it is probable the economic benefits will flow to the Group and the revenue can be reliably measured,

regardless of when the payment is made. Revenue is measured at the fair value of consideration received or receivable, taking into account

contractually defined terms of payment and excluding taxes or duty. The Group assesses its revenue arrangements to determine if it is acting as

principal or agent. The Group has concluded that it is acting as a principal in all of its revenue arrangements. The following specific recognition

criteria must also be met before revenue is recognised:

a) Sale of goods

Revenue is recognised upon the transfer of significant risk and rewards of ownership of the goods to the customer, usually on the delivery

of the goods. Revenue is not recognised to the extent where there are significant uncertainties regarding recovery of the consideration

due, associated costs or the possible return of goods.

b) Franchise fees

Franchise fees are recognised upon the execution of the Master Franchise Agreements unless collectibility is in doubt.

c) Royalty income

Royalty income is recognised upon the sale of goods by franchise outlets and the amount is determined based on a certain percentage of

net sales in accordance with the terms of the Master Franchise Agreements unless collectibility is in doubt.

d) Interest income

Interest income is recognised as interest accrues (using the effective interest method) unless collectibility is in doubt.

e) Dividend income

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

f) Rental income

Rental income arising from operating leases on investment properties is accounted for on a straight-line basis over the lease terms. The

aggregate costs of incentives provided to lessees are recognised as a reduction of rental income over the lease terms on a straight-line

basis.




2.26 Taxes

a) Current income tax

Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from

or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted or substantively

enacted by end of the reporting period, in the countries where the Group operates and generates taxable income.

Current income taxes are recognised in profit or loss except that tax relating to items recognised outside profit or loss, either in other

comprehensive income or directly in equity. Management periodically evaluates positions taken in the tax returns with respect to situations

in which applicable tax regulations are subject to interpretation and establishes provisions where appropriate.

b) Deferred tax

Deferred income tax is provided using the liability method on temporary differences at the balance sheet date between the tax bases of

assets and liabilities and their carrying amounts for financial reporting purposes.

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

- where the deferred income tax liability arises from the initial recognition of goodwill or of an asset or liability in a transaction that is

not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and

- in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint venture,

where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary differences

will not reverse in the foreseeable future.

Deferred income tax assets are recognised for all deductible temporary differences, carry forward of unused tax credits and unused tax

losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences, and the

carry forward of unused tax credits and unused tax losses can be utilised except:

- where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of an asset

or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting

profit nor taxable profit or loss; and

- in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint venture,

deferred tax assets are recognised only to the extent that it is probable that the temporary differences will reverse in the foreseeable

future and taxable profit will be available against which the temporary differences can be utilised.




2.26 Taxes (cont’d)

b) Deferred tax (cont’d)

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer

probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred

tax assets are reassessed at the end of each reporting period and are recognised to the extent that it has become probable that future

taxable profit will allow the deferred tax asset to be recovered.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss, is recognised outside profit or loss.

Deferred tax items are recognised in correlation to the underlying transaction either in other comprehensive income or directly in equity

and deferred tax arising from a business combination is adjusted against goodwill on acquisition.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current income tax assets against

current income tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separate recognition at the date, would be

recognised subsequently if new information about facts and circumstances changed. The adjustment would either be treated as a

reduction to goodwill (as long as it does not exceed goodwill) if it incurred during the measurement period or in profit or loss.

c) Sales tax

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

- Where the sales tax incurred on a purchase of assets or services is not recoverable from the taxation authority, in which case the

sales tax is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and

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

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

balance sheet.

2.27 Segments

For management purposes, the Group is organised on a world-wide basis into two major operating businesses. The divisions are the basis on which

the Group reports its primary segment information.

Segment revenue, expenses and results include transfers between business segments and between geographical segments. Such transfers take place

at terms agreed between the parties during the financial year.

2.28 Share capital and share issuance expenses

Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly attributable to the issuance of

ordinary shares are deducted against share capital.



Summary of significant accounting policies (cont’d)

2.29 Government grants

Grants and subsidies from government are recognised at their fair value where there is a reasonable assurance that the grant/subsidy will be

received and all attaching conditions will be complied with. When the grant or subsidy relates to an expense item, it is recognised as income over

the periods necessary to match them on a systematic basis to the costs which it is intended to compensate. Where the grant relates to an asset,

the fair value is credited to a deferred income account and is released to profit or loss over the expected useful life of the relevant asset by equal

annual installments.

2.30 Cumulative preference shares

Cumulative preference shares that exhibit the characteristics of a liability are recognised as a liability and accordingly, the corresponding dividends

on these preference shares are charged as an interest expense in profit or loss.

Preference shares of a joint venture of the Group that have the potential to become redeemable upon occurrence of certain events as stipulated in

the partnership agreement are recorded as a liability.

2.31 Contingencies

A contingent liability is:

(a) a possible obligation that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence of one

or more uncertain future events not wholly within the control of the Group; or

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

(i) It is not probable that an outflow of resources embodying economic benefits will be required to settle the obligation; or

(ii) The amount of the obligation cannot be measured with sufficient reliability.

A contingent asset is a possible asset that arises from past events and whose existence will be confirmed only by the occurrence or non-occurrence

of one or more uncertain future events not wholly within the control of the Group.

Contingent liabilities and assets are not recognised on the balance sheet of the Group, except for contingent liabilities assumed in a business

combination that are present obligations and which the fair values can be reliably determined.

2.32 Treasury shares

The Group’s own equity instruments, which are reacquired (treasury shares), are recognised at cost and deducted from equity. No gain or loss is

recognised in profit or loss on the purchase, sale, issue or cancellation of the Group’s own equity instruments. Any difference between the carrying

amount of treasury shares and the consideration received, if reissued, is recognised directly in equity. Voting rights related to treasury shares are

nullified for the group and no dividends allocated to them respectively.



Summary of significant accounting policies (cont’d)

2.33 Related parties

A related party is defined as follows:

(a) A person or a close member of that person’s family is related to the Group and Company if that person:

(i) Has control or joint control over the Company;

(ii) Has significant influence over the Company; or

(iii) Is a member of the key management personnel of the Group or Company or of a parent of the Company.

(b) An entity is related to the Group and the Company if any of the following conditions applies:

(i) The entity and the Company are members of the same group (which means that each parent, subsidiary and fellow subsidiary

is related to the others)

(ii) One entity is an associate or joint venture of the other entity (or an associate or joint venture of a member of a group of which

the other entity is a member)

(iii) Both entities are joint ventures of the same third party

(iv) One entity is a joint venture of a third entity and the other entity is an associate of the third entity

(v) The entity is a post-employment benefit plan for the benefit of employees of either the Company or an entity related to

the Company. If the Company is itself such a plan, the sponsoring employers are also related to the Company;

(vi) The entity is controlled or jointly controlled by a person identified in (a)

(vii) A person identified in (a) (i) has significant influence over the entity or is a member of the key management personnel of the entity

(or of a parent of the entity)



3. Share capital and treasury shares

a) Share capital

Group and Company

2011 2010

$’000 $’000Issued and fully paid:

At beginning of year 714,916,514 (2010: 662,516,431) ordinary shares 72,410 49,252

Exercise of options under the OSIM Share Option Scheme :

Nil (2010: 450,000) ordinary shares at $0.178 per share – 80

247,500 (2010: 337,500) ordinary shares at $0.236 per share 58 80

Nil (2010: 143,000) ordinary shares at $0.506 per share – 72




Issuance of 86,505,887 (2010: 50,700,943) ordinary shares pursuant to exercise of warrants 37,941 22,237

Cancellation of 50,000,000 (2010: Nil) treasury shares (46,970) –

At end of year 752,138,701 (2010: 714,916,514) ordinary shares 63,983 72,410

The holders of ordinary shares (except treasury shares) are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one

vote per share without restriction. The ordinary shares have no par value.

The Company has an employee share option scheme (Note 29) under which options to subscribe for the Company’s ordinary shares have been granted to

employees.



3. Share capital and treasury shares (cont’d)

b) Treasury shares

Group and Company

2011 2010

$’000 $’000Issued and fully paid:

At beginning of year

42,543,000 (31 December 2010: 4,538,000) ordinary shares (37,662) (2,289)

Acquired during the financial year

24,854,000 (31 December 2010: 46,505,000) ordinary shares (26,511) (41,608)

Treasury shares reissued pursuant to purchase of

NCIs’ shares 3,056,000 (31 December 2010: 8,500,0000) ordinary shares 2,926 6,235

Cancellation of treasury shares 50,000,000 (31 December 2010: Nil) 46,970 –

At end of year 14,341,000 (31 December 2010: 42,543,000) ordinary shares (14,277) (37,662)

Treasury shares relate to ordinary shares of the Company that is held by the Company.

The Company acquired 24,854,000 (2010: 46,505,000) shares in the Company through purchases on the SGX-ST during the financial year. The total

amount paid to acquire the shares was $26,511,000 (2010: $41,608,000) and this was presented as a component within shareholders’ equity.

The Company reissued 3,056,000 (2010: 8,500,000) treasury shares pursuant to acquisition of non-controlling interests’ shares at a weighted average

exercise price of $0.9574 (2010: $0.7335) each.

The Company cancelled 50,000,000 (2010: Nil) treasury shares, amounting to $46,970,000 (2010: $Nil), during the financial year. The amount of

cancelled shares was deducted against the share capital of the Company.

4. Enterprise expansion funds

Up to the financial year ended 31 December 2002, in accordance with the relevant laws and regulations of the People’s Republic of China (“PRC”), OSIM

International Trading (Shanghai) Co., Ltd and OSIM (China) Co., Ltd appropriated tax refunds from accumulated profits to enterprise expansion fund.

The enterprise expansion fund may be used to increase the registered capital of these subsidiaries, subject to approval from the PRC authorities.

The enterprise expansion fund is not available for dividend distribution to the shareholder.



5. Capital reserves

a) China statutory reserve

In accordance with the relevant laws and regulations of the PRC, OSIM International Trading (Shanghai) Co., Ltd and OSIM (China) Co., Ltd are

required to set up a statutory reserve by way of appropriations from its statutory net profit. These subsidiaries are required to allocate at least 10%

of their net profit to the statutory reserve until the balance of the statutory reserve reaches 50% of its registered capital. The statutory reserve may

be used to offset accumulated losses or increase the registered capital of the subsidiaries, subject to approval from the PRC authorities. The statutory

reserve is not available for dividend distribution to the shareholder.

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

At beginning of year 4,003 1,640 – –

Appropriation of profits during the year 401 2,363 – –

At end of year 4,404 4,003 – –

b) Employees share option reserve

Included in the capital reserves is the employees share option reserve. Employees share option reserve represents the equity-settled share

options granted to employees. The reserve is made up of the cumulative value of services received from employees recorded over the vesting

period commencing from the grant date of equity-settled share options, and is reduced by the expiry, lapse and exercise of the share options.

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

At beginning of year 380 700 380 700

Lapse of employees share options (8) (178) (8) (178)

Exercise of employees share options (138) (142) (138) (142)

At end of year 234 380 234 380



5. Capital reserves (cont’d)

c) Reissuance of treasury shares

This capital reserve records the excess of fair value over the weighted average exercise price of reissued treasury shares.

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000At beginning of year 480 – 480 –

Treasury shares reissued pursuant to purchase

of non-controlling interests’ shares 359 480 359 480

At end of year 839 480 839 480

Total capital reserves 5,477 4,863 1,073 860

6. Warrant reserve

In 2008, the Company issued 135,459,476 warrants on the basis of one warrant for every four existing ordinary shares held by the shareholders of the

Company at an issue price of $0.09 for each warrant. Each warrant carries the right to subscribe for one new ordinary share in the capital of the Company

at an exercise price of $0.35.

In 2009, the Company announced 2,083,351 additional warrants to be issued and allotted to the warrant holders as a consequence of the issuance of

Rights Shares. The exercise price of the warrant for one new ordinary share in the capital of the Company remained at $0.35.

The proceeds from the issuance of warrants have been fully utilised for working capital purposes as at the balance sheet date.

The value ascribed to the warrants less issue expenses is credited as a reserve in equity under warrant reserve and an appropriate amount is transferred to

the share capital account as and when the warrants are exercised.

The warrants issued by the Company do not entitle the holders of the warrants, by virtue of such holdings, to any right to participate in any share issue of

any other subsidiaries.

During the financial year, 86,505,887 (2010: 50,700,943) warrants amounting to $7,664,000 were exercised and transferred to share capital. On 23 June

2011, 335,997 outstanding warrants amounting to $35,000 expired and were transferred to accumulated profits upon the expiry of the warrants. The

number of warrants outstanding at the end of the financial year was Nil (2010: 86,841,884).

Group and Company

2011 2010

$’000 $’000

At beginning of year 7,699 12,191

Exercise of warrants (7,664) (4,492)

Lapse of warrants (35) –

At end of year – 7,699



7. Revaluation reserve

The revaluation reserve records the adjustment to the fair value of a subsidiary’s identifiable net assets at the date of acquisition attributable to previously

held ownership interests.

Group

2011 2010

$’000 $’000

At beginning of year 2,724 5,237

Reversal (Note 13) – (2,513)

At end of year 2,724 2,724

8. Premium on purchase of non-controlling interests’ (NCIs’) shares

Group

2011 2010

$’000 $’000

At beginning of year (10,171) (7,862)

Premium arising from purchase of NCIs’ shares (Note 11c, 11d) (4,373) (2,309)

At end of year (14,544) (10,171)

9. Foreign currency translation reserve

The foreign currency translation reserve records exchange differences arising from the translation of the financial statements of foreign operations whose

functional currencies are different from that of the Group’s presentation currency.

Group

2011 2010

$’000 $’000

At beginning of year (30,302) (26,130)

Net effect of exchange differences arising from translation of financial statements of foreign operations 3,269 (4,172)

At end of year (27,033) (30,302)



10. Fixed assets

Group

Freehold

land

Freehold

building

Leasehold

building

Plant and

machinery Computers

Motor

vehicles

Shop

renovations

Furniture

and fittings

Office

equipment Total

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

Cost

As at 1 January 2010 3,246 1,400 2,602 10,103 9,431 2,506 32,941 18,223 2,937 83,389

Additions – – – 209 689 352 10,595 613 116 12,574

Disposals – – (2,230) (9) (173) (243) (2,791) (251) (47) (5,744)

Write-off – – – – (13) – (1,298) (7,255) (14) (8,580)

Net exchange differences – – (9) (1) (106) (57) (1,243) (205) (49) (1,670)

As at 31 December 2010

and 1 January 2011 3,246 1,400 363 10,302 9,828 2,558 38,204 11,125 2,943 79,969

Additions – – – 189 1,112 559 9,100 1,064 588 12,612

Disposals – – – (55) (1,887) (240) (3,123) (205) (69) (5,579)

Write-off – – – – (38) – (590) (201) (16) (845)

Net exchange differences (32) (74) 9 7 35 20 716 86 16 783

As at 31 December 2011 3,214 1,326 372 10,443 9,050 2,897 44,307 11,869 3,462 86,940

Accumulated depreciation and impairmentAs at 1 January 2010 30 162 1,504 7,889 8,321 2,006 28,202 13,356 2,364 63,834

Depreciation charge for the year – 27 64 1,160 806 307 5,987 1,188 508 10,047

Disposals – – (1,332) (3) (170) (229) (2,648) (245) (40) (4,667)

Write-off – – – – (13) – (851) (5,580) (14) (6,458)

Net exchange differences – – (1) – (86) (50) (1,121) (104) (60) (1,422)


and 1 January 2011 30 189 235 9,046 8,858 2,034 29,569 8,615 2,758 61,334

Depreciation charge for the year 27 – 2 1,151 836 265 7,807 568 302 10,958

Disposals – – – (54) (1,885) (231) (2,909) (193) (69) (5,341)

Write-off – – – – (38) – (330) (179) (16) (563)

Net exchange differences (4) (1) 1 3 12 12 661 (2) (2) 680

As at 31 December 2011 53 188 238 10,146 7,783 2,080 34,798 8,809 2,973 67,068

Net carrying amountAs at 31 December 2011 3,161 1,138 134 297 1,267 817 9,509 3,060 489 19,872

As at 31 December 2010 3,216 1,211 128 1,256 970 524 8,635 2,510 185 18,635



10. Fixed assets (cont’d)

Company

Leasehold

buildings

Plant and

machinery Computers

Motor

vehicles

Shop

renovations

Furniture

and

fittings

Office

equipment Total

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

Cost

As at 1 January 2010 2,230 9,733 2,716 888 3,904 2,948 820 23,239

Additions – – 122 87 972 71 5 1,257

Disposals (2,230) – – (168) (712) (50) (2) (3,162)

Write-off – – – – (450) (2) – (452)


and 1 January 2011 – 9,733 2,838 807 3,714 2,967 823 20,882

Additions – – 88 384 1,007 62 25 1,566

Disposals – – (1,432) (161) (1,298) (134) (2) (3,027)

Write-off – – – – (353) (16) – (369)

As at 31 December 2011 – 9,733 1,494 1,030 3,070 2,879 846 19,052

Accumulated depreciation and impairment

As at 1 January 2010 1,272 7,644 2,700 723 3,781 2,484 682 19,286

Depreciation charge for the year 61 1,059 66 99 122 105 72 1,584

Disposals (1,333) – – (160) (712) (46) (1) (2,252)

Write-off – – – – 109 (1) – (110)


and 1 January 2011 – 8,703 2,766 662 3,082 2,542 753 18,508

Depreciation charge for the year – 1,030 105 110 520 112 70 1,947

Disposals – – (1,432) (161) (1,298) (126) (1) (3,018)

Write-off – – – – (125) (6) – (131)

As at 31 December 2011 – 9,733 1,439 611 2,179 2,522 822 17,306

Net carrying amount

As at 31 December 2011 – – 55 419 891 357 24 1,746

As at 31 December 2010 – 1,030 72 145 632 425 70 2,374




10. Fixed assets (cont’d)

Assets held under finance leases

As at 31 December 2011, the carrying amount of fixed assets held under finance leases are as follows:

Group

2011 2010

$’000 $’000 113 173

19 28

Assets pledged as security 132 201

In addition to assets held under finance leases, the Group’s freehold land and building with carrying amounts of $4,299,000 (2010: $4,427,000) were

mortgaged to secure the bank loans and banking facilities of a subsidiary.

11. Subsidiaries

Unquoted equity shares, at cost

a) These comprise:

Company

2011 2010

$’000 $’000

102,159 96,381

Motor vehicles Plant and machinery



11. Subsidiaries (cont’d)

b) Details of subsidiaries are as follows:

Name of company Principal activities

Country of

incorporation

Percentage of

equity held

Cost of

investment

2011 2010 2011 2010

% % $’000 $’000

Held by the Company

OSIM International Trading

(Shanghai) Co., Ltd #

Import, trading and

distribution of healthy

lifestyle products

People’s Republic of

China

100 100 295 295

OSIM (M) Sdn Bhd # Sale and marketing of

healthy lifestyle products

Malaysia 99.50 87.57 12,925 9,640

OSIM (HK) Company

Limited #

Sale and marketing of


Hong Kong 100 100 17,700 17,700

OSIM (Taiwan) Co., Ltd # Sale and marketing of


Taiwan 100 100 7,989 7,989

ONI Global Pte Ltd

(formerly known as Global Active

Limited) #

Specialty retailer and

distributor of nutraceutical

products

Singapore 94.63 94.52 49,938 49,749

OSIM (China) Co., Ltd # Sale and marketing of



China

100 100 11,008 11,008

OSIM-TWG Tea

(North Asia) Pte Ltd # #


luxury tea products

Singapore 60 – 2,304 –

102,159 96,381




b) Details of subsidiaries are as follows (cont’d):


Country of

incorporation

Percentage of

equity held

2011 2010

% %

Held through ONI Global Pte Ltd

Nutri Active Pte Ltd # Wholesale of nutraceutical

products and supplements

Singapore 94.63** 94.52**

Victoria House Pte Ltd # Retailing of nutraceutical


Singapore 94.63** 94.52**

RichLife (Shanghai) Co., Ltd

(formerly known as VHE

Shanghai Limited)^

Wholesale and retailing of

nutraceutical products and

supplements


China

94.63** 94.52**

RichLife (Beijing) Co.,

Ltd ^



supplements


China

94.63**

94.52**

RichLife (Guangzhou) Co.,

Ltd &&&



supplements


China

94.63** 94.52**

Nutrition Imports Pty Ltd*** Wholesale of nutraceutical


Australia – 94.52**

ONI Global (Australia) Pte

Ltd (formerly known as Green

Valley Nutrition Pty Ltd) +

Retailing of nutraceutical


Australia 94.63** 94.52**

Held through Victoria House Pte Ltd

ONI Global (Malaysia)

Sdn Bhd (formerly known

as Victoria House

Sdn Bhd) #

Retailing of nutraceutical


Malaysia 94.63** 80.34**

Nutri Active Sdn Bhd # Wholesale of nutraceutical


Malaysia 94.63** 80.34**




b) Details of subsidiaries are as follows (cont’d):


Country of

incorporation

Percentage of

equity held

2011 2010

% %

Held through OSIM (China) Co., Ltd

OSIM (Shenzhen) Trading

Co., Ltd *




China

100** 100**

OSIM (Guangzhou) Trading

Co., Ltd &




China

100** 100**

OSIM Xinya (Beijing) Trading

Co., Ltd &&




China

100** 100**

OSIM (Hangzhou) Trading

Co., Ltd ^^




China

100** 100**

OSIM (Chongqing) Trading

Co., Ltd ##




China

100** 100**

OSIM Xinya (Shenyang)

Trading Co., Ltd &&




China

100** 100**

## Not required to be audited under the laws of its country of incorporation.

# Audited by member firms of Ernst & Young Global, in the respective countries.

+ Audited by Banks Group Assurance Pty Ltd, Chartered Accountants, Australia.

^ Audited by Crowe Horwath, Certified Public Accountants Co., Ltd, People’s Republic of China.

* Audited by Shenzhen Lianjie Great Wall Certified Public Accountants Co., Ltd, People’s Republic of China.

& Audited by Guangdong Baide Certified Public Accountants Co., Ltd, People’s Republic of China.

&& Audited by Beijing Hengjie Certified Public Accountants Co., Ltd, People’s Republic of China.

^^ Audited by Hangzhou Dadi, Certified Public Accountants Co., Ltd, People’s Republic of China.

&&& Audited by Guangzhou Kai Hong, Certified Public Accountant Co., Ltd, People’s Republic of China.

** Group’s effective shareholdings.

*** Deregistered on 7 December 2011.




c) Acquisition of additional interests in subsidiaries in the financial year ended 31 December 2011

During the year, the Company acquired additional shares of ONI totalling 0.11% from the non-controlling interests.

The aggregate cash consideration for acquiring the additional interests was $189,000 and these resulted in an increase in premium on

purchase of non-controlling interests’ shares of $134,000.

As at 31 December 2011, the total percentage of equity held by the Company in ONI was 94.63%.

During the year, the Company acquired additional interests of OSIM (Malaysia) totalling 11.93% from the non-controlling interests.

The fair value of the treasury shares issued for acquiring the additional interests was $3,285,000 and this resulted in an increase in

premium on purchase of non-controlling interests’ shares of $2,642,000.

As at 31 December 2011, the total percentage of equity held by the Company in OSIM (Malaysia) was 99.50%.

During the year, ONI acquired additional interests of Victoria House totalling 15% from the non-controlling interest. The cash consideration

for acquiring the additional interests was $1,598,000 and this resulted in an increase in premium on purchase of non-controlling interests

shares of $1,115,000. As at 31 December 2011, the total percentage of equity held by ONI in Victoria House was 100%.

During the year, ONI acquired additional interests of Nutri Active totalling 15% from the non-controlling interest. The cash consideration

for acquiring the additional interests was $599,000 and this resulted in an increase in premium on purchase of non-controlling interests’

shares of $482,000. As at 31 December 2011, the total percentage of equity held by ONI in Nutri Active was 100%.




d) Acquisition of additional interests in subsidiaries in the financial year ended 31 December 2010

In 2010, the Company, acquired additional shares of ONI totalling 11.68% from the non-controlling interests.

The aggregate cash considerations and the fair value of the treasury shares issued for acquiring the additional interests were $1,023,000

and $6,715,000 respectively and these resulted in an increase in premium on purchase of non-controlling interests’ shares of $2,998,000.

As at 31 December 2011, the total percentage of equity held by the Company in ONI was 94.52%.

In 2010, the Company acquired additional interests of OSIM (Taiwan) totalling 7.50% from the non-controlling interest. The cash

consideration for acquiring the additional interests was $833,000 and this resulted in a decrease in premium on purchase of non-

controlling interests’ shares of $689,000. As at 31 December 2011, the total percentage of equity held by the Company in OSIM

(Taiwan) was 100%.



12. Associates and a joint venture

a) These comprise:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Unquoted equity shares, at cost 178,583 147,223 178,095 146,735

Share of post-acquisition losses of associates

and a joint venture (25,305) (24,854) – –

Dividends received from associates (12,226) (12,226) – –

Share of impairment loss of a joint venture (77,314) (77,314) – –

Impairment losses on associates and a joint venture – – (145,414) (145,414)

63,738 32,829 32,681 1,321

Translation reserve (18,243) (19,086) – –

Losses on deemed changes in shareholdings in a joint venture (1,151) (1,151) – –

44,344 12,592 32,681 1,321



12. Associates and a joint venture (cont’d)

b) Details of the associates are as follows:


Country of

incorporation and

place of business

Percentage of

equity held

Cost of

investment

2011 2010 2011 2010

% % $’000 $’000

Held by the Company

DT-OSIM Healthcare

Appliances (Suzhou) Co.,

Ltd (formerly known as

Daito-OSIM Healthcare

(Suzhou) Co., Ltd) *

Manufacturer and exporter

of healthy lifestyle products


China

30 30 346 346

Daito-OSIM (Thailand) Co.,

Ltd ^



Kingdom of Thailand 30 30 567 567

OSIM (Thai) Co., Ltd + Sale and marketing of


Kingdom of Thailand 49 49 116 116

Daito-Healthcare

Appliances (Taicang) Co., Ltd

(formerly known as

Hong Ming (China) Co., Ltd) #




China

19 19 408 408

TWG Tea Pte Ltd

(“TWG Tea”) * *

Sale and marketing of luxury

tea products

Singapore 35 – 31,360 –

32,797 1,437

* Audited by Welsen Certified Public Accountants Co., Ltd, People’s Republic of China.

^ Audited by Me Bless Audit Office Co., Ltd, Certified Public Accountants, Kingdom of Thailand.

+ Audited by Sunantanawat Karnbanchee, Certified Public Accountants, Kingdom of Thailand.

# Audited by Suzhou Leader Co., Ltd, Certified Public Accountants, People’s Republic of China.

** Audited by Moore Stephens LLP, Singapore.




c) Acquisition of an associate

On 18 March 2011, the Company acquired 35% equity interest in TWG Tea, a luxurious tea brand, focusing on well-being and lifestyle products, for

a cash consideration of $31,360,000.

The purchase price allocation of the Group’s investment in TWG Tea to the fair value of intangible assets (other than goodwill), other assets and to

goodwill is currently being assessed. It is expected to be finalised within 12 months from the date of acquisition. Any adjustments to the fair values

of these assets at the acquisition date, including the resultant amortisation impact for identifiable intangible assets (if any), will be accounted for in

the financial statements in 2012.

d) The summarised financial information of the associates, not adjusted for the proportion of ownership interests held by the Group, is as follows:

Associated companies 2011 2010

$’000 $’000

Assets and liabilities:

Current assets 79,543 61,955

Non-current assets 20,766 12,152

Total assets 100,309 74,107

Current and total liabilities (52,966) (35,508)

Results:

Revenue 197,842 159,420

Expenses (194,693) (155,500)

Profit for the year 3,149 3,920




e) Details of a joint venture are as follows:


Country of

incorporation

Percentage of

equity held

Cost of

investment

2011 2010 2011 2010

% % $’000 $’000

Held by the Company

OSIM-Brookstone Holdings,

Inc (“OBH”)#

Innovative product

development and sales of

specialty lifestyle products

United States of

America

55.56 55.56 145,298 145,298

# Audited by PriceWaterhouseCoopers, Boston, the United States of America.

By virtue of a partnership agreement, the Company only has joint control, together with the rest of the joint-venture partners, over the financial and

operating policies of OBH.

Upon the occurrence of certain events as stipulated in the partnership agreement, the management of OBH will be entitled to receive common

shares of OBH. This would have the effect of diluting the Group’s interest in the joint venture.




e) Details of a joint venture are as follows: (cont’d)

The Group has not recognised losses relating to OBH where its share of losses exceeds the Group’s interest in this joint venture. The Group’s share

of unrecognised losses at the balance sheet date was $57,064,000 (2010: $48,364,000). The Group has no obligation in respect of these losses.

f) The aggregate amounts of each of the current assets, non-current assets, current liabilities, non-current liabilities, income and expenses related to

the Group’s interests in the jointly-controlled entity are as follows:

Joint venture 2011 2010

$’000 $’000

Assets and liabilities:

Current assets 97,187 97,341

Non-current assets 186,115 186,508

Total assets 283,302 283,849

Current liabilities (60,002) (53,664)

Non-current liabilities (286,807) (283,683)

Total liabilities (346,809) (337,347)

Results: Revenue 346,226 353,846

Expenses (99,269) (108,491)

Loss for the year (8,700) (15,917)



13. Intangible assets

Group

Franchise

rights and

trademarks

Distribution

rights

Product

development Total

$’000 $’000 $’000 $’000

Cost

As at 1 January 2010 14,854 2,096 2,239 19,189

Additions during the year 464 88 – 552

Write-off (290) – (2,239) (2,529)

Net exchange differences 11 8 – 19

As at 31 December 2010 and 1 January 2011 15,039 2,192 – 17,231

Additions during the year 442 7 – 449

Write-off – (35) – (35)

Net exchange differences (20) (3) – (23)

As at 31 December 2011 15,461 2,161 – 17,622

Accumulated amortisation

As at 1 January 2010 2,719 1,822 2,239 6,780

Amortisation for the year 1,158 71 – 1,229

Write-off (98) – (2,239) (2,337)

Impairment loss 5,260 187 – 5,447

Net exchange differences (1) 8 – 7

As at 31 December 2010 and 1 January 2011 9,038 2,088 – 11,126

Amortisation for the year 468 46 – 514

Write-off – (12) – (12)

Net exchange differences (4) (2) – (6)

As at 31 December 2011 9,502 2,120 – 11,622

Net carrying amount

As at 31 December 2011 5,959 41 – 6,000

As at 31 December 2010 6,001 104 – 6,105


13. Intangible assets (cont’d)

Group

Franchise

rights and

trademarks

Distribution

rights

Product

development

$’000 $’000 $’000

Average remaining amortisation period (years) - 2011 13 13 –

Average remaining amortisation period (years) - 2010 14 14 –

Amortisation expenses of intangible assets (excluding goodwill) is included in the following line item in the statement of comprehensive income.

Group

2011 2010

$’000 $’000

Amortisation expenses 514 1,229

Impairment loss recognised

In 2010, an impairment loss of $5,447,000 was recognised to write down the carrying amount of franchise rights and trademarks and distribution rights

attributable to a subsidiary in the Australia segment as management expects that the benefits from these intangible assets will no longer be derived through

use. The impairment loss was offset against an existing surplus on the same assets carried in the revaluation reserve amounted to $2,513,000 and an

amount of $2,934,000 was recognised in the statement of comprehensive income under the line item “other operating expenses”.

Goodwill on consolidation

Group 2011 2010

$’000 $’000Cost:

At beginning and end of year 23,836 23,836

Accumulated impairment:

At beginning and end of year 13,293 13,293

Net carrying amount of goodwill on consolidation 10,543 10,543

Total intangible assets 16,543 16,648




13. Intangible assets (cont’d)

Impairment testing of goodwill

Goodwill acquired through business combinations has been allocated to two individual cash-generating units (“CGUs”), which are also the reportable

segments, for impairment testing as follows:

Carrying amount of goodwill allocated to each of the Group’s CGUs is as follows:

Goodwill

2011 2010

$’000 $’000

Singapore segment 10,373 10,373

Malaysia segment 170 170

10,543 10,543

The recoverable amount of a CGU is determined based on value-in-use calculation, using cash flow projections based on financial budgets approved by

management covering a five year period. The pre-tax discount rate applied to the cash flow projections and the forecasted growth rate during the five-year

period are 9.1% (2010: 11.6%) and 3% (2010: 5%) per annum respectively.

The calculation of value in use for the CGU is most sensitive to the following assumptions:

Budgeted gross margin – Gross margin is based on average value achieved in the three years preceding the start of the budget period. The budgeted gross

margin is kept constant over the five year period of cash flow projection.

Pre-tax discount rates – Discount rates reflect the current market assessment of the risks specific to the CGU, regarding the time value of money and

individual risks of the underlying assets which have not been incorporated in the cash flow estimates. The discount rate calculation is based on the specific

circumstances of the Group and its operating segments and derived from its weighted average cost of capital (“WACC”). The WACC takes into account both

debt and equity. The cost of equity is derived from the expected return on investment by the Group’s investors. The cost of debt is based on the interest

bearing borrowings the Group is obliged to service. Segment-specific risk is incorporated by applying individual beta factors. The beta factors are evaluated

annually based on publicly available market data.

Market share assumptions – These assumptions are important because management assesses how the CGU’s position, relative to its competitors, might

change over the budget period. Management expects the Group’s share of the Singapore segment to be stable over the budget period.


14. Long-term investments

Short-term investments

Group and Company

2011 2010

$’000 $’000 Current:

Held for trading investmentsQuoted equity shares, at fair value 10,202 –

Quoted debt securities, at fair value 708 –

10,910 –

Non-Current:

Available-for-sale financial assetsUnquoted debt securities, at cost 1 12,498 12,498

Unquoted equity shares, at cost – 930

Quoted equity shares, at fair value 4,961 –

17,459 13,428

1 Comprise senior preferred notes issued by OBH.

Impairment losses

During the financial year, the Group and the Company recognised the following impairment losses:

- Impairment loss of $7,966,000 (2010: $Nil) for the quote equity shares as there was significant decline in the fair value of these investments below their costs. The Group and the Company treats “significant” generally as 30% decline in the fair value of investment below its cost.

- Impairment loss of $930,000 (2010: $Nil) relating to unquoted equity shares carried at cost, reflecting the write-down in the carrying value of this

private equity investment in a company. The impairment loss was subsequently reversed during the financial year upon sale of the unquoted equity

shares at cost.



15. Long-term receivables

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Long-term deposits (Note 19) 7,941 7,480 846 855

Long-term deposits relate to deposits placed for the lease of retail outlets and building.

16. Loan to associate

Loan to an associate is non-trade, unsecured, bears interest at 1.95% per annum and is repayable on demand. Loan to an associate is to be settled

in cash.

17. Stocks

Group Company

2011 2010 2011 2010

Balance sheet $’000 $’000 $’000 $’000

Finished goods 49,985 45,818 4,441 1,828

Goods in transit 2,318 917 1,285 1,776

52,303 46,735 5,726 3,604

Statement of comprehensive income:

Inventories recognised as an expense, being cost of sales 171,964 176,328 84,160 95,133

Inclusive of the following charge/(credit):

- Inventories (written-back)/written-down(net) (2,936) 7,770 (2,004) 1,709



18. Trade debtors

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Trade debtors 42,842 39,102 6,034 4,956

Allowance for doubtful debts (1,868) (1,099) (868) (889)

40,974 38,003 5,166 4,067

Trade debtors

Trade debtors are non-interest bearing and are generally on 30 to 90 day terms. They are recognised at their original invoice amounts which represent their

fair values on initial recognition.

At the balance sheet date, trade receivables arising from export sales amounting to $257,000 (2010: $164,000) are arranged to be settled via letter of

credits issued by reputable banks in countries where the customers are based.

Trade receivables denominated in foreign currencies at 31 December are as follows:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

United States Dollar 444 702 445 699

Renminbi 151 103 – –

Australia 3,751 3,265 – –



18. Trade debtors (cont’d)

Receivables that are past due but not impaired

The Group has trade receivables amounting to $6,963,000 (2010: $5,847,000) that are past due at the balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the balance sheet date is as follows:

Group

2011 2010

$’000 $’000Trade debtors past due:

Lesser than 30 days 4,287 3,719

30-60 days 794 1,077

61-90 days 277 207

91-120 days 282 109

More than 120 days 1,323 735

6,963 5,847

Receivables that are impaired

The Group’s trade receivables that are impaired at the balance sheet date and the movement of the allowance account used to record the impairment are

as follows:

Group

Individually impaired

2011 2010

$’000 $’000

Trade debtors - nominal amounts 1,868 1,099

Less: Allowance for impairment (1,868) (1,099)

– –

Movement in allowance account:

At 1 January 1,099 2,726

Charge for the year 3,247 736

Write back (2,139) (727)

Written off (120) (1,485)

Exchange differences (219) (151)

At 31 December 1,868 1,099

Trade receivables that are individually determined to be impaired at the balance sheet date relate to debtors that are in significant financial difficulties and

have defaulted on payments. These receivables are not secured by any collateral or credit enhancements.



18. Trade debtors (cont’d)

Allowance for doubtful debts

For the year ended 31 December 2011, an impairment loss of $3,247,000 (2010: $736,000) is recognised in the “other operating expenses” in the statement

of comprehensive income subsequent to a debt recovery assessment performed on trade debtors as at 31 December 2011.

19. Other debtors, deposits and prepaid operating expenses

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000Deposits 3,013 2,516 445 614

Advances to employees 141 121 – –

Other debtors 3,898 2,865 793 92

Income tax recoverable 42 397 – –

Prepaid operating expenses 3,389 2,652 759 1,141

10,483 8,551 1,997 1,847

Other debtors, deposits and prepaid operating expenses due:

Within 12 months 10,483 8,551 1,997 1,847

After 12 months (Note 15) 7,941 7,480 846 855

18,424 16,031 2,843 2,702

For the year ended 31 December 2011, an impairment loss of $Nil (2010: $92,000) is recognised in the “other operating expenses” in the statement of

comprehensive income subsequent to a debt recovery assessment performed on other debtors as at 31 December 2011.

20. Due from/(to) subsidiaries/related parties/associates/a joint venture

These amounts are unsecured, interest free, repayable on demand and are to be settled in cash.

Allowance for doubtful debts

For the year ended 31 December 2011, the Company wrote back $1,918,000 (2010: $Nil) of allowance for doubtful debts for the amount due from an

associate as management believes that the amount is recoverable, subsequent to receiving regular payments for receivables which are past due.



21 Convertible bonds

On 5 July 2011, the Company issued 120 million 2.75% convertible bonds (the “Bonds”) at nominal value of $1 per bond, which are listed in the Singapore

Exchange Securities Trading Limited (“SGX”). The contractual interest rate on the Bonds is 2.75% per annum, but excluding the equity conversion option,

the effective interest rate is 4.39% per annum. The Bonds mature 5 years from the issue date at the principal amount together with the unpaid interest

(if any) unless converted into the Company’s ordinary shares at the holder’s option at the rate of $2.025 per share. The holder of each convertible bond

has the right to require the Company to redeem the Bond on 5 July 2014. The convertible bonds are callable at the option of the Company at the principal

amount together with the interest accrued any time after 5 July 2014, subject to the satisfaction of certain conditions. Any bondholder may request that the

Company redeems all of the Bonds in the event that the Company’s shares ceased to be listed or admitted to trading on SGX.

The convertible bonds comprise a financial liability at amortised cost and an equity component. The equity component of the Bonds amounted to

$3,773,000. At 31 December 2011, the carrying value of the liability component of the convertible bonds, measured at amortised cost (net of transaction

costs), was $117,040,000.

22. Cash and cash equivalents

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000Cash and bank balances 76,462 56,364 20,200 26,503

Fixed deposits 117,351 16,793 80,778 5,000

Cash and cash equivalents in the consolidated cash flow statement 193,813 73,157 100,978 31,503

Cash at banks earns interest at floating rate on daily bank deposit rates. Fixed deposits are made for varying period between one day and twelve months

depending on the immediate cash requirements of the Group, and earn interests at the respective fixed deposit rates. The weighted effective interest rate

of fixed deposits ranges from 0.39% to 3.60% (2010: 0.25% to 1.35%) per annum.

Cash and bank balances denominated in foreign currencies at 31 December are as follows:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

United States Dollar 14,272 8,266 6,995 6,375

Ringgit Malaysia 2,911 1,454 – –

Renminbi 11,910 8,487 8,047 5,971

Canadian Dollar 166 413 166 413

Japanese Yen 15 191 15 191

Hong Kong Dollar 895 – – –

Taiwan Dollar 105 – – –

Australian Dollar 404 75 – –




23. Trade creditors

Trade creditors are non-interest bearing and are normally settled on 30 to 150 day terms.

Trade payables denominated in foreign currencies at 31 December are as follows:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

United States Dollar 17,373 12,952 5,681 5,170

Euro 30 149 30 149

Renminbi 308 255 – –

Australian Dollar 147 1,318 – –

Japanese Yen 776 2,402 199 2,203


Ringgit Malaysia 32 – – –



24. Other creditors and accruals

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Other creditors 14,904 12,179 5,600 3,804

Accrued operating expenses 21,707 20,433 9,378 8,506

Deposits received 12,194 16,733 5,249 7,120

Accrued payroll costs 6,039 4,627 1,355 1,278

Deferred revenue 2,628 1,946 – –

57,472 55,918 21,582 20,708

Other creditors are non-interest bearing and are normally settled on 30 to 90 day terms.

Deferred revenue relates to the consideration received from the sale of goods that is allocated to the reward points issued under a subsidiary’s “VIP cards”

programme. Deferred revenue is recognised in the statement of comprehensive income as revenue when the VIP points are redeemed in exchange for free

goods.

Other creditors and operating expenses denominated in foreign currencies as at 31 December are as follows:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

United States Dollar 137 4,944 21 4,936

Ringgit Malaysia 1,882 1,734 – –

Renminbi 1,508 365 – –

Australian Dollar 1,637 2,385 – –

Japanese Yen – 2,203 – 2,203




25. Provisions

Group

Provision for warranties

(Note A)

Provision for restoration costs

(Note B) Total

2011

$’000

2010

$’000

2011

$’000

2010

$’000

2011

$’000

2010

$’000

At beginning of year 1,985 1,369 3,697 4,061 5,682 5,430

Provided during the year 1,107 1,359 419 575 1,526 1,934

Utilised during the year (815) (633) (179) (711) (994) (1,344)

Net exchange differences (135) (110) (219) (228) (354) (338)

At end of year 2,142 1,985 3,718 3,697 5,860 5,682

Company

Provision for warranties

(Note A)

Provision for restoration costs

(Note B) Total

2011

$’000

2010

$’000

2011

$’000

2010

$’000

2011

$’000

2010

$’000

At beginning of year 487 533 2,315 2,325 2,802 2,858

Provided during the year 806 487 40 30 846 517

Utilised during the year (487) (533) (35) (40) (522) (573)

At end of year 806 487 2,320 2,315 3,126 2,802

Note A Provision for warranties

The Group provides one to two years of warranty to its customers on certain of its products, during which faulty products are repaired or

replaced. The amount of the provision for warranty is estimated based on sales volumes and past experience of the level of repairs and

return. The estimation basis is reviewed on an ongoing basis and revised where appropriate.

As at 31 December 2011, the Group provided $2,142,000 (2010: $1,985,000) for expected warranty claims on merchandise sold during the

year. The provision is expected to be utilised in the next financial year.

The above provision has not been discounted as the effect of discounting is not significant.

Note B Provision for restoration costs

Provision for restoration costs of $3,718,000 (2010: $3,697,000) is the estimated costs of restoring leasehold premises, retail outlets and

warehouse, which are capitalised and included in the cost of fixed assets. The provision is expected to be utilised at the end of the lease

terms.



26. Short-term bank loan

Group

2011 2010

$’000 $’000

Unsecured bank loan – Ringgit Malaysia – 1,251

The unsecured short-term bank loan bears interest at the rates of 4.10% to 4.16% (2010: 4.06% to 4.11%) per annum. This loan has been fully repaid in

April 2011.

27. Bank loan

Effective

interest rate

per annum Maturity Group Company

2011

$’000

2010

$’000

2011

$’000

2010

$’000

Bank loan – Ringgit Malaysia 6.74% 2011 – 357 – –

The bank loan taken up by a subsidiary is secured by a corporate guarantee from the Company and personal guarantee from a director of a subsidiary.

The bank loan bears interest at the rate of 6.000% per annum or 1.750% per annum over the 3 years effective cost of fund whichever is higher on monthly

rests basis. This loan has been fully repaid in October 2011.



28. Obligations under finance leases

The Group has finance leases for motor vehicles and plant and machinery (Note 10). Lease terms range from 1 year to 5 years and do not contain restrictions

concerning dividends, additional debt or further leasing. These leases have varying terms of renewal, purchase options and escalation clauses. The effective

interest rates in the leases range from 2.80% to 8.50% (2010: 2.80% to 8.50%) per annum.

Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

Group Maturities

Minimum lease

payments Interest

Present value

of payments

$’000 $’000 $’000

2011

Not later than 1 year 2012 45 (5) 40

More than 1 year and not later than 5 years 2015 81 (4) 77

126 (9) 117

2010

Not later than 1 year 2011 66 (8) 58

More than 1 year and not later than 5 years 2013 128 (9) 119

194 (17) 117

29. Employee benefits

Employee benefits expense (including executive directors):

Group

2011 2010

$’000 $’000

Wages, salaries, bonuses and other costs 81,289 74,802

Central Provident Fund contributions 6,893 4,550

Pension costs (Note 29b) 82 52

88,264 79,404



29. Employee benefits (cont’d)

a) OSIM Share Option Scheme

Share options are granted to confirmed full time employees and directors of the Group who are not controlling shareholders. The options will vest if

the employee remains in service for one year period from the date of grant. The exercise price of the options is equal to the market price of the shares

on the date of grant. Where the exercise price as determined by the market price on the date of grant is less than $0.05, the exercise price shall be

$0.05. The contractual life of the options granted to executive directors and employees is ten years. There are no cash settlement alternatives.

There has been no cancellation or modification to the share option scheme during 2011 and 2010.

The following table illustrates the number and weighted average exercise prices (“WAEP”) of, and the movements in, share options during the year:

No. WAEP No. WAEP

2011

’000

2011

$

2010

’000

2010

$

Outstanding at beginning of year 1,910 0.71 4,171 0.74

Lapsed during the year (30) 0.92 (562) 0.92

Exercised during the year1 (716) 0.65 (1,699) 0.46

Outstanding at end of year2 1,164 0.74 1,910 0.71

Exercisable at end of year 1,164 0.74 1,910 0.71

1 The weighted average share price at the date of exercise for the options exercised was $1.42 (2010: $0.46).

2 The range of exercise prices for options outstanding at the end of the year was $0.236 to $0.917 (2010: $0.236 to $0.917). The weighted

average remaining contractual life for these options is 1.28 years (2010: 2.28 years).

The fair value of share options as at the date of grant is estimated by an external valuer using a Trinomial option pricing model, taking into account

the terms and conditions upon which the options were granted. The inputs to the model used are shown below:

Dividend yield (%) 22.00

Expected volatility (%) 34.00

Historical volatility (%) 34.00

Risk-free interest rate (%) 1.346 to 1.792

Expected life of option (years) 2 to 10

Weighted average share price ($) 1.34

The expected life of the options is based on historical data and is not necessarily indicative of exercise patterns that may occur. The expected

volatility reflects the assumption that the historical volatility is indicative of future trends, which may also not necessarily be the actual outcome. No

other features of the option grant were incorporated into the measurement of fair value.



b) Pension benefits plan

This relates to the amount of pension cost provided for by a subsidiary in Taiwan. This subsidiary has a retirement plan covering all its regular

employees. Benefits under the plan are based on the length of service and estimated base pay at the time of retirement. The subsidiary made a

monthly contribution at certain percentage of the salaries to the pension fund, which is administered by a pension committee and deposited in its

name with the Central Trust of China.

Certain pension information is as follows:

i) Net periodic pension costs are as follows:

Group

2011 2010

$’000 $’000

Service cost 25 27

Interest cost 49 40

Expected returns on plan assets (24) (27)

Net amortisation and deferral 32 12

Net pension costs 82 52

ii) Based on the actuarial report which measures the pension assets and liabilities, the reconciliation between the funding status of pension

plan and accrued pension liability was as follows:

Group

2011 2010

$’000 $’000

Projected benefit obligation 2,143 2,493

Fair value of plan assets (1,225) (1,237)

Status of pension plan 918 1,256

Unrecognised net transitional obligation (134) (150)

Unamortised actuarial gain (271) (661)

Provision for pension benefits 513 445




b) Pension benefits plan (cont’d)

iii) Changes in the present value of the projected benefit obligation are as follows:

Group

2011 2010

$’000 $’000

Benefit obligation at beginning of year 2,493 1,772

Service cost 25 27

Interest cost 49 40

Actuarial loss on obligation (368) 654

Exchange differences on foreign plan (56) –

Benefit obligation at end of year 2,143 2,493

iv) Changes in the fair value of plan assets are as follows:

Group

2011 2010

$’000 $’000

Fair value at beginning of year (1,237) (1,210)

Expected returns (24) (27)

Contribution by employer 4 (8)

Actuarial loss (12) 8

Exchange differences 44 –

Fair value at end of year (1,225) (1,237)

v) Actuarial assumptions are as follows:

Group

2011 2010

% %

Discount rate used in determining present values 1.75 2.00

Future salary increase rate 3.00 3.00

Expected rate of return of plan assets 1.75 2.00

The plan assets are deposited with the Bank of Taiwan and are managed by the government of the Republic of China.



30. Revenue

Income from sale of goods is recognised upon delivery of goods and acceptance by customers.

31. Other operating income

Group

2011 2010

$’000 $’000

Royalty income 2,714 1,663

Repair income 1,776 2,516

Government development grant 226 481

Grant income from jobs credit scheme – 189

Foreign currency gains, net – 2,206

Handling income 80 64

Gain on disposal of fixed assets – 4,962

Gain on disposal of unquoted equity shares 7 –

Gain on disposal of properties held-for-sale – 78

Fair value gain on short-term investments 82 –

Rental income 699 846

Income for extension of product warranty 501 448

Transportation income 678 401

Spare parts income 2,715 791

Write-back of allowance for inventories 3,460 –

Others 144 770

13,082 15,415

During the financial year ended 31 December 2009, the Singapore Finance Minister announced the introduction of a Jobs Credit Scheme (Scheme).

Under this Scheme, the Group received a 12% cash grant on the first $2,500 of each month’s wages for each employee on their Central Provident Fund

payroll. The Government extended the Scheme with another two payments at stepped-down rates of 6% and 3% in March and June 2010 respectively.

During the financial year ended 31 December 2010, the Group received grant income of $189,000 under the Scheme.



32 Profit before taxation

The following items have been included in arriving at profit before taxation:

Group

2011 2010

$’000 $’000

Allowance for doubtful debts, net:

- Trade 1,108 9

- Non-trade – 92

Write-back of allowance for amount due from an associate, trade (1,918) –

Inventories written down 524 7,770

Audit fees paid to:

- Auditors of the Company 149 149

- Other auditors 316 220

Non-audit fees paid to:

- Auditors of the Company 144 117

- Other auditors 92 37

Loss on disposal of fixed asset 187 –

Impairment loss on intangible assets (Note 13) – 2,934

Impairment loss on quoted and unquoted equity shares (Note 14) 8,896 –

Reversal of impairment loss on unquoted equity shares (Note 14) (930) –

Write off of fixed assets (Note 10) 282 2,122

Write off of intangible assets (Note 13) 23 192

Depreciation of fixed assets (Note 10) 10,958 10,047

Amortisation of intangible assets (Note 13) 514 1,229




33. Interest expenses and interest income

Group

2011 2010

$’000 $’000

(a) Interest expenses

- bank loans 105 327

- lease obligations 8 12

- bills payable 479 562

- bank overdraft – 3

- convertible bonds 2,513 –

- others 3 57

3,108 961

(b) Interest income

- fixed deposits 421 67

- bank balances 593 130

- loan to an associate 224 –

1,238 197

34. Taxation

a) Major components of income tax expense

The major components of income tax expense for the years ended 31 December 2011 and 2010 are:

Group

Consolidated statement of comprehensive income: 2011 2010

$’000 $’000Current income tax

- Current year 21,413 15,082

- Under provision in respect of previous years 3,283 574

Deferred tax

- Movement in temporary differences 1,995 (1,346)

- Overprovision in respect of previous years (198) (44)

Withholding tax 1,617 3,615

Income tax expenses recognised in profit or loss 28,110 17,881



34. Taxation (cont’d)

b) Reconciliation between tax expense and accounting profit1

A reconciliation between the tax expense and the product of accounting profit multiplied by the applicable tax rate for the years ended

31 December 2011 and 2010 is as follows:

Group

2011 2010

$’000 $’000

Accounting profit before income tax 98,049 67,690

Tax at the domestic rates applicable to profits in the countries where the Group operates 23,291 16,122

Adjustments:

Permanent differences/expenses not deductible for tax purpose 2,281 2,192

Income not subject to taxation (3,020) (5,968)

Difference between corporate tax rate and Global Trader Programme concessionary tax rate (541) –

Effect of change in tax rates – (724)

Underprovision in respect of previous years 3,085 530

Deferred tax assets not recognised 2,088 3,417

Effect of partial tax exemption and tax relief (457) (185)

Utilisation of tax losses/unabsorbed capital allowances from previous years (1,615) (901)

Deferred tax on undistributed earnings of overseas subsidiaries 1,304 70

Share of results of associates and a joint venture 77 (287)

Withholding tax 1,617 3,615

Income tax expense recognised in profit or loss 28,110 17,881

1 The reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction.




c) Deferred tax assets and liabilities as at 31 December relate to the following:

Group Company

Consolidated

balance sheet

Consolidated

statement of

comprehensive income Balance sheet

2011

$’000

2010

$’000

2011

$’000

2010

$’000

2011

$’000

2010

$’000

Deferred tax liabilities

Excess of net book value over tax

written down value of fixed assets (938) (980) 45 (1,291) (180) (180)

Undistributed earnings of

overseas subsidiaries (3,445) (884) (2,561) 67 – –

Net deferred tax liabilities* (4,383) (1,864) (180) (180)

Deferred tax assetsProvisions 424 499 (91) 185 – –

Unutilised tax losses 378 44 334 2 – –

Unrealised profits on sale of

inventories to related companies 1,556 1,081 476 (353) – –

Net deferred tax assets* 2,358 1,624 – –

Deferred income tax expenses (1,797) (1,390)

* Including a translation loss of $12,000 (2010: $145,000).




c) Unrecognised tax losses and unabsorbed capital allowance

The Group has tax losses and unabsorbed capital allowance of approximately $48,627,000 and $961,000 (2010: $44,555,000 and $746,000) that

are available for offset against future taxable profits of the companies in which the losses arose, for which no deferred tax asset is recognised due to

uncertainty of its recoverability. The use of these tax losses is subject to the agreement of the tax authorities and compliance with certain provisions

of the tax legislation of the respective countries in which the companies operate.

d) Global Trader Programme

The Company was awarded the Global Trader Programme (“GTP”) Incentive status by the Economic Development Board (“EDB”) and International

Enterprise Singapore (“IES”) on 6 May 2011. The commencement date was 1 May 2011 and was for a period of 2 years and 8 months. The

qualifying income from GTP activities during the period enjoyed a concessionary tax rate, as stipulated in the EDB’s and IES’s offer letter.

As at 31 December 2011, the Company did not fulfill one of the criteria under the EDB’s and IES’s offer letter. The Company believes that the GTP

status will not be affected. As the ultimate outcome of this matter cannot presently be determined, no provision for any additional tax liability has

been made in the financial statements. The Company will provide for additional tax liability that may arise, as and when known.



35. Earnings per share

Basic earnings per share amounts are calculated by dividing profit for the year, net of tax, attributable to ordinary equity holders of the Company by the

weighted average number of ordinary shares (excluding treasury shares) outstanding during the year.

Diluted earnings per share amounts are calculated by dividing profit for the year, net of tax, attributable to ordinary equity holders of the Company by the

weighted average number of ordinary shares (excluding treasury shares) outstanding during the year plus the weighted average number of ordinary shares

that would be issued on the conversion of all the dilutive potential ordinary shares into ordinary shares.

The following table reflects the profit and share data used in the computation of basic and diluted earnings per share for the years ended 31 December:

Group

2011 2010

$’000 $’000Profit for the year attributable to ordinary equity holders of the Company

used in computation of basic and diluted earnings per share 69,063 50,069

Number of shares

’000 ’000

Weighted average number of ordinary shares for basic earnings per share computation* 678,314 678,818

Effects of dilution:

- share options 855 1,450

- warrants 58,950 77,872

Weighted average number of ordinary shares adjusted for the effect of dilution** 738,119 758,140

* The weighted average number of shares takes into account the weighted average effect of changes in treasury shares transactions

during the year.

** The convertible bonds issued on 5 July 2011 have not been included in the calculation of diluted earnings per share because they are

anti-dilutive.

Since the end of the financial year, senior executives have exercised the options to acquire 247,500 (2010: 865,500) ordinary shares. There have

been no other transactions involving ordinary shares or potential ordinary shares since the reporting date and before the completion of these

financial statements.

The basic and diluted earnings per share are calculated by dividing the profit for the year attributable to ordinary equity holders of the Company

by the weighted average number of ordinary shares for basic earnings per share computation and weighted average number of ordinary shares

adjusted for the effect of dilution for diluted earnings per share computation. These profit and share data are presented in the table above.



36. Dividends

Group and Company

2011 2010

$’000 $’000Declared and paid during the financial year

Dividends on ordinary shares:

- Final exempt (one-tier) dividend for 2010: 1.00 cents (2009: 1.00 cents) per share 6,744 6,564

- Interim exempt (one-tier) dividend for 2011: 2.00 cents (2010: 1.00 cents) per share 15,169 6,697

21,913 13,261

Proposed but not recognised as liability as at 31 December

Dividends on ordinary shares, subject to shareholders’ approval at Annual General Meeting:

- A final exempt (one-tier) dividend of one cent (2010: one cent) per share for 2011 7,378 6,723



37. Related party disclosures

An entity or individual is considered a related party of the Group and the Company for the purposes of the financial statements if: i) it possesses the ability

(directly or indirectly) to control or exercise significant influence over the operating and financial decisions of the Group and the Company or vice versa; or ii)

it is subject to common control or common significant influence.

a) Sale and purchase of goods and services

In addition to those related party information disclosed elsewhere in the financial statements, the following significant transactions between the

Group and related parties took place during the year on terms agreed between the parties:

Group

2011 2010

$’000 $’000Sales of finished goods to:

- Associates 1,760 1,813

- Joint venture 12,493 12,920

- Related parties 1,789 3,793

Purchases of finished goods from:

- Associates 96,288 75,887

- Joint venture – 7



37. Related party disclosures (cont’d)

b) Compensation of key management personnel

Group

2011 2010

$’000 $’000

Short-term employee benefits 9,480 7,064

Central Provident Fund contributions 61 54

Directors’ fees 147 173

Total compensation paid to key management personnel 9,688 7,291

Comprise amounts paid to:

- Directors of the Company 8,924 6,614

- Other key management personnel 764 677

9,688 7,291

The remuneration of key management personnel is determined by the remuneration committee having regard to the performance of individuals

and market trends.

Directors’ interests in an employee share option plan

At 1 January 2011 and 31 December 2011, the following directors held options to purchase ordinary shares of the Company under the OSIM

Share Option Scheme as follows:

At 1 January

2011

At 31 December

2011 Exercise Price Expiry Date

$

Options to subscribe for ordinary shares

Charlie Teo Chay Lee 247,500 – 0.236 14.01.2012

198,000 198,000 0.442 26.12.2012

Richard Leow Lian Soon 40 40 0.917 15.02.2014

Peter Lee Hwai Kiat 120 120 0.917 15.02.2014

No share options were granted to the directors during the financial year.

Apart from the remuneration paid and share options granted to directors and key management, the Group did not enter into any significant

transactions with related parties who are not members of the Group.



38. Operating lease commitments

The Group and the Company have lease commitments with respect to the rental of shops and office premises. The leases have varying terms, escalation

clauses and renewal rights. The lease commitments include commitments for basic operating lease payments, as well as commitments for additional

contingent rental payable when turnover of certain retail outlets exceeds pre-determined levels. Lease terms do not contain restrictions on the Group’s

activities concerning dividends, additional debt or further leasing. The Group’s operating lease payments recognised in the statement of comprehensive

income during the year amounted to $48,240,000 (2010: $50,494,000).

Future minimum lease payments payable under non-cancellable operating leases as at 31 December are as follows:

Group Company

2011 2010 2011 2010

$’000 $’000 $’000 $’000

Not later than 1 year 32,698 37,759 8,979 8,763

Later than 1 year but not later than 5 years 46,919 53,199 23,287 21,279

Later than 5 years 17,886 7,788 14,092 1,869

97,503 98,746 46,358 31,911



39. Segment information

For management purposes, the Group is organised into business units based on their products and services, and has two reportable operating segments as

follows:

i) Retail: Outlets and counters operated by the Group in selected shopping centers and departmental stores where the products are sold

directly to end user customers.

ii) Distribution: Products distributed by the Group and franchisees in overseas markets.

Except as indicated above, no operating segments have been aggregated to form the above reportable operating segments.

Management monitors the operating results of its business units separately for the purpose of making decisions about resource allocation and performance

assessment. Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured

differently from operating profit or loss in the consolidated financial statements.

Group financing (including financial expenses) and income taxes are managed on a group basis and are not allocated to operating segments.

Transfer prices between operating segments took place at terms agreed between the parties during the financial year.


39. Segment information (cont’d)

The Group is organised on a worldwide basis into two main operating divisions, namely retail and distribution, and their revenue, results and assets are

analysed as follows:

Retail Distribution Adjustments

Per consolidated

financial statements

2011 2010 2011 2010 2011 2010 2011 2010

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

Revenue:

Sales to external customers 515,058 476,143 38,682 32,595 – – 533,740 508,738

Inter-segment sales – – 129,833 142,166 (129,833) (142,166) A – –

Total revenue 515,058 476,143 168,515 174,761 (129,833) (142,166) 553,740 508,738

Results:

Interest income – – 1,238 197 – – 1,238 197

Depreciation and amortisation 10,078 9,505 1,394 1,771 – – 11,472 11,276

Share of (losses)/profits of

associates – – (451) 975 – – (451) 975

Impairment of non-financial assets – 9,560 – 1,144 – – – 10,704

Other non-cash expenses 1,808 4,248 10,027 828 – – B 11,835 5,076

Segment results 73,678 44,273 29,951 24,419 (5,580) (1,002) C 98,049 67,690

2011 2010 2011 2010 2011 2010 2011 2010

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

Assets:

Investments in associates and

a joint venture – – 44,344 12,592 – – 44,344 12,592

Additions to non-current assets 12,230 11,819 45,117 14,213 – – D 57,347 26,032

Segment assets 229,970 146,710 181,289 77,400 19,817 15,052 E 431,076 239,162

Segment liabilities: 90,190 37,354 33,205 76,784 139,174 15,092 F 262,569 129,230



39. Segment information (cont’d)Notes Nature of adjustments and eliminations to arrive at amounts reported in the consolidated financial statements

A Inter-segment revenues are eliminated on consolidation.

B Other non-cash expenses consist of write-off of fixed assets and intangible assets, provisions, and impairment of financial assets as presented in

the respective notes to the financial statements.

C The following items are added to/(deducted from) segment profit to arrive at “profit before tax” presented in the consolidated statement of com-

prehensive income:

2011

$’000

2010

$’000

Share of (losses)/profits of associates (451) 975

Profit from inter-segment sales (2,021) (1,016)

Interest expenses (3,108) (961)

(5,580) (1,002)

D Additions to non-current assets consist of additions to property, plant and equipment, intangible assets, investment in an associate and long-

term investments.

E The following items are added to segment assets to arrive at total assets reported in the consolidated balance sheet:

2011

$’000

2010

$’000

Long-term investments 17,459 13,428

Deferred tax assets 2,358 1,624

19,817 15,052

F The following items are added to segment liabilities to arrive at total liabilities reported in the consolidated balance sheet:

2011

$’000

2010

$’000

Deferred tax liabilities 4,383 1,864

Provision for income tax 17,121 10,998

Loans and borrowings 117,157 1,785

Provision for pension benefits 513 445

139,174 15,092



39. Segment information (cont’d)

Geographical information

Revenue and non-current assets information based on the geographical location of customers and assets respectively are as follows:

North Asia South Asia


Middle East/Oceania Total

2011 2010 2011 2010 2011 2010 2011 2010

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

Turnover

Sales to external customers 317,405 298,455 205,397 168,669 30,938 41,614 553,740 508,738

Non-current assets 13,046 11,711 22,847 23,152 522 420 36,415 35,283

Non-current assets information presented above consists of fixed assets and intangible assets.

40. Financial risk management objectives and policies

The Group’s principal financial instruments, other than derivative financial instruments, comprise bank loans and overdraft, finance leases, and cash and

short term deposits. The main purpose of these financial instruments is to finance the Group’s operations. The Group has various other financial assets and

liabilities such as trade receivables and trade payables, which arise directly from its operations.

The Group also enters into derivative transactions, including principally forward currency contracts. The purpose is to manage the currency risks arising from

the Group’s operations and its sources of financing.

It is, and has been throughout the year under review, the Group’s policy that no trading in derivative financial instruments shall be undertaken.

The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, foreign exchange risk, credit risk and market risk. The board

reviews and agrees policies for managing each of these risks and they are summarised below.

There has been no change to the Group’s exposure to these financial risks or the manner in which it manages and measures the risks.

a) Interest rate riskThe Group obtains additional financing through bank borrowings and leasing arrangements. The Group’s policy is to obtain the most favourable in-

terest rates available without increasing its foreign currency exposure. Surplus funds are placed with reputable banks and/or financial institutions.

The Group’s policy is to manage its exposure to interest risks using a mix of fixed and variable rate debts.

The interest rate risk is deemed not significant by management as the Group does not have significant bank borrowings.



40. Financial risk management objectives and policies (cont’d)

b) Liquidity riskThe Group’s exposure to liquidity risk may arise due to mismatches of financial assets and liabilities.

In the management of liquidity risk, the Group monitors and maintains a level of cash and cash equivalents and banking facilities deemed adequate

by management to finance the Group’s operations and mitigate the effect of fluctuations in cash flows.

The Group assessed the concentration of risk with respect to refinancing its debt and concluded it to be low. Access to sources of funding is

sufficiently available and debt maturing within 12 months can be rolled over with existing lenders.

Analysis of financial instruments by remaining contractual maturities

The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities at the balance sheet date based on contractual

undiscounted payments.

2011

$’000

2010

$’000

1 year

or less

1 to

5 years

Over 5

years Total

1 year

or less

1 to

5 years

Over 5

years Total

Group

Trade creditors 21,025 – – 21,025 19,039 – – 19,039

Other creditors and accruals 54,844 – – 54,844 53,972 – – 53,972

Due to related parties 38 – – 38 79 – – 79

Due to associates 22,740 – – 22,740 19,651 – – 19,651

Due to a joint venture – – – – 99 – – 99

Short-term bank loan – – – – 1,251 – – 1,251

Bank loan – – – – 357 – – 357

Finance leases 45 81 – 126 66 128 – 194

Bills payable 16,260 – – 16,260 13,670 – – 13,670Liability portion of convertible bonds 3,300 133,200 – 136,500 – – – –

118,252 133,281 – 251,533 108,184 128 – 108,312

Company

Trade creditors 5,910 – – 5,910 7,503 – – 7,503

Other creditors and accruals 21,582 – – 21,582 20,708 – – 20,708

Due to subsidiaries 5,357 – – 5,357 11,458 – – 11,458

Due to associates 14,641 – – 14,641 12,664 – – 12,664

Due to a joint venture – – – – 99 – – 99

Bills payable 16,260 – – 16,260 13,670 – – 13,670

Liability portion of convertible bonds 3,300 133,200 – 136,500 – – – –

67,050 133,200 – 230,250 66,102 – – 66,102





c) Foreign exchange riskThe Group has transactional currency exposures arising from sales or purchases that are denominated in a currency other than the respective func-

tional currencies of Group entities, primarily SGD, Renminbi (“RMB”), Ringgit Malaysia (“RM”), New Taiwan dollars (“NTD”) and Hong Kong dollars

(“HKD”). The foreign currency in which these transactions are denominated is United States dollar (“USD”).

Approximately 18% (2010: 20%) of the Group’s sales are denominated in foreign currencies while 61% (2010: 62%) of costs are denomi-

nated in the respective currencies of the Group entities.

The Group and the Company also hold cash and cash equivalent denominated in foreign currencies for working capital purposes. At the balance

sheet date, such foreign currency balances are mainly in USD and RMB.

The Group uses foreign exchange contracts in managing its foreign exchange risk resulting from cash flows from anticipated transactions and fi-

nancing arrangements denominated in foreign currencies, primarily USD. Transaction risk is calculated in each foreign currency and includes foreign

currency denominated assets and liabilities and firm and probable purchase and sale commitments.

Sensitivity analysis for foreign currency risk

The following table demonstrates the sensitivity of the Group’s profit net of tax to a reasonably possible change in the Group’s foreign currencies

against the respective functional currencies of the Group’s entities, with all other variables held constant.

Group

2011 2010$’000 $’000

Profit net of tax Profit net of tax

USD/SGD - strengthened 3% (2010: 3%) -718 -656

- weakened 3% (2010: 3%) +718 +656

JPY/SGD - strengthened 3% (2010: 3%) -22 -65

- weakened 3% (2010: 3%) +22 +65

RMB/SGD - strengthened 3% (2010: 3%) +400 +274

- weakened 3% (2010: 3%) -400 -274

RM/SGD - strengthened 3% (2010: 3%) +104 +57

- weakened 3% (2010: 3%) -104 -57

HK/SGD - strengthened 3% (2010: 3%) +26 –

- weakened 3% (2010: 3%) -26 –

NTD/SGD - strengthened 3% (2010: 3%) +3 –

- weakened 3% (2010: 3%) -3 –




d) Credit riskCredit risk, or the risk of counterparties defaulting, is managed through the application of credit approvals, credit limits and monitoring procedures.

As the nature of the Group’s business is in retail, the majority of outstanding trade receivables are due from department stores and financial

institutions.

There are no significant concentrations of credit risk within the Group or the Company.

Exposure to credit risk

At the balance sheet date, the Group’s and the Company’s maximum exposure to credit risk is represented by the carrying amount of each class of

financial assets recognised in the balance sheets.

Information regarding credit enhancements for trade debtors is disclosed in Note 18.

Credit risk concentration profile

The Group determines concentrations of credit risk by monitoring the country and industry sector profile of its trade debtors on an on-going basis.

The credit risk concentration profile of the Group’s trade debtors at the balance sheet date is as follows:

Group

2011 2010

$’000 % of total $’000 % of totalBy region:

North Asia 29,569 72.2% 31,672 83.3%

South Asia 7,626 18.6% 6,331 16.7%

Others 3,779 9.2% – –

40,974 100% 38,003 100%

By business segments:

Retail 36,381 88.8% 33,972 89.4%

Distribution 4,593 11.2% 4,031 10.6%

40,974 100% 38,003 100%

Financial assets that are neither past due nor impaired

Trade and other debtors that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and

cash equivalents and derivatives that are neither past due nor impaired are placed with or entered into with reputable financial institutions or

companies with high credit ratings and no history of default.

Financial assets that are either past due or impaired

Information regarding financial assets that are either past due or impaired is disclosed in Note 18 (Trade debtors).




e) Market riskMarket price risk is the risk that the fair value or future cash flows of the Group’s financial instruments will fluctuate because of changes in market

prices (other than interest or exchange rates). The Group is exposed to equity price risk arising from its investments in quoted equity instruments.

These instruments are quoted on the SGX-ST in Singapore and are classified as held for trading investments and available-for-sale financial assets.

The Group does not have exposure to commodity price risk.

The Group’s objective is to manage investment returns and equity price risk using a mix of investment grade shares with steady dividend yield and

non-investment grade shares with higher volatility.

Sensitivity analysis for equity price risk

At the end of the reporting period, if the Straits Times index (“STI”) had been 10% (2010: Nil%) higher/lower with all other variables held

constant, the Group’s profit before taxation would have been $1,091,000 (2010: $Nil) higher/lower, arising as a result of higher/lower fair value

gains on short-term quoted investment securities classified as held for trading, and the Group’s fair value adjustment reserve would have been

$496,000 (2010: $Nil) higher/lower, arising as a result of an increase/decrease in the fair value of long-term quoted investment securities classified

as available-for-sale.



41. Financial instruments

a) Fair value of financial instruments

The following table shows an analysis of financial instruments carried at fair value by level of fair value hierarchy.

Quoted prices

in active

market for

identical

instruments

(Level 1)

Significant

other

observable

inputs

(Level 2)

Significant

unobservable

inputs

(Level 3) Total

Held for trading investments

Quoted equity shares 10,202 – – 10,202

Quoted debt securities 708 – – 708

Available-for-sale financial assets

Quoted equity shares 4,961 – – 4,961

15,871 – – 15,871

Fair value hierarchy

The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the

measurements. The fair value hierarchy has the following levels:

- Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities;

- Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as

prices) or indirectly (i.e., derived from prices), and

- Level 3 – Inputs for the asset or liability that are not based on observable market data (unobservable inputs)

There were no financial instruments that were carried at fair value during the financial year 2010.

Determination of fair value

Quoted equity instruments: Fair value is determined by direct reference to their bid price quotations in an active market at the end of the

reporting period.

Group and Company

2011

$’000


41. Financial instruments

b) Fair value of financial instruments

approximation of fair value

Cash and cash equivalents and other current financial assets and liabilities and short-term borrowings

The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values, either due to their short-term

nature or that they are floating rate instruments that are re-priced to market interest rates on or near the balance sheet date.

approximation of fair value

The fair value of financial assets and liabilities by classes that are not carried at fair value and whose carrying amounts are not reasonable

approximation of fair value are as follows:

2011 2010

Group

Carrying

amount

$’000

Estimated fair

value

$’000

Carrying

amount

$’000

Estimated fair

value

$’000

Financial assets:

Unquoted debt securities 12,498 (i) 12,498 (i)

Unquoted equity shares – – 930 (i)

Long-term receivables 7,941 7,574 7,480 7,309

Financial liabilities:

Obligations under finance leases 117 116 177 172

Liability portion of convertible bonds 117,040 116,506 – –

Company

Financial assets:

Unquoted debt securities 12,498 – 12,498 (i)

Unquoted equity shares – – 930 (i)

Long-term receivables 846 786 855 835

Financial liabilities:

Liability portion of convertible bonds 117,040 116,506 – –

(i) Fair value information has not been disclosed for the Group’s and the Company’s unquoted investments that are carried at cost

because fair value cannot be measured reliably. These instruments represent ordinary shares and senior preferred shares in an

external party and a joint venture company that are not quoted on any market.



41. Financial instruments (cont’d)

b) Fair value of financial instruments (cont’d)

approximation of fair value (cont’d)

Determination of fair value

Long-term receivables and obligations under finance leases

The fair values as disclosed in the table above are estimated by discounting expected future cash flows at market incremental lending rate

for similar types of lending, borrowing or leasing arrangements at the balance sheet date.

42. Financial instruments by category

The carrying amounts of the categories of financial instruments as at balance sheet are as follows:

2011

Group

Loans and

receivables

Available-for-

sale

Held for

trading

$’000 $’000 $’000

AssetsLong-term investments – 17,459 –

Short-term investments – – 10,910

Long-term receivables 7,941 – –

Trade debtors 40,974 – –

Other debtors and deposits 7,094 – –

Due from associates – trade 1,016 – –

Due from associates – non-trade 260 – –

Loan to an associate 12,800 – –

Fixed deposits 117,351 – –

Cash and bank balances 76,462 – –

Total 263,898 17,459 10,910




42. Financial instruments by category (cont’d)

2011

Liabilities at

amortised

cost

$’000

Group (cont’d)

Liabilities

Obligations under finance leases 117

Trade creditors 21,025

Other creditors and accruals 54,844

Due to related parties – non-trade 38

Due to associates – trade 22,448

Due to associates – non-trade 292

Liability component of convertible bonds 117,040

Bills payable to banks (unsecured) 16,260

Total 232,064

2010

Loans and

receivables

Available-for-

sale

$’000 $’000

Group

AssetsLong-term investments – 13,428

Long-term receivables 7,480 –

Trade debtors 38,003 –

Other debtors and deposits 5,899 –

Due from related parties – trade 467 –

Due from related parties – non-trade 13 –

Due from associates – non-trade 1 –

Due from a joint venture – trade 1,828 –

Fixed deposits 16,793 –

Cash and bank balances 56,364 –

Total 126,848 13,428




2010

Liabilities at

amortised

cost

$’000

Group (cont’d)

LiabilitiesBank loan 357

Obligations under finance leases 177

Trade creditors 19,039


Due to related parties – non-trade 79



Due to a joint venture – trade 99

Short-term bank loan 1,251


Total 108,295




2011

Company

Loans and

receivables

Available-for-

sale

Held for

trading

$’000 $’000 $’000

AssetsLong-term investments – 17,459 –

Short-term investments – – 10,910

Long-term receivables 846 – –

Trade debtors 5,166 – –

Other debtors and deposits 1,238 – –

Due from subsidiaries – trade 2,825 – –

Due from subsidiaries – non-trade 1,110 – –

Due from associates – non-trade 260 – –

Due from associates – trade 1,016 – –

Loan to an associate 12,800 – –

Fixed deposits 80,778 – –

Cash and bank balances 20,200 – –

Total 126,239 17,459 10,910




2011

Company (cont’d)

Liabilities at

amortised

cost

$’000

LiabilitiesTrade creditors 5,910


Due to subsidiaries – trade 4,039

Due to subsidiaries – non-trade 1,318



Liability component of convertible bonds 117,040


Total 180,790



2010

Company (cont’d)

Loans and

receivables

Available-for-

sale

$’000 $’000

AssetsLong-term investments – 13,428

Long-term receivables 855 –

Trade debtors 4,067 –

Other debtors and deposits 706 –

Due from subsidiaries – trade 2,283 –

Due from subsidiaries – non-trade 1,556 –

Due from associates – non-trade 1 –

Due from a joint venture – trade 1,828 –

Fixed deposits 5,000 –

Cash and bank balances 26,503 –

Total 42,799 13,428





2010

Company (cont’d)

Liabilities at

amortised

cost

$’000

LiabilitiesTrade creditors 7,503


Due to subsidiaries – trade 33

Due to subsidiaries – non-trade 11,425



Due to a joint venture – trade 99


Total 66,102



43. Capital management

The objective of the Group’s capital management is to ensure that it maintains healthy ratios in order to support its business operation and maximise

shareholders value.

The Group manages its capital structure and makes adjustment to it, as deemed appropriate by management. In order to maintain or adjust the capital

structure, the Group may issue new shares, declared dividend or any other means as deemed appropriate by management. No changes were made in the

objectives, policies or processes during the years ended 31 December 2011 and 2010.

As disclosed in Note 5(a), two subsidiaries of the Group are required by the Foreign Enterprise Law of the PRC to contribute to and maintain a non-distributable

statutory reserve fund whose utilisation is subject to approval by the relevant PRC authorities. This externally imposed capital requirement has been complied

with by the above-mentioned subsidiaries for the financial years ended 31 December 2011 and 2010.

The Group regards net debt to include all loans and borrowings less cash and cash equivalent (including fixed deposits) and capital to include all equities

attributable to the equity holders of the Company, less the abovementioned statutory reserve fund.

Group

2011 2010

$’000 $’000

Short-term bank loan – 1,251

Bank loan – 357

Liability component of convertible bonds 117,040 –

Finance leases obligations 117 177

Bills payable to banks 16,260 13,670

133,417 15,455

Less: - Cash and cash equivalent (193,813) (73,157)

Net cash (60,396) (57,702)

Equity attributable to the equity holders of the Company 165,458 108,124

Less: - China statutory fund (Note 5a) (4,404) (4,003)

Total capital 161,054 104,121

The Group is currently in net cash position. The Group will continue to be guided by prudent financial policies of which gearing is an important aspect.


44. Events occurring after the balance sheet date

On 4 January 2012, the Company entered into a sale and purchase agreement with Standard Chem. & Pharma. Co. Ltd through its subsidiary ONI Global

Pte Ltd to acquire a majority controlling interest in the share capital of its GNC Taiwan franchise Standard Nutrition Corporation for a consideration of

about $6.6 million. GNC Taiwan currently operates 34 GNC outlets and the acquisition is funded by internal resources.

On 13 February 2012, the Company incorporated a wholly-owned subsidiary in Singapore known as OSIM Services Pte Ltd. Its principal activities are

training and development of the Group’s employees.

45. Authorisation of financial statements for issue

The financial statements for the year ended 31 December 2011 were authorised for issue in accordance with a resolution of the directors on 24 February

2012.



MAJOR PROPERTIES

Description Location Area (sq m) Tenure (years)

Unexpired term of

lease (years)

Residential condominium Unit 8C, 1523-2

Dong Fang Road, Pudong

New Area, Shanghai, PRC

165 68 51

Strata units in commercial building 11F, 11F-1, 11F-2 and 11F-3,

No.176, Jian Yi Road,

Chung Ho City, Taipei, Taiwan

1,572 Freehold NA

Land (1) Jian Kang section,

Chung Ho City, Taipei, Taiwan

779/10000

share of 30,072.47

Freehold NA

Note:-(1) This is the land on which the building at 11F, 11F-1, 11F-2 and 11F-3, No.176, Jian Yi Road, was constructed on.

USE OF PROCEEDS

1) The proceeds of S$48 million (net) from the exercise of 137,206,830 warrants (from the issuance of 135,459,476 warrants in FY2008) have been utilised

as follows :

$’000

General Working Capital (1,558)

Part fund TWG Tea acquisition (31,360)

Loan to TWG Tea (12,800)

Subscription into OSIM-TWG Tea (North Asia) (2,304)

Balance –

2) The proceeds of S$118 million (net) from the issue of Convertible Bonds due 2016 have been utilised as follows :

$’000

General Working Capital (9,791)

Balance 108,509



SHAREHOLDINGS STATISTICS

as at 24 February 2012

Issued and Fully Paid-Up Capital (including Treasury Shares): 752,138,701Issued and Fully Paid-Up Capital (excluding Treasury Shares): 732,650,701Number of Issued Shares (excluding Treasury Shares): 732,650,701Number/Percentage of Treasury Shares: 19,488,000 (2.66%)Class Of Shares: Ordinary sharesVoting Rights (excluding Treasury Shares): One Vote Per Share

SIZE OF NO. OF

SHAREHOLDINGS SHAREHOLDERS % NO. OF SHARES %

1 – 999 376 9.50 153,896 0.021,000 – 10,000 2,439 61.62 12,438,222 1.7010,001 – 1,000,000 1,116 28.20 59,804,864 8.161,000,001 & ABOVE 27 0.68 660,253,719 90.12TOTAL 3,958 100.00 732,650,701 100.00

TOP TWENTY SHAREHOLDERS NO. OF SHARES %

HSBC (SINGAPORE) NOMINEES PTE LTD 356,487,643 48.66CITIBANK NOMINEES SINGAPORE PTE LTD 100,212,462 13.68 DBS NOMINEES PTE LTD 37,870,171 5.17 RAFFLES NOMINEES (PTE) LTD 31,985,117 4.37 HONG LEONG FINANCE NOMINEES PTE LTD 26,042,000 3.55UNITED OVERSEAS BANK NOMINEES PTE LTD 23,055,343 3.15 DBSN SERVICES PTE LTD 12,538,800 1.71PHILLIP SECURITIES PTE LTD 7,841,310 1.07 RON SIM CHYE HOCK 7,415,904 1.01UOB KAY HIAN PTE LTD 6,900,200 0.94TEO SWAY HEONG 6,492,020 0.89MAYBANK KIM ENG SECURITIES PTE LTD 5,590,000 0.76TAY SIM KIM 5,217,800 0.71HSIEH WEN-HSU OR YANG PAO-FENG 4,911,560 0.67 CIMB SECURITIES (SINGAPORE) PTE LTD 4,068,437 0.56 LEOW LIAN SOON 3,104,614 0.42TEO CHAY LEE 2,915,162 0.40CHOU JEN CHUNG 2,750,000 0.38MORGAN STANLEY ASIA (SINGAPORE) PTE LTD 2,532,559 0.34 OCBC SECURITIES PRIVATE LTD 2,449,780 0.33

TOTAL 650,380,882 88.77

SUBSTANTIAL SHAREHOLDERS DIRECT INTEREST DEEMED INTEREST %

RON SIM CHYE HOCK 334,817,815 176,777,719 69.82 PERCENTAGE OF SHAREHOLDING IN PUBLIC’S HAND Approximately 29.35% of the company’s shares are held in the hands of the public. Accordingly, the Company has complied with Rule 723 of the Listing Manual by SGX-ST.


Notice of Annual General Meeting 164

Appendix l 170

Appendix ll 180

Proxy Form 197


NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of OSIM International Ltd (“the Company”) will be held at 65 Ubi Avenue 1, OSIM Headquarters,

Singapore 408939 on Tuesday, 27 March 2012 at 3.00 p.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 year ended 31 December 2011 together with the Auditors’

Report thereon. (Resolution 1)

2. To declare a final dividend of 1.00 cent per ordinary share for the year ended 31 December 2011. (Resolution 2)

3. To re-elect the following Directors who retire pursuant to Article 92 of the Company’s Articles of Association and being eligible, offer themselves for

re-election:

Mr Charlie Teo Chay Lee (Executive Director) (Resolution 3)

Mr Peter Lee Hwai Kiat (Executive Director) (Resolution 4)

4. To approve the payment of Directors’ fees of S$147,500 for the year ended 31 December 2011 (2010: S$147,500). (Resolution 5)

5. To re-appoint Messrs Ernst & Young LLP as the Company’s Auditors and to authorise the Directors to fix their remuneration. (Resolution 6)

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

That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited,

the Directors of the Company be authorised and empowered to:

(a) (i) issue shares in the Company (“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 Instrument made or

granted by the Directors of the Company while this Resolution was in force,

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)

and Instruments 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

and Instruments to be issued other than on a pro rata basis to existing shareholders of the Company shall not exceed twenty per centum (20%)

of the total number of issued shares (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 Singapore Exchange Securities Trading Limited) for the purpose of determining the

aggregate number of shares and Instruments that may be issued under sub-paragraph (1) above, the percentage of issued shares and Instruments

shall be based on the total number of issued shares (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 the Instruments or any convertible securities that have been issued pursuant to any

previous shareholder approval and which are outstanding as at the date of the passing of this Resolution;

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

Resolution; and

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

NOTICE OF ANNUAL GENERAL MEETING (CONT’D)


(3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual of the Singapore

Exchange Securities Trading Limited for the time being in force (unless such compliance has been waived by the Singapore Exchange Securities

Trading Limited) and the Articles of Association of the Company; and

(4) unless revoked or varied by the Company in a general meeting, such authority shall continue in force (i) until the conclusion of the next Annual

General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever

is earlier or (ii) in the case of shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution, until the issuance of

such shares in accordance with the terms of the Instruments.

[See Explanatory Note (i)] (Resolution 7)

8. Authority to issue shares under the OSIM Share Option Scheme

That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors of the Company be authorised and empowered to offer and grant options under

the OSIM Share Option Scheme (“the Scheme”) and to issue from time to time such number of shares in the capital of the Company as may be required to be

issued pursuant to the exercise of options granted by the Company under the Scheme, whether granted during the subsistence of this authority or otherwise,

provided always that the aggregate number of additional ordinary shares to be issued pursuant to the Scheme shall not exceed fifteen per centum (15%) of

the total number of issued shares (excluding treasury shares) in the capital of the Company 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 Annual General Meeting of the Company or the date by

which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

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

9. Renewal of Shareholders’ Mandate for Interested Person Transactions

That for the purposes of Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited:

(a) approval be given for the renewal of the mandate for the Company, its subsidiaries and target associated companies or any of them to enter into

any of the transactions falling within the types of Interested Person Transactions as set out in Appendix I to the Annual Report dated 24 February

2012 ( “Appendix I”) with any party who is of the class of Interested Persons described in Appendix I, provided that such transactions are carried out

in the normal course of business, at arm’s length and on commercial terms and in accordance with the guidelines of the Company for Interested

Person Transactions as set out in Appendix I (the “Shareholders’ Mandate”);

(b) the Shareholders’ Mandate shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next

Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held,

whichever is earlier; and

(c) authority be given to the Directors of the Company to complete and do all such acts and things (including executing all such documents

as may be required) as they may consider necessary, desirable or expedient to give effect to the Shareholders’ Mandate as they may think fit.

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




10. Renewal of Share Buy-back Mandate

That:

(1) for the purposes of Sections 76C and 76E of the Companies Act, Cap 50 of Singapore (the “Companies Act”), the exercise by the Directors of the

Company of all the powers of the Company to purchase or otherwise acquire issued ordinary shares in the capital of the Company (the “Shares”)

not exceeding in aggregate the Maximum Limit (as hereafter defined), at such price or prices as may be determined by the Directors from time to

time up to the Maximum Price (as hereafter defined), whether by way of:

(a) market purchase(s) on the SGX-ST; and/or

(b) off-market purchase(s) (if effected otherwise than on the SGX-ST) in accordance with any equal access scheme(s) as may be determined

or formulated by the Directors as they consider fit, which scheme(s) shall satisfy all the conditions prescribed by the Companies Act,

and otherwise in accordance with all other laws and regulations and rules of the SGX-ST as may for the time being be applicable, be and is hereby

authorised and approved generally and unconditionally (the “Share Purchase Mandate”);

(2) unless varied or revoked by the Company in general meeting, the authority conferred on the Directors of the Company pursuant to the Share

Purchase Mandate may be exercised by the Directors at any time and from time to time during the period commencing from the date of the passing

of this Resolution and expiring on the earlier of:

(a) the date on which the next Annual General Meeting of the Company is held; and

(b) the date by which the next Annual General Meeting of the Company is required by law to be held;

(3) In this Resolution:

“Average Closing Price” means the average of the last dealt prices of a Share for the five consecutive trading days on which the Shares are

transacted on the SGX-ST immediately preceding the date of market purchase by the Company or, as the case may be, the date of the making of

the offer pursuant to the off-market purchase, and deemed to be adjusted in accordance with the listing rules of the SGX-ST for any corporate action

which occurs after the relevant five days period;

“Date of the making of the offer” means the date on which the Company announces its intention to make an offer for the purchase or acquisition

of Shares from holders of Shares, stating therein the purchase price (which shall not be more than the Maximum Price calculated on the foregoing

basis) for each Share and the relevant terms of the equal access scheme for effecting the off-market purchase;

“Maximum Limit” means that number of issued Shares representing 10% of the total number of issued Shares as at the date of the passing of

this Resolution (excluding any Shares which are held as treasury shares as at that date); and

“Maximum Price”, in relation to a Share to be purchased or acquired, means the purchase price (excluding brokerage, commission, applicable

goods and services tax and other related expenses) which shall not exceed:

(a) in the case of a market purchase of a Share, 105% of the Average Closing Price of the Shares; and

(b) in the case of an off-market purchase of a Share pursuant to an equal access scheme, 110% of the Average Closing Price of the Shares;

and


(4) the Directors of the Company and/or any of them be and are hereby authorised to complete and do all such acts and things (including executing

such documents as may be required) as they and/or he may consider expedient or necessary to give effect to the transactions contemplated and/

or authorised by this Resolution (Resolution 10)

By Order of the Board

Lee Hwai Kiat

Company Secretary

Singapore, 12 March 2012



Explanatory Notes:

(i) The Ordinary Resolution 7 in item 7 above, if passed, will empower the Directors of the Company from the date of this Meeting until the date of the next

Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such

authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue shares, make or grant instruments convertible into shares

and to issue shares pursuant to such instruments, up to a number not exceeding, in total, 50% of the total number of issued shares (excluding treasury

shares) in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to existing shareholders of the Company.

For determining the aggregate number of shares that may be issued, the percentage of issued shares in the capital of the Company will be calculated

based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time this Ordinary Resolution is passed after

adjusting for new shares arising from the conversion or exercise of the Instruments or any convertible securities, the exercise of share options or the vesting

of share awards outstanding or subsisting at the time when this Ordinary Resolution is passed and any subsequent bonus issue, consolidation or subdivision

of shares.

(ii) The Ordinary Resolution 8 in item 8 above, if passed, will empower the Directors of the Company, from the date of this Meeting until the next Annual General

Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such authority is varied or

revoked by the Company in a general meeting, whichever is the earlier, to issue shares in the Company pursuant to the exercise of options granted or to be

granted under the Scheme up to a number not exceeding in total (for the entire duration of the Scheme) fifteen per centum (15%) of the total number of

issued shares (excluding treasury shares) in the capital of the Company from time to time.

(iii) The Ordinary Resolution 9 proposed in item 9 above, if passed, will authorise the Interested Person Transactions as described in Appendix I and recurring

in the year and will empower the Directors of the Company to do all acts necessary to give effect to the Shareholders’ Mandate. This authority will, unless

previously revoked or varied by the Company in a general meeting, expire at the conclusion of the next Annual General Meeting of the Company or the date

by which the next Annual General Meeting of the Company is required by law to be held whichever is the earlier.

(iv) The Ordinary Resolution 10 proposed in item 10 above, if passed, will authorise the Directors of the Company from the date of this Meeting until the next

Annual General Meeting of the Company, or the date by which the next Annual General Meeting of the Company is required by law to be held or such

authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to purchase up to 10% of the total number of issued ordinary

shares in the capital of the Company.

Notes:

1. A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint a proxy to attend and vote in his/her stead.

A proxy need not be a Member of the Company.

2. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 65 Ubi Avenue 1, OSIM Headquarters, Singapore 408939

not less than forty-eight (48) hours before the time appointed for holding the Meeting.



OSIM INTERNATIONAL LTD(Incorporated In The Republic of Singapore with Limited Liability)

(Company Registration No. 198304191N)

APPENDIX I IN RELATION TO DETAILS OF THEPROPOSED RENEWAL OF THE SHAREHOLDERS’ MANDATE FOR

INTERESTED PERSON TRANSACTION

24 February 2012

This Appendix is circulated to Shareholders of OSIM International Ltd (the “Company”) together with the Company’s Annual Report. Its purpose is to

provide Shareholders with the relevant information relating to, and to seek Shareholders’ approval for, the renewal of the Shareholders’ mandate to be

tabled at the Annual General meeting to be held on 27 March 2012 at 3 pm at 65 Ubi Avenue 1 OSIM Headquarters Singapore 408939.

The Notice of Annual General Meeting and a Proxy Form are enclosed with the Annual Report. The Singapore Exchange Securities Trading Limited takes

no responsibility for the correctness of any of the statements made, reports contained/referred to, or opinions expressed in this Appendix.

APPENDIX I


DEFINITIONS

In this appendix (“Appendix I”), the following definitions apply throughout unless otherwise stated:

“AGM” : the annual general meeting of the Company to be convened on 27 March 2012, notice of which is set out in the

Annual Report 2011 despatched together with this Appendix I

“Audit Committee” : the audit committee of the Company as at the date of this Appendix, comprising of Mr Tan Soo Nan (Chairman),

Mr Colin Low Tock Cheong and Mr Sin Boon Ann

“CDP” : the Central Depository (Pte) Limited

“Companies Act” : the Companies Act, Chapter 50, of Singapore as amended by the Companies (Amendment) Act

“Company” or “OSIM” : OSIM International Ltd

“Directors” : the Directors of the Company for the time being

“Group” : the Group refers to the Company, its subsidiaries, joint ventures and associated companies

“Interested Persons Transactions” : defined in paragraph 3.2 of this Appendix

“Latest Practicable Date” : the latest practicable date prior to the printing of this Appendix, being 24 February 2012

“Listing Manual” : the listing manual of the SGX-ST, which became effective on July 1, 2002, including amendments made thereto

up to the date of this Appendix

“Notice of AGM” : the notice of AGM as set out on page 164 of this Annual Report

“NTA” : net tangible assets

“SGX-ST” : the Singapore Exchange Securities Trading Limited

“Shares” : ordinary shares in the capital of the Company

“Share Options” : options to subscribe for new Shares granted pursuant to share option schemes/plans implemented by the

Company

“Shareholders” : registered holders of Shares, except that where the registered holder is CDP, the term “Shareholders” shall, where

the context admits, mean the Depositors whose Securities Accounts are credited with Shares

APPENDIX I (CONT’D)


“Shareholders’ Mandate” : defined in paragraph 2.4 of this Appendix

“$” and “cents” : Singapore dollars and cents, respectively

“%” or “per cent” : Per centum or percentage

The terms “Depositor” and “Depository Agent” shall have the meanings ascribed to them respectively in Section 130A of the Companies Act.

Words importing the singular shall, where applicable, include the plural and vice versa. Words importing the masculine gender shall, where applicable, include the

feminine and neuter genders. References to persons shall include corporations.

Any reference in this Appendix to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under the

Companies Act or any statutory modification thereof and not otherwise defined in this Appendix shall have the same meaning assigned to it under the Companies

Act or any statutory modification thereof, as the case may be.

Should you as a Shareholder have any doubt as to any action you should take, you should consult an independent financial or legal advisor for assistance.

Any reference to a time of day in this Appendix is made by reference to Singapore time unless otherwise stated.



PROPOSED RENEWAL OF THE SHAREHOLDERS’ MANDATE

FOR INTERESTED PERSON TRANSACTIONS

1. INTRODUCTION

1.1 The purpose of this Appendix is to provide the Shareholders of the Company with information relating to, and to seek Shareholders’ approval at the AGM to

renew the Shareholders’ Mandate that will enable the Company to enter into transactions with the Interested Persons in compliance with Chapter 9 of the

Listing Manual.

1.2 Pursuant to Chapter 9 of the Listing Manual, the Shareholders’ Mandate was renewed at an annual general meeting held on 18 March 2011, will continue

in force until the forthcoming annual general meeting. Accordingly, the Directors propose that the Shareholders’ Mandate be renewed at the AGM to

Shareholders’ Mandate to be held on 27 March 2012. The Shareholders’ Mandate will take effect from the date of the passing of the Ordinary Resolution

approving the Shareholders’ Mandate until the next Annual General Meeting of the Company

1.3 There are no modifications to the existing Shareholders’ Mandate in relation to the nature of Interested Person Transactions which covers the following

categories of transactions:

1.3.1 franchising, distribution and licensing agreements

1.3.2 the sale of healthy lifestyle products

1.4 There are no modifications to the review procedures for such transactions (as described in paragraph 3.4)

2. CHAPTER 9 OF THE LISTING MANUAL

2.1 Chapter 9 (“Chapter 9”) of the Listing Manual of the SGX-ST deals with transactions in which a listed company or any of its subsidiaries or associated

companies (that are not listed on the SGX-ST or an approved exchange, provided that the listed group, or the listed group and its Interested Person(s) (as

defined in paragraph 2.5.1) has control over) proposes to enter with a party who is an Interested Person (as defined below) of the listed company.

2.2 Save for transactions which are not considered to put the listed company at risk and which are therefore excluded from the ambit of Chapter 9, Shareholder

approval and/or an immediate announcement would be required in respect of transactions with Interested Persons if certain financial thresholds are reached

or exceeded. Specifically, an immediate announcement is required for the following transactions of a certain threshold where:-

2.2.1 the value of a proposed transaction is equal to or exceeds 3% of the Group’s latest audited NTA; or

2.2.2 the aggregate value of all transactions entered into with the same Interested Person during the same financial year, is equal to or more than 3% of

the Group’s latest audited NTA. An announcement will have to be made immediately of the latest transaction and all future transactions entered

into with that same Interested Person during the financial year,

and shareholder approval (in addition to an immediate announcement) is required where:-

2.2.3 the value of a proposed transaction is equal to or exceeds 5% of the latest Group’s audited NTA; or

2.2.4 the aggregate value of all transactions (including the subject transaction) entered into with the same Interested Person during the same financial

year, is equal to or more than 5% of the Group’s latest audited NTA. The aggregation will exclude any transaction that has been approved by

shareholders previously, or is the subject of aggregation with another transaction that has been approved by shareholders.




2.3 For the purposes of aggregation, Interested Persons Transactions below $100,000 each are to be excluded.

2.4 Part VIII of Chapter 9 allows for a listed company to seek a mandate (the “Shareholders’ Mandate”) from its shareholders for recurrent transactions with

Interested Person of a revenue or trading nature necessary for its day-to-day operations such as sales of supplies and materials, but not in respect to the

purchase or sale of assets, undertakings or businesses.

2.5 For the purposes of Chapter 9:-

2.5.1 an “Interested Person” means a Director, Chief Executive Officer or controlling Shareholder of the listed company, or an associate of such director,

chief executive officer or controlling shareholder;

2.5.2 a “controlling shareholder” is a person who holds directly or indirectly 15% or more of the nominal amount of all voting shares in the listed company

(unless otherwise excepted by SGX-ST) or in fact exercises control over a company; and

2.5.3 an “associate” in relation to any Director, Chief Executive Officer or controlling Shareholder (being an individual) means his immediate family (i.e.,

spouse, children, adopted children, step-children, siblings and parents), the trustees of any trust of which he or his immediate family is a beneficiary

or, in the case of a discretionary trust, is a discretionary object, and any company in which he and his immediate family together (directly or

indirectly) have an interest of 30% or more. An “associate” in relation to a controlling Shareholder (being a company) means any other company

which is its subsidiary or holding company or is a subsidiary of such holding company or one in the equity of which it and/or such other company or

companies taken together (directly or indirectly) have an interest of 30% or more.

.

3. SHAREHOLDERS’ MANDATE

3.1 Background

3.1.1 The principal activities of OSIM are marketing, distributing and franchising of a comprehensive range of healthy lifestyle products. Other than DT-

OSIM Healthcare Appliance (Suzhou) Co., Ltd, and Daito-OSIM (Thailand) Co., Ltd, all the Group’s production needs are outsourced, for example, to

contract manufacturers in Japan and Taiwan as the Group focuses on its strengths in marketing and brand management. As at Latest Practicable

Date, the Group has 1,168 point-of-sales outlets over 30 countries worldwide.

3.1.2 It is envisaged that in the normal course of business of the Group, transactions involving the sale, purchase, provision or supply of services and/or

products between the Group and Interested Persons will likely occur from time to time. Such transactions include, but are not limited to, licensing

and distribution agreements, franchise agreements, transactions of a revenue and trading nature.

3.1.3 The Directors are seeking the approval from Shareholders for the proposed renewal, of the Shareholders’ Mandate for the Group to enter, in their

normal course of business, with the class of Interested Persons described in paragraph 3.3, into the Interested Person Transactions described in

paragraph 3.2, provided that such transactions are made at arm’s length and on the Group’s normal commercial terms and not prejudicial to the

interests of the Company and its minority Shareholders.

3.1.4 The Shareholders’ Mandate will take effect from the date of the passing of Ordinary Resolution 9 to be proposed at the AGM until the next annual

general meeting of the Company. Thereafter, approval from Shareholders for a subsequent renewal of the Shareholders’ Mandate will be sought at

each subsequent Annual General Meeting of the Company.


3.2 Nature and Scope of the Interested Person Transactions Contemplated under the Shareholders’ Mandate

3.2.1 Franchising, distribution and licensing agreements

Within the ambit of this category are franchising arrangements with FK Marketing Ltd, and distribution and licensing agreements with the PRC

affiliates (as defined in paragraph 3.3.1).

3.2.2 Sales of healthy lifestyle products

This category covers the sale of healthy lifestyle products such as, but not limited to, massage chairs, foot reflexology rollers, handheld massagers

and fitness equipments to Interested Persons, including, without limitation, agreements for the sale, supply and distribution of such products.

3.3 Class of Interested Persons

3.3.1 Interested Person refers to a Director, Chief Executive Officer or controlling Shareholder of OSIM, or an associate (as defined in paragraph 2.5.3 of

the Appendix) of such Director, Chief Executive Officer or controlling Shareholder. The Shareholders’ Mandate, if renewed, will apply to the following

class of Interested Persons only:

- OSIM (Langfang) Co., Ltd

- OSIM (Guangzhou) Co., Ltd

(the above collectively known as the “PRC affiliates”)

- FK Marketing Ltd

Note: Ms Tao Dong Mei, who is the wife of Mr Leow Lian Soon, has a 90 per cent interest in the shares of OSIM (Langfang) Co., Ltd. As such,

Mr Leow Lian Soon is deemed to have a 90 percent interest in the shares of the same company. Ms Tao Dong Mei and OSIM (Langfang)

Co., Ltd each owns 50 percent in OSIM (Guangzhou) Co., Ltd. Mr Francis Leow Lian Teck who is the brother of Mr Leow Lian Soon owns

50 percent interest in the shares of FK Marketing Ltd. Accordingly, Mr Leow Lian Soon is deemed to have a 50 percent interest in the shares

of the aforementioned four companies.

3.3.2 Any person or company who, at the point in time when the transaction is proposed to be entered into, is an associate of any one or more of the

persons named above, the term “associate” has the meaning set out in paragraph 2.5.3 of the Appendix.

3.3.3 Transactions with Interested Persons which do not fall within the ambit of the Shareholders’ Mandate shall be subject to the relevant provisions of

Chapter 9 of the Listing Manual.

3.4 Review Procedures for Interested Person Transactions

3.4.1 To ensure that the Interested Person Transactions arising in the normal course of business of the Group are undertaken at arm’s length and on the

Group’s normal commercial terms, and will not be prejudicial to the interests of the Company and its minority Shareholders, the following guidelines

will be implemented for the review and approval of Interested Person Transactions under the proposed renewal of the Shareholders’ Mandate:-

(a) Franchising, distribution and licensing agreements

No franchising, distribution and licensing fees are payable by the PRC Affiliates.




(b) Sales of healthy lifestyle products

The sale of healthy lifestyle products by the Group shall not be approved unless the pricing policy and the terms are no more favourable to

the Interested Person than the usual commercial terms extended to unrelated third parties taking into consideration factors such as, but not

limited to, market conditions, brand awareness and tax structures, in the relevant markets.

The selling price of products is reviewed by the Chief Executive Officer, the Chief Merchandising Officer and the Chief Financial Officer on

a regular basis.

The following transactions are subject to review by the Audit Committee and approval by the Board of Directors:-

(I) transactions of value above $1 million; or

(II) transactions with the same Interested Person with aggregated value of above 3% of the Company’s NTA. The Audit Committee

will review the transactions which are subject to the aggregation.

3.4.2 Each Interested Person Transaction will be properly documented and submitted to Audit Committee which will review such transactions on a

quarterly basis to ensure that they are carried out at normal arm’s length and commercial terms.

3.4.3 In addition to the guidelines set out above, the Audit Committee of the Company will also undertake the following periodic reviews:

(a) the Audit Committee will carry out an annual review to ascertain that the established guidelines and procedures for the Interested Person

Transactions have been complied with; and

(b) the Audit Committee will consider from time to time whether the established guidelines and procedures for the Interested Person Transactions

have become inappropriate or are unable to ensure that the transactions will be on the Group’s normal commercial terms and will not be

prejudicial to the interests of the Company and its minority Shareholders.

(c) If a member of the Audit Committee has an interest in an Interested Person Transaction to be reviewed by the Audit Committee, he will

abstain from any decision-making in respect of that transaction and the review and approval of that transaction will be undertaken by the

remaining members of the Audit Committee.

4. Rationale and Benefit The Shareholders’ Mandate will enhance the ability of companies in the Group to pursue business opportunities which are time-sensitive in nature, and will

eliminate the need for OSIM to announce, or to announce and convene separate general meetings on each occasion to seek Shareholder prior approval for

the entry by the relevant company in the Group into such transactions. This will substantially reduce the expenses associated with the convening of general

meetings on an ad hoc basis, improve administrative efficacy considerably, and allow manpower resources and time to be channeled towards attaining other

corporate objectives.

5. Validity Period of the Shareholders Mandate The renewal of the Shareholders’ Mandate will take effect from the passing of the ordinary resolution relating thereto, and will (unless revoked or varied by

the Company in general meeting) continue in force until the next Annual General Meeting of the Company following thereafter. Approval from Shareholders

will be sought for the renewal of the Shareholders’ Mandate at the subsequent Annual General Meeting of the Company and each Annual General Meeting

thereafter, subject to satisfactory review by the Audit Committee of its continued application to the transactions with Interested Persons.


6. Disclosure of Interested Person Transactions pursuant to Shareholders Mandate 6.1. The Company will announce the aggregate value of transactions conducted with Interested Persons pursuant to the Shareholders’ Mandate

for the quarterly financial periods which the Company is required to report pursuant to the Listing Manual and within the time required for the

announcement of such report.

6.2. Disclosure will also be made in the Company’s Annual Report of the aggregate value of transactions conducted with Interested Persons, pursuant

to the Shareholders Mandate during the financial year, and in the Annual Reports for subsequent financial years that the Shareholders Mandate

continues in force, in accordance with the requirements of Chapter 9 of the Listing Manual.

7. INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS

7.1 Directors

As at the Latest Practicable Date, the direct and indirect interests of each of the Directors in the Shares and Share Options of the Company are as

follows:-

Number of Shares Number of Shares

comprised in outstanding

Share OptionsDirect Interest Indirect Interest

Number %(1) Number %(1)

Ron Sim Chye Hock 334,817,815 45.69 176,777,719 24.12 –

Teo Sway Heong 6,692,020 0.91 504,903,514 68.91 –

Teo Chay Lee 2,915,162 0.39 300,000 0.04 198,000

Leow Lian Soon 3,104,615 0.42 – – 40

Lee Hwai Kiat 2,804,000 0.38 496,000 0.07 120

Tan Soo Nan 10,000 0.001 – – –

Sin Boon Ann – – – – –

Colin Low Tock Cheong – – – – –

Note:-(1) Based on the total issued and fully paid-up ordinary share capital of 732,650,701 shares as at the Latest Practicable Date.

7.2 Substantial Shareholders

As at the Latest Practicable Date, the only substantial Shareholder of the Company is Mr Ron Sim Chye Hock who has a direct interest in 334,817,815

shares and a deemed interest in 176,777,719 shares, together comprising 69.82 per cent of the total issued and fully paid-up ordinary share capital

of the Company.

7.3 Mr Ron Sim Chye Hock and Mr Leow Lian Soon will abstain, and have undertaken to ensure that their associates will abstain, from voting at the AGM

in respect of the Shares held by them respectively on Resolution 9 in the Notice of AGM on page 169 of the Annual Report relating to the proposed

renewal of the Shareholders’ Mandate.




8. STATEMENT OF THE AUDIT COMMITTEE

The Audit Committee of the Company has reviewed the terms of the proposed Shareholders’ Mandate subject to renewal. Having considered, inter alia, the

scope, the guidelines on review procedures, the rationale and the benefits of the Shareholders’ Mandate, the Audit Committee confirms that

(i) the review procedures for determining the prices of Interested Person Transactions have not changed since approval for the Shareholders’ Mandate

was last given; and

(ii) the review procedures referred to in the above paragraph are sufficient to ensure that the Interested Person Transactions will be transacted on

normal commercial terms and will not be prejudicial to the Shareholders nor disadvantageous to the Group. However, should the Audit Committee

subsequently no longer be of this opinion, the Company will revert to the Shareholders for a fresh mandate based on new review procedures for

transactions with Interested Persons.

An independent financial adviser’s opinion is not required for renewal of this general mandate as the Audit Committee has confirmed that the methods and

procedures for determining the transaction prices have not changed since the last Shareholders’ approval and the foregoing said methods and procedures

are sufficient to ensure that the transactions will be carried out on normal commercial terms and will not be prejudicial to the interests of the Company and

its minority shareholders.

9. DIRECTORS’ RECOMMENDATION

The Directors who are considered independent for the purpose of the proposed renewal of the Shareholders’ Mandate are Mr Colin Low Tock Cheong,

Mr Tan Soo Nan and Mr Sin Boon Ann (the “Independent Directors”). The Independent Directors are of the opinion that it is in the interests of the Group to

be permitted to enter into the transactions in their normal course of business with the class of Interested Persons described in paragraph 3.3 of this Appendix

provided that such transactions are made at arm’s length and on normal commercial terms and will not be prejudicial to the interest of the Company and

its minority Shareholders, and in accordance with the guidelines set out in paragraph 3.4 of this Appendix. They accordingly recommend that Shareholders

vote in favour of Resolution 9 set out in the Notice of AGM on page 166 of this Annual Report.

10. APPROVALS AND RESOLUTIONS

Your approval for the proposed renewal of the Shareholders’ Mandate is sought at the Company’s AGM to be held at 65 Ubi Avenue 1, OSIM Headquarters,

Singapore 408939 on 27 March 2012 at 3 pm.

11. ACTION TO BE TAKEN BY SHAREHOLDERS

If a Shareholder is unable to attend the AGM and wishes to appoint a proxy to attend and vote on his behalf, he should complete, sign and return the

enclosed Proxy Form in accordance with the instructions printed thereon as soon as possible and, in any event, so as to arrive at the registered office of the

Company at 65 Ubi Avenue 1, OSIM Headquarters, Singapore 408939 not later than 48 hours before the time fixed for the AGM. Completion and return of

the Proxy Form by a Shareholder does not preclude him from attending and voting at the AGM if he so wishes.

12. DOCUMENTS FOR INSPECTION

The following documents may be inspected at the registered office of the Company during normal business hours from the date hereof up to and including

the date of the AGM:-

(i) the Memorandum and Articles of Association of the Company; and

(ii) the Annual Report of the Company and of the Group for the financial year ended 31 December 2011.


13. DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors collectively and individually accept full responsibility for the accuracy of the information given in this Appendix I and confirm after making

all reasonable enquiries that, to the best of their knowledge and belief, this Appendix I constitutes full and true disclosure of all material facts about the

proposed renewal of the Shareholders’ Mandate, The Company and its subsidiaries, and the Directors are not aware of any facts the omission of which

would make any statement in this Appendix I misleading. Where information in this Appendix I has been extracted from published or otherwise publicly

available source or obtained from the named source, the sole responsibility of the Directors has been to ensure that such information has been accurately

and correctly extracted from those sources and/or reproduced in this Appendix I in its proper form and context.

Yours faithfully

OSIM INTERNATIONAL LTD

Ron Sim Chye Hock

Chairman

for and on behalf of the Board



APPENDIX II

OSIM INTERNATIONAL LTD(Incorporated in the Republic of Singapore)

(Company Registration No. 198304191N)

APPENDIX II IN RELATION TO DETAILS OF THEPROPOSED RENEWAL OF THE SHARE

BUY-BACK MANDATE

24 February 2012

This Appendix II is circulated to Shareholders of OSIM International Ltd (the “Company”) together with the Company’s Annual Report. Its purpose is to provide

Shareholders with the relevant information relating to, and to seek Shareholders’ approval for, the renewal of the Share Buy-back Mandate to be tabled at the

Annual General meeting to be held on 27 March 2012 at 3.00pm at 65 Ubi Avenue 1 OSIM Headquarters Singapore 408939.

The Notice of Annual General Meeting and a Proxy Form are enclosed with the Annual Report. The Singapore Exchange Securities Trading Limited takes no

responsibility for the correctness of any of the statements made, reports contained/referred to, or opinions expressed in this Appendix.


1. INTRODUCTION

On 18 March 2011, the Company obtained shareholders’ approval at the Annual General Meeting (“2011 AGM”) of the Company to authorise the

Directors to exercise all powers of the Company to purchase or acquire its issued ordinary shares in the capital of the Company (the “Shares”) (“Share

Buy-back Mandate”) on the terms of the Share Buy-back Mandate which has taken effect from the date of 2011 AGM until the date on which the next

annual general meeting (“AGM”) of the Company is held or is required by applicable law to be held, whereupon it will lapse unless renewed at such meeting.

Accordingly, approval for the renewal of the Share Buy-back Mandate will be sought again at the AGM to be held on 27 March 2012.

2. DEFINITIONS

In this Apendix II, the following definitions apply throughout unless otherwise stated:

General

“Articles” : the Articles of Association of the Company, as amended from time to time

“Audit Committee” : the audit committee of the Company as at the date of this Apendix II, comprising of Mr Tan Soo Nan (Chairman),

Mr Colin Low Tock Cheong and Mr Sin Boon Ann

“CDP” : the Central Depository (Pte) Limited

“CLOB trading system” : the Central Limit Order Book trading system

“Code” : Singapore Code on Take-overs and Mergers, as amended, supplemented or modified from time to time

“Companies Act” : the Companies Act, Chapter 50, of Singapore as amended or modified from time to time

“Companies (Amendment) Act” : the Companies (Amendment) Act 2005 of Singapore

“Company” or “OSIM” : OSIM International Ltd

“Directors” : the Directors of the Company for the time being

“Group” : the Group refers to the Company, its subsidiaries, joint ventures and associated companies

“Latest Practicable Date” : the latest practicable date prior to the printing of this Appendix, being 24th February 2012

“Listing Manual” : the listing manual of the SGX-ST, which became effective on July 1, 2002, including amendments made thereto

up to the date of this Apendix II

APPENDIX II (CONT’D)



“Maximum Price” : The maximum price to be paid for the Shares as determined by the Directors under paragraph 2.3.4 of the Letter

to Shareholders contained in this Apendix II

“NTA” : net tangible assets

“SGX-ST” : the Singapore Exchange Securities Trading Limited

“Securities Account” : securities accounts maintained by Depositors with CDP, but not including securities accounts maintained with a

Depository Agent

“Shares” : ordinary shares in the capital of the Company

“Share Buy-back Mandate” : A general unconditional mandate given by Shareholders to authorise the Directors to purchase or acquire, on

behalf of the Company, Shares, in accordance with the terms set out in this Appendix II, as well as the rules and

regulations set forth in the Companies Act and the Listing Manual

“Share Options” : options to subscribe for new Shares granted pursuant to share option schemes/plans implemented by the

Company

“Shareholders” : registered holders of Shares, except that where the registered holder is CDP, the term “Shareholders” shall, where

the context admits, mean the Depositors whose Securities Account are credited with Shares

“$” and “cents” : Singapore dollars and cents, respectively

“%” or “per cent” : Per centum or percentage

The terms “Depositor” and “Depository Agent” shall have the meanings ascribed to them respectively in Section 130A of the Companies Act.

Words importing the singular shall, where applicable, include the plural and vice versa. Words importing the masculine gender shall, where applicable, include the

feminine and neuter genders. References to persons shall include corporations.

Any reference in this Appendix to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defined under

the Companies Act or any statutory modification thereof and not otherwise defined in this Appendix II shall have the same meaning assigned to it under the

Companies Act or any statutory modification thereof, as the case may be.

Should you as a Shareholder have any doubt as to any action you should take, you should consult an independent financial or legal advisor for assistance.

Any reference to a time of day in this Appendix II is made by reference to Singapore time unless otherwise stated.



3 RENEWAL OF THE SHARE BUY-BACK MANDATE

3.1 Rationale of Share Buy-back Mandate

The renewal of the Share Buy-back Mandate would give the Company the flexibility to undertake buy-backs of the Shares at any time, subject to market

conditions, during the period when the Share Buy-back Mandate is in force. Further, Share purchases provide the Company with a mechanism to facilitate

the return of surplus cash over and above its ordinary capital requirements in an expedient and cost-efficient manner. The Directors also expect that Share

buy-backs may also help mitigate against short term volatility of share price and offset the effects of short term speculation. Share buy-backs will allow the

Directors greater flexibility over the Company’s share capital structure with a view to enhancing the earnings and/or net asset value per share.

Shareholders can be assured that Share buy-backs by the Company would be made in circumstances where it is considered to be in the best interests of

the Company, after taking into account the amount of surplus cash available and the prevailing market conditions. Further, the Directors do not propose

to carry out buy-backs to such an extent that would, or in circumstances that might, result in a material adverse effect on the liquidity, the orderly trading

of the Shares, the working capital requirements of the Company or its gearing positions which are, in the opinion of the Directors, appropriate from time

to time, or result in the Company being de-listed from the SGX-ST. For example, the Directors will ensure that the Share buy-back will not be carried out to

such an extent that the free float of the Company’s Shares held by the public falls to below ten per cent (10%).

3.2 Share Buy-back Mandate

Approval is being sought from Shareholders at the AGM for the renewal of the Share Buy-back Mandate for the purchase by the Company of its issued

Shares. If approved, the Share Buy-back Mandate will take effect from the date of the AGM and continue in force until the date of the next annual general

meeting of the Company or such date as the next annual general meeting is required by law to be held, unless prior thereto, Share buy-backs are carried

out to the full extent mandated or the Share Buy-back Mandate is revoked or varied by the Company in a general meeting. The Share Buy-back Mandate

will be put to Shareholders for renewal at each subsequent annual general meeting of the Company.

Any purchase of its Shares by the Company has to be made in accordance with, and in the manner prescribed by, the Companies Act, the Listing Rules and

such other laws and regulations as may for the time being be applicable.

3.3 Terms of the Proposed Share Buy-back Mandate

The authority and limitations placed on the Share buy-back Mandate, if renewed at the AGM, are substantially the same as previously approved by the

Shareholders at the AGM. The authority and limits on the Share Buy-back Mandate are summarised below:

3.3.1 Maximum number of Shares

Only Shares which are issued and fully paid-up may be purchased or acquired by the Company.

The total number of Shares that may be purchased or acquired by the Company is limited to that number of Shares representing not more

than ten per cent (10%) of the issued ordinary share capital of the Company as at the date of the AGM at which the Share Buy-back Mandate

is approved (“Approval Date”). For the purposes of calculating the percentage of issued Shares, any Shares which are held by the Company as

treasury shares will be disregarded for the purposes of computing the ten per cent (10%) limit.


For illustrative purposes, on the basis of 752,138,701 Shares in issue as at the Latest Practicable Date, not more than 75,213,870 Shares

[representing ten per cent (10%) of the Shares in issue as at that date] may be purchased or acquired by the Company pursuant to the proposed

Share Buy-back Mandate.

3.3.2 Duration of authority

Purchases or acquisitions of Shares may be made, at any time and from time to time, from the Approval Date up to the earlier of:

(i) the date on which the next annual general meeting of the Company is held or required by law to be held;

(ii) the date on which the authority contained in the Share Buy-back Mandate is varied or revoked by the Company in a general meeting; or

(iii) the date on which the Share buy-backs are carried out to the full extent mandated.

3.3.3 Manner of purchases or acquisitions of Shares

Purchases or acquisitions of Shares may be made by way of:

(i) on-market purchases (“Market Purchases”), transacted on the SGX-ST through the SGX-ST’s CLOB trading system or, as the case may

be, any other stock exchange on which the Shares may for the time being be listed and quoted, through one or more duly licensed

stockbrokers appointed by the Company for the purpose; and/or

(ii) off-market purchases (“Off-Market Purchases”) effected pursuant to an equal access scheme (as defined in section 76C of the Companies

Act).

The Directors may impose such terms and conditions, which are consistent with the Share Buy-back Mandate, the Listing Rules and the Companies

Act, as they consider fit in the interests of the Company in connection with or in relation to an equal access scheme or schemes. Under the

Companies Act, an equal access scheme must satisfy all the following conditions:

(i) offers for the purchase of issued Shares shall be made to every person who holds issued Shares to purchase or acquire the same percentage

of their issued Shares;

(ii) all of those persons shall be given a reasonable opportunity to accept the offers made; and

(iii) the terms of all the offers are the same, except that there shall be disregarded:

(a) differences in consideration attributable to the fact that the offers may relate to Shares with different accrued dividend

entitlements;

(b) (if applicable) differences in consideration attributable to the fact that the offers relate to Shares with different amounts remaining

unpaid; and

(c) differences in the offers introduced solely to ensure that each member is left with a whole number of Shares.




In addition, the Listing Rules provide that, in making an Off-Market Purchase, the Company must issue an offer document to all Shareholders

which must contain at least the following information:

(i) the terms and conditions of the offer;

(ii) the period and procedures for acceptances;

(iii) the reasons for the proposed Share buy-back;

(iv) the consequences, if any, of Share buy-backs by the Company that will arise under the Code or other applicable takeover rules;

(v) whether the Share buy-back, if made, would have any effect on the listing of the Shares on the SGX-ST; and

(vi) details of any Share buy-backs (whether Market Purchases or Off-Market Purchases) made by the Company in the previous twelve (12)

months, giving the total number of Shares purchased, the purchase price per Share or the highest and lowest prices paid for the purchases,

where relevant, and the total consideration paid for the purchases.

3.3.4 Maximum purchase price

The purchase price (excluding brokerage, stamp duties, applicable goods and services tax and other related expenses) to be paid for the Shares will

be determined by the Directors.

However, the purchase price to be paid for a Share as determined by the Directors must not exceed:

(i) in the case of a Market Purchase, one hundred and five per cent (105%) of the Average Closing Price (as defined hereinafter); and

(ii) in the case of an Off-Market Purchase pursuant to an equal access scheme, one hundred and ten per cent (110%) of the Average Closing

Price,

(the “Maximum Price”) in either case, excluding related expenses of the purchase or acquisition.

For the above purposes:

“Average Closing Price” means the average of the closing market prices of the Shares over the last five (5) market days, on which transactions in

the Shares were recorded, immediately preceding the day of the Market Purchase, and deemed to be adjusted for any corporate action that occurs

after such five-market day period;

“day of the making of the offer” means the day on which the Company announces its intention to make an offer for the purchase of Shares from

Shareholders, stating the purchase price (which shall not be more than the Maximum Price calculated on the foregoing basis) for each Share and

the relevant terms of the equal access scheme for effecting the Off-Market Purchase; and

“market day” means a day on which the SGX-ST is open for trading in securities.

3.4 Status of purchased or acquired Shares

Under the Companies Act, any Shares purchased or acquired by the Company are deemed cancelled immediately on purchase or acquisition,

and all rights and privileges attached to those Shares expire on cancellation, unless such Shares are held by the Company as treasury shares.

Accordingly, the total number of issued Shares will be diminished by the number of Shares purchased or acquired by the Company and which are

not held as treasury shares.


3.5 Treasury Shares

Under the Companies Act, Shares purchased or acquired by the Company may be held or dealt with as treasury shares. Some of the provisions

relating to treasury shares under the Companies Act, are summarised below:-

3.5.1 Maximum Holdings

The number of Shares held as treasury shares cannot at any time exceed ten per cent (10%) of the total number of issued Shares.

3.5.2 Voting and Other Rights

The Company cannot exercise any right in respect of treasury shares. In particular, the Company cannot exercise any right to attend or vote at

meetings and for the purposes of the Companies Act, the Company shall be treated as having no right to vote and the treasury shares shall be

treated as having no voting rights.

In addition, no dividend may be paid, and no other distribution (whether in cash or otherwise) of the Company’s assets (including any distribution

of assets to members on a winding up) may be made, to the Company in respect of the treasury shares. However, the allotment of Shares as

fully paid bonus shares in respect of the treasury shares is allowed. Also, a subdivision or consolidation of any treasury share into treasury shares

of a smaller amount is allowed so long as the total value of the treasury shares after the subdivision or consolidation is the same as before such

subdivision or consolidation, as the case may be.

3.5.3 Disposal and Cancellation

Where Shares are held as treasury shares, the Company may at any time:-

(a) sell the treasury shares (or any of them) for cash;

(b) transfer the treasury shares (or any of them) for the purposes of or pursuant to an employees’ share scheme;

(c) transfer the treasury shares (or any of them) as consideration for the acquisition of shares in or assets of another company or assets of a

person;

(d) cancel the treasury shares (or any of them); or

(e) sell, transfer or otherwise use the treasury shares for such other purposes as may be prescribed by the Minister for Finance.

3.6 Source of funds

Previously, any payment made by a company in consideration of the purchase or acquisition of its own Shares could only be made out of the Company’s

distributable profits. The Companies Act now permits the Company to pay for the consideration for the purchase or acquisition of its Shares out of capital

or profits provided the Company is solvent.

The Directors do not propose to exercise the Share Buy-back Mandate in a manner and to such an extent that the liquidity and capital adequacy position

of the Group would be materially adversely affected.



3.7 Financial Effects

The financial effects on the Company and the Group arising from purchases or acquisitions of Shares which may be made pursuant to the Share Buy-back

Mandate will depend on, inter alia, whether the Shares are purchased or acquired out of profits and/or capital of the Company, the number of Shares

purchased or acquired, the price paid for such Shares and whether the Shares purchased or acquired are held in treasury or cancelled.

Under the Companies Act, purchases or acquisitions of Shares by the Company may be made out of the Company’s profits and/or capital so long as the

Company is solvent.

Where the consideration paid by the Company for the purchase or acquisition of Shares is made out of profits, such consideration (excluding brokerage,

commission, goods and services tax and other related expenses) will correspondingly reduce the amount available for the distribution of cash dividends

by the Company.

Where the consideration paid by the Company for the purchase or acquisition of Shares is made out of capital, the amount available for the distribution

of cash dividends by the Company will not be reduced.

The financial effects on the Company and the Group, based on the financial statements of the Company and the Group for the financial year period 1

January 2011 to 31 December 2011, are based on the assumptions set out below.

3.7.1 Number of Shares Acquired or Purchased

Although the Share Buy-back Mandate (if approved by Shareholders) will permit the Company to purchase or acquire up to 10% of its issued

Shares (excluding treasury shares), based on the financial statements of the Company and the Group for the financial period 1 January 2011 to

31 December 2011, the purchase or acquisition of up to 10% of its issued Shares would not result in negative Shareholders’ funds. The illustrative

financial effects shown on the following pages are based on a purchase or acquisition of Shares by the Company of up to 10% of its issued Shares

which, based on the number of issued and paid-up Shares as at the Latest Practicable Date and assuming no further Shares are issued and no

Shares are held by the Company as treasury shares on or prior to the AGM, is 752,138,701 Shares.

Shareholders should note that the financial effects set out on the following pages are for illustrative purposes only. It should be noted

that the above analyses are based on the audited financial statement for the financial year ending 31 December 2011 and is not

necessarily representative of future financial performance.

A 10% buy-back (and not any other percentage) was assumed so that positive Shareholders’ funds could be maintained solely for the

purposes of these illustrative financial effects. Although the Share Buy-back Mandate would authorize the Company to purchase or

acquire up to ten per cent (10%) of the issued Shares, the Company may not necessarily purchase or acquire or be able to purchase or

acquire the entire ten per cent (10%) of the total issued ordinary share capital of the Company. In additional, the Company may cancel

all or part or the Shares repurchased or hold all or part of the Shares repurchased in treasury.

3.7.2 Maximum Price Paid for Shares Acquired or Purchased

In the case of Market Purchases by the Company and assuming that the Company purchases or acquires 75,213,870 Shares at the maximum

price of S$1.276 for one Share (being the price equivalent to 5% above the Average Closing Price of the Shares immediately preceding the Latest

Practicable Date), the maximum amount of funds required for the purchase or acquisition of 75,213,870 Shares is S$95,972,898.12.




In the case of Off-Market Purchases by the Company and assuming that the Company purchases or acquires 75,213,870 Shares at the maximum

price of S$1.337 for one Share (being the price equivalent to 10% above the Average Closing Price of the Shares immediately preceding the Latest

Practicable Date), the maximum amount of funds required for the purchase or acquisition of 75,213,870 Shares is S$100,560,944.19.

3.7.3 Illustrative Financial Effects

As at Latest Practicable Date, the Company holds 19,488,000 treasury shares, representing 2.72%. For illustrative purposes only and on the basis

of the assumptions set out in paragraphs 3.7.1 and 3.7.2 above, the financial effects of the purchase or acquisition of Shares by the Company

pursuant to the Share Buy-back Mandate are projected on the basis that the Company has first cancelled the said treasury shares and the

Company’s financial statements for the financial year period from 1 January 2011 to 31 December 2011 are set out below and assuming the

following:

(a) the purchase or acquisition of 75,213,870 Shares by the Company pursuant to the Share Buy-back Mandate by way of Market Purchases

made entirely out of capital and cancelled;

(b) the purchase or acquisition of 75,213,870 Shares by the Company pursuant to the Share Buy-back Mandate by way of Off-Market

Purchases made entirely out of borrowings and cancelled;

(c) the purchase or acquisition of 75,213,870 Shares by the Company pursuant to the Share Buy-back Mandate by way of Market Purchases

made entirely out of capital and cancelled;

(d) the purchase or acquisition of 75,213,870 Shares by the Company pursuant to the Share Buy-back Mandate by way of Off-Market

Purchases made entirely out of borrowings and cancelled.

Market Purchases

The financial effects set out on the following pages are for illustrative purposes only. However, the illustrations are based on historical

numbers for the financial period 1 January 2011 to 31 December 2011 and are not necessarily representative of future financial

performance.

Although the Share Buy-back Mandate would authorise the Company to purchase or acquire up to 10% of the issued Shares, the Company

may not necessarily purchase or acquire part of or the entire 10% of the issued Shares. In addition, the Company may cancel all or part

of the Shares repurchased or hold all or part of the Shares repurchased in treasury.

Although the Share Buy-back Mandate would authorise the Company to purchase or acquire up to 10% of the issued Shares, the Directors

will not exercise the Share Buy-back Mandate if the Group’s working capital requirements, current dividend policy for the financial year

ending 31 December 2012 and ability to service its debts would be adversely affected.


Scenario 1

Market Purchases of up to 10% out of capital after cancellation of 19,488,000 treasury shares

Group Company

Before Share Purchase

$’000

After Share Purchase

$’000


$’000


$’000

As at 31 Dec 2011(1)

Share Capital 63,983 49,706 63,983 49,706

Treasury Shares (14,277) (95,973) (14,277) (95,973)

Revenue Reserves 144,810 144,810 56,340 56,340

Capital Reserves 5,477 5,477 1,073 1,073

Warrant Reserves - - - -

Other Reserves (34,535) (34,535) 3,773 3,773

Shareholders’ Funds 165,458 69,485 110,892 14,919

NTA 151,964 55,991 110,892 14,919

Current Assets 322,559 226,586 142,788 46,815

Current Liabilities 140,556 140,556 69,566 69,566

Total Borrowings 133,417 133,417 133,300 133,300

Cash & Cash Equivalents 193,813 97,840 100,978 5,005

Number of Shares (‘000) 752,138 732,650 752,138 732,650

Financial Ratios

Basic EPS (cents) 9.18 9.43 4.38 4.50

NTA per share (cents) 20.20 7.64 14.74 2.04

Gearing (%) - - - -

Current Ratio (times) 2.29 1.61 2.05 0.67

(Assumption: Company purchases or acquires at the price of S$1.276 for one share, refer to section 3.7.2)



Scenario 2

Off-Market Purchases of up to 10% out of capital after cancellation of 19,488,000 treasury shares

Group Company


$’000


$’000


$’000


$’000

As at 31 Dec 2011(1)

Share Capital 63,983 49,706 63,983 49,706

Treasury Shares (14,277) (100,561) (14,277) (100,561)




Other Reserves (34,535) (34,535) 3,773 3,773


NTA 151,964 51,403 110,892 10,331

Current Assets 322,559 221,998 142,788 42,227



Cash & Cash Equivalents 193,813 93,252 100,978 417

Number of Shares (‘000) 752,138 732,650 752,138 732,650

Financial Ratios

Basic EPS (cents) 9.18 9.43 4.38 4.50


Gearing (%) - - - -



Note:

(1) The figures for the Group and the Company are based on the financial statements as at 31 December 2011.

Off-Market Purchases

The financial effects set out below are for illustrative purposes only. However, the illustrations are based on historical numbers for the financial period 1

January 2011 to 31 December 2011 and are not necessarily representative of future financial performance.




Although the Share Buy-back Mandate would authorise the Company to purchase or acquire up to 10% of the issued Shares, the Company may not

necessarily purchase or acquire part of or the entire 10% of the issued Shares. In addition, the Company may cancel all or part of the Shares repurchased

or hold all or part of the Shares repurchased in treasury.

Although the Share Buy-back Mandate would authorise the Company to purchase or acquire up to 10% of the issued Shares, the Directors will not exercise

the Share Buy-back Mandate if the Group’s working capital requirements, current dividend policy for the financial year ending 31 December 2012 and

ability to service its debts would be adversely affected.

Scenario 3

Market Purchases of up to 10% out of borrowings after cancellation of 19,488,000 treasury shares

Group Company


$’000


$’000


$’000


$’000

As at 31 Dec 2010(1)

Share Capital 63,983 49,706 63,983 49,706

Treasury Shares (14,277) (95,973) (14,277) (95,973)




Other Reserves (34,535) (34,535) 3,773 3,773


NTA 151,964 55,991 110,892 14,921

Current Assets 322,559 322,559 142,788 142,788




Number of Shares (‘000) 752,138 732,650 752,138 732,650

Financial Ratios

Basic EPS (cents) 9.18 9.43 4.38 4.50


Gearing (%) - - - -




Scenario 4

Off-Market Purchases of up to 10% out of borrowings after cancellation of 19,488,000 treasury shares

Group Company


$’000


$’000


$’000


$’000

As at 31 Dec 2010(1)

Share Capital 63,983 49,706 63,983 49,706

Treasury Shares (14,277) (100,561) (14,277) (100,561)




Other Reserves (34,535) (34,535) 3,773 3,773


NTA 151,964 51,403 110,892 10,331

Current Assets 322,559 322,559 142,788 142,788




Number of Shares (‘000) 752,138 732,650 752,138 732,650

Financial Ratios

Basic EPS (cents) 9.18 9.43 4.38 4.50


Gearing (%) - - - -



Note:

(1) The figures for the Group and the Company are based on the financial statements as at 31 December 2011.




3.8 Taxation

Shareholders who are in doubt as to their respective tax positions or the tax implications of Share purchases or acquisitions by the Company, or, who may

be subject to tax whether in or outside Singapore, should consult their own professional advisers.

3.9 Listing Status of the Shares

The Listing Manual specifies that a listed company shall report all purchases or acquisitions of its shares to the SGX-ST not later than 9.00 a.m.: (a) in

the case of a Market Purchase, on the market day following the day of purchase or acquisition of any of its shares; and (b) in the case of an Off-Market

Purchase under an equal access scheme, on the second market day after the close of acceptances of the offer. Such announcement currently requires

the inclusion of details of the total number of shares purchased, the purchase price per share or the highest and lowest prices paid for such shares, as

applicable.

While the Listing Manual does not expressly prohibit any purchase of shares by a listed company during any particular time or times, because the listed

company would be regarded as an “insider” in relation to any proposed purchase or acquisition of its issued shares, the Company will not undertake any

purchase or acquisition of Shares pursuant to the proposed Share Buy-back Mandate at any time after a price sensitive development has occurred or has

been the subject of a decision until the price sensitive information has been publicly announced. In particular, the Company would not purchase or acquire

any Shares through Market Purchases during the period of one month immediately preceding the announcement of the Company’s full-year results and

the period of two weeks before the announcement of the Company’s financial statements for each of the first three quarters of its financial year.

The Listing Manual requires a listed company to ensure that at least full ten per cent (10%) of any class of its listed securities must be held by public

shareholders. As at the Latest Practicable Date, approximately [37.89 per cent (37.89%)] of the issued Shares are held by public Shareholders. Accordingly,

the Company is of the view that there is a sufficient number of the Shares in issue held by public Shareholders which would permit the Company to

undertake purchases or acquisitions of its Shares through Market Purchases up to the full ten per cent (10%) limit pursuant to the Share Buy-back Mandate

without affecting the listing status of the Shares on the SGX-ST, and that the number of the Shares remaining in the hands of the public will not fall to such

a level as to cause market illiquidity or to affect orderly trading.

3.10 Take-over Obligations

Appendix 2 of the Take-over Code contains the Share Buy-Back Guidance Note. The take-over implications arising from any purchase or acquisition by the

Company of its Shares are set out below.

3.10.1 Obligation to make a Take-over Offer

If, as a result of any purchase or acquisition by the Company of its Shares, the proportionate interest in the voting capital of the Company of a

Shareholder and persons acting in concert with him increases, such increase will be treated as an acquisition for the purposes of Rule 14 of the

Take-over Code. Consequently, a Shareholder or a group of Shareholders acting in concert with a Director could obtain or consolidate effective

control of the Company and become obliged to make an offer under Rule 14 of the Take-over Code.

3.10.2 Persons Acting in Concert

Under the Take-over Code, persons acting in concert comprise individuals or companies who, pursuant to an agreement or understanding (whether

formal or informal) co-operate, through the acquisition by any of them of shares in a company, to obtain or consolidate effective control of that

company.

Unless the contrary is established, the following persons will, inter alia, be presumed to be acting in concert:



(a) A company with any of its directors (together with their close relatives, related trusts as well as companies controlled by any of the

directors, their close relatives and related trusts);

(b) A company with its parent company, subsidiaries, its fellow subsidiaries, any associated companies of the above companies, and any

company whose associated companies include any of the above companies. For this purpose, a company is an associated company of

another company if the second company owns or controls at least 20% but not more than 50% of the voting rights of the first-mentioned

company;

(c) A company with any of its pension funds and employee share schemes;

(d) A person with any investment company, unit trust or other fund in respect of the investment account which such person manages on a

discretionary basis;

(e) A financial or other professional adviser, with its client in respect of the shareholdings of the adviser and the persons controlling, controlled

by or under the same control as the adviser and all the funds which the adviser manages on a discretionary basis, where the shareholding

of the adviser and any of those funds in the client total 10% or more of the client’s equity share capital;

(f) Directors of a company, together with their close relatives, related trusts and companies controlled by any of them, which is subject to an

offer or where the directors have reason to believe a bona fide offer for their company may be imminent;

(g) Partners; and

(h) An individual, his close relatives, his related trusts, and any person who is accustomed to act according to his instructions and companies

controlled by any of the above.

The circumstances under which Shareholders of the Company (including Directors) and persons acting in concert with them respectively will incur

an obligation to make a take-over offer under Rule 14 after a purchase or acquisition of Shares by the Company are set out in Appendix II of the

Take-over Code.

3.11 Effect of Rule 14 and Appendix II of the Take-over Code

In general terms, the effect of Rule 14 and Appendix 2 is that, unless exempted (or if exempted, if such exemption is subsequently revoked), the Directors

of the Company and persons acting in concert with them will incur an obligation to make a take-over offer for the Company under Rule 14 if, as a result of

the Company purchasing or acquiring Shares, the voting rights of such Directors and their concert parties would increase to 30% or more, or if the voting

rights of such Directors and their concert parties fall between 30% and 50% of the Company’s voting rights, the voting rights of such Directors and their

concert parties would increase by 1% in any period of six months.

Under Appendix II, a Shareholder not acting in concert with the Directors of the Company will not be required to make a take-over offer under Rule 14 if,

as a result of the Company purchasing or acquiring its Shares, the voting rights of such Shareholder in the Company would increase to 30% or more, or, if

such Shareholder holds between 30% and 50% of the Company’s voting rights, the voting rights of such Shareholder would increase by more than 1% in

any period of six months. Such Shareholder need not abstain from voting in respect of the resolution authorising the Share Buy-back Mandate, unless so

required under the Companies Act.

Based on substantial Shareholders’ notifications received by the Company as at the Latest Practicable Date which is set out in paragraph 3 of this Appendix

II, none of the substantial Shareholders would become obliged to make a take-over offer for the Company under rule 14 of the Take-over Code as a result

of the purchase by the Company of the maximum limit of ten per cent (10%) of its issued Shares.

Shareholders are advised to consult their professional advisers and/or the Securities Industry Council at the earliest opportunity as to whether

an obligation to make a takeover offer would arise by reason of any share purchase by the Company.


4 INTERESTS OF DIRECTORS AND SUBSTANTIAL SHAREHOLDERS

4.1 Directors

As at the Latest Practicable Date, the direct and indirect interests of each of the Directors in the Shares and Share Options of the Company are as

follows:-

Number of Shares Number of Shares

comprised in outstanding

Share OptionsDirect Interest Indirect Interest

Number %(1) Number %(1)

Ron Sim Chye Hock 334,817,815 45.69 176,777,719 24.12 –

Teo Sway Heong 6,692,020 0.91 5004,903,514 68.91 –

Teo Chay Lee 2,915,162 0.39 300,000 0.04 198,000

Leow Lian Soon 3,104,615 0.42 – – 40

Lee Hwai Kiat 2,804,000 0.38 496,000 0.07 120

Tan Soo Nan 10,000 0.001 – – –

Sin Boon Ann – – – – –

Colin Low Tock Cheong – – – – –

Note:-(1) Based on the total issued and fully paid-up ordinary share capital of 732,650,701 Shares as at the Latest Practicable Date.

4.2 Substantial Shareholders

As at the Latest Practicable Date, the only substantial Shareholder of the Company is Mr Ron Sim Chye Hock who has a direct interest in

334,817,815 Shares and a deemed interest in 176,777,719 Shares, together comprising 69.82 per cent of the total issued and fully paid-

up ordinary share capital of the Company.

5. DIRECTORS’ RECOMMENDATION

Proposed Renewal of the Share Buy-back Mandate

The Directors are of the opinion that the proposed renewal of the Share Buy-back Mandate is in the best interest of the Company. Accordingly, they

recommend that Shareholders vote in favour of Resolution 10 in the notice of AGM, being the ordinary resolution relating to the proposed renewal of the

Share Buy-back Mandate.

6. APPROVALS AND RESOLUTIONS

Your approval for the proposed renewal of the Share Buy-back Mandate is sought at the Company’s AGM to be held at 65 Ubi Avenue 1, OSIM Headquarters,

Singapore 408939 on 27 March 2011 at 3.00 pm or immediately after the AGM.

7. ACTION TO BE TAKEN BY SHAREHOLDERS

If a Shareholder is unable to attend the AGM and wishes to appoint a proxy to attend and vote on his behalf, he should complete, sign and return the




enclosed Proxy Form in accordance with the instructions printed thereon as soon as possible and, in any event, so as to arrive at the registered office of the

Company at 65 Ubi Avenue 1, OSIM Headquarters, Singapore 408939 not later than 48 hours before the time fixed for the AGM. Completion and return

of the Proxy Form by a Shareholder does not preclude him from attending and voting at the AGM if he so wishes.

8. DOCUMENTS FOR INSPECTION

The following documents may be inspected at the registered office of the Company during normal business hours from the date hereof up to and including

the date of the AGM:-

(i) the Memorandum and Articles of Association of the Company; and

(ii) the Annual Report of the Company and of the Group for the financial year ended 31 December 2011.

9. DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors collectively and individually accept full responsibility for the accuracy of the information given in this Appendix II and confirm after making

all reasonable enquiries that, to the best of their knowledge and belief, this Appendix II constitutes full and true disclosure of all material facts about the

proposed renewal of the Share Buy-back Mandate, The Company and its subsidiaries, and the Directors are not aware of any facts the omission of which

would make any statement in this Appendix II misleading. Where information in this Appendix II has been extracted from published or otherwise publicly

available source or obtained from a named source, the sole responsibility of the Directors has been to ensure that such information has been accurately

and correctly extracted from those sources and/or reproduced in this Appendix II in its proper form and context.

Yours faithfully


Ron Sim Chye Hock

Chairman

for and on behalf of the Board



[Company Registration No. 198304191N]

(Incorporated In The Republic of Singapore)

(Please see notes overleaf before completing this Form)

I/We,

of

being a member/members of OSIM International Ltd (the “Company”), hereby appoint:

Name NRIC/Passport No. Proportion of Shareholdings No. of Shares %Address

and/or (delete as appropriate)

Name NRIC/Passport No. Proportion of Shareholdings No. of Shares %Address

or failing the person, or either or both of the persons, referred to above, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our

behalf at the Annual General Meeting (the “Meeting”) of the Company to be held on 27 March 2012 at 3 p.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 Against

1 Directors’ Report and Audited Accounts for the year ended 31 December 2011

2 Declare a final dividend of 1.00 cent per ordinary share for the year ended 31 December 2011

3 Re-election of Mr Charlie Teo Chay Lee as an Executive Director

4 Re-election of Mr Peter Lee Hwai Kiat as an Executive Director

5 Approval of Directors’ fees amounting to S$147,500

6 Re-appointment of Messrs Ernst & Young LLP as Auditors and authorise the Directors to fix their remuneration

7 Authority to allot and issue new shares

8 Authority to allot and issue shares under the OSIM Share Option Scheme

9 Renewal of Shareholders’ Mandate for Interested Person Transactions

10 Renewal of Share Buy-back Mandate

Dated this day of 2012 Total number of Shares in: No. of Shares

(a) CDP Register

(b) Register of Members

Signature of Shareholder(s)

or, Common Seal of Corporate Shareholder

PROXY FORM

IMPORTANT:1. For investors who have used their CPF monies to buy OSIM International Ltd’s shares, this

Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely

FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents

and purposes if used or purported to be used by them.

3. CPF investors who wish to attend the Meeting as an observer must submit their requests

through their CPF Approved Nominees within the time frame specified. If they also wish to

vote, they must submit their voting instructions to the CPF Approved Nominees within the

time frame specified to enable them to vote on their behalf.

✃


Notes :

1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defined in Section 130A

of the Companies Act, 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.

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.

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.

3. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 65 Ubi Avenue 1, OSIM Headquarters, Singapore

408939 not less than 48 hours before the time appointed for the Meeting.

4. 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.

5. 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 48 hours before the time appointed for holding the Meeting, as certified by The

Central Depository (Pte) Limited to the Company.


Documents

ir.zaobao.comir.zaobao.com/osim/pages/osim_ar2011.pdf · REVIEW PERFORMANCE OF THE GROUP Record Proﬁt in FY 2011 We have now achieved positive growth in proﬁtability for 12 consecutive