Xpress Holdings Annual Report 2008

Consolidation... Xpress Holdings Ltd

Consolidation...

Strengthening our Foundations for Continuous Growth

1 Kallang Way 2A Singapore 347495 Tel: +65 6880 2288 Fax: +65 6274 1980

Strengthening our Foundations for Continuous Growth

Design Rationale Traditionally a symbol of prosperity and abundance, the koi fish represents Xpress’ steady and healthy progress to reach higher levels of success. The growth process from roe to adult fish signifies our determination and commitment, surpassing customer expectations and all – to Asia-Pacific’s leading print management specialist. The pair of grown koi swimming gracefully around the theme ‘Consolidation’ accentuates the Group’s premier industry position, and the perseverance to build its competitive strengths to deliver. With a fortified foundation, Xpress will continue to grow – depicted by the shoal of active young fish, to reach the next pinnacle of success in the new economy.

Contents Vision & Mission 2 Corporate Profile 4 Corporate Information 6 Group Structure 7 Chairman’s Statement 11 Board of Directors 12 Executive Directors 16 Key Management 17 Division Heads 18 CEO’s Statement 23 Sales & Marketing 27 Business Operations 33 Investor Relations 42 Founder & COO’s Message 47 Performance Summary 50 Financial Summary 52 5-Year Financial Highlights 53 Risk Management 54 Corporate Governance 56 Financial Statements F 01

Focus for year 2009...

Our Milestones

‘06

Xpress Holdings Ltd

‘07

Annual Report 2007

Beyond China...

Going Global

Print Stations in China

‘08

In Sales & Marketing Innovating our Products and Services Consolidation...

Harbin

Xpress Holdings Ltd

Changchun Beyond China...

Shenyang Beijing

Going Global

Tianjin

Dalian

Shanghai Chengdu

No. 1 Kallang Way 2A Singapore 347495 Tel: +65 6880 2828 Fax: +65 6880 2720

Chongqing

Nanning

www.xpressholdings.com

Wuhan Changsha Xiamen Guangzhou Shenzhen Dongguan

Strengthening our Foundations for Continuous Growth

Hongkong

Existing Print Stations Future Print Stations

Annual Report 2006

Annual Report 2007

China... and Beyond...

Bangkok • Beijing • Changsha • Chengdu • Doha • Ho Chi Minh City • Hong Kong • Jakarta • Kuala Lumpur • Manila • Melbourne • Seoul • Shanghai • Shenzhen • Shenyang • Singapore • Suzhou • Sydney • Taipei

China... and Beyond...

in all markets, driven by our relentless focus on anticipating and exceeding clients’ needs, drawn from the success in utilising our time-sensitive print solutions capabilities to meet the requirements of commercial clients. This will allow us to break new and untapped markets.

Beyond China... Going Global

Consolidation... Strengthening our Foundations for Continuous Growth

In Business Operations Building Strategic Alliances and Partnerships

with potential business partners who can offer complementary benefits, not just in the existing Asian markets we serve but also in our future markets, like in North America, Europe and Middle East, so that we will have a global network.

 Acquisition of remaining 40% of PMG  Appointment of Director, Strategic Planning and Business Development  Acquisition of Beijing Hengzhi by Shenzhen Jiaxinda  Incorporation of Xpress Print (Shenzhen)

 MOU with Shenzhen Securities Info Co. Ltd (China Listed Companies Handbook)  MOU with SWT: Formed translation JV  Appointment of key managers to drive PRC strategy  Incorporation of Xpress Print (Vietnam)  Issuance of up to S$25m Convertible Bonds to Credit Suisse in 2 tranches  Incorporation of Xpress Print (Shenyang)

2008

 Private placement of new ordinary shares with net proceeds of S$21.5m

2007

2006

In Human Talent  Signed 3-year print management agreements worth RMB200m annually with 7 major PRC media companies  3 new Print Stations in China - Wuhan, Xiamen and Changsha  Sale and leaseback of Kallang Way building for S$14m  Signed MOUs to provide 2-year print management services worth RMB140m annually with 6 major PRC publishers in Hunan province  Xpress Vietnam client won top awards in Vietnam’s first ever Annual Report Award  Accredited with Forest Stewardhip Council Chain of Custody (FSC CoC) certificate  Attained ISO 12647-2 accreditation  Mercomm ARC Gold Award (AR cover/award)

Developing and Retaining Human Talent

to ensure we have a cross-border team of dedicated, skilful, and competitive employees to execute and deliver the market-leading services that will win and retain customers.

Our Vision We aim to become a global leader in financial printing services by offering one-stop print solution services and continually investing in strategic alliances, customer service, information technology, facilities and human talent.

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Our Mission We strive to meet and surpass customer needs and expectations by delivering our products with speed and absolute reliability, without compromise on quality.

Xpress Holdings Ltd Annual Report 2008 | 3

Corporate Profile Xpress Holdings Ltd (“Xpress” or the “Group”) was established as an instant name card printer in 1986. Within a short time-span, it carved out a niche in the market by providing a full spectrum of one-stop time-sensitive print management solutions for financial and corporate organisations through its network of 20 locations in Asia Pacific, covering China, Vietnam, the Philippines, Malaysia, Hong Kong, Indonesia and Australia The Group’s wide range of print services include pre-press design, layout, typesetting, printing and post-press, letter shopping, as well as global distribution and delivery.

Enterprise of the Year Award (1994)

Xpress’ products include time-sensitive and quick turnaround publications like annual reports, IPO prospectuses, shareholders' circulars, financial research reports, asset and fund management reports, brochures, newsletters and trade directories, etc. Since its listing in 1999 on the Mainboard of Singapore Exchange, Xpress has expanded geographically to China with the acquisitions of Precise Media Group and Shenzhen Jiaxinda Printing Co Ltd in 2006. Through its network of established print partners in China, Xpress is able to harness its strong design and printing capabilities to serve the needs of its customers.

National IT Award (1994)

In 2007, Xpress strengthened its regional presence by setting up Print Stations – a one-stop printing facility that provides services such as print consultancy, concept development and layout, photography and art direction, editorial and translation in: Vietnam, the Philippines, Malaysia, Hong Kong, Indonesia, Australia and China. 2008 was another year of steady expansion. Xpress continued to strengthen its foothold in China by signing print management agreements with seven major China publishers while setting up three new Print Stations in China – Wuhan, Xiamen and Changsha. The concept of On-Site Print Stations – providing customised services of on-site designing and typesetting at client’s premise, was further explored, with Xpress leveraging on its unique business model offering convenient, efficient and cost-saving print solutions for customers. Xpress was also able use its time-sensitive print services to capture greater share of commercial clients requiring such services through On-Site Print Stations. The Group continues to widen its global reach and enhance its service to its international client base by investing in technology, infrastructure, human talent and strategic business alliances. Located where customers are and print/deliver where customers want is what Xpress promises and delivers.

ISO9001 Certification (1997-2003)

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ISO9001:2000 Certification (2003-2006)

ISO12647-2 Certification (2008)

Enterprise 50 Award (1995-1998)

Rotary-ASME Entrepreneur of the Year Award (1997)

FSC CoC Certification (2008)

Corporate Profile

Changsha Print Station in Hunan, China. Standard exterior frontage of Print Stations.

Artists impression of the On-Site Print Station located within our client’s premises - Hunan Fine Arts Publishing

Xpress Holdings Ltd Annual Report 2008 | 5

Corporate Information Board of Directors

Investment and Risk Management Committee

Dr Wang Kai Yuen Independent Non-Executive Director Chairman

Dr Wang Kai Yuen (Chairman) Mr Christopher Chong Meng Tak Mr Lai Hock Meng Mr Jerry Lee Yin Chia

Mr Poh Eng Seng Chief Executive Officer / Executive Director (Appointed on 16 February 2008) Mr Darlington Tseng Te-Lin Executive Director (Appointed on 1 March 2008) Mr Victor Khoo Choon Meng Executive Director (Appointed on 1 March 2008) Mr Christopher Chong Meng Tak Independent Director

Company Secretary Ng Lai Ying, ACIS Registered Office 1 Kallang Way 2A Singapore 347495 Tel: (65) 6880 2288 Fax: (65) 6274 1980 Website: www.xpressholdings.com Share Registrar

Mr Lai Hock Meng Independent Director (Appointed on 1 March 2008)

Boardroom Corporate & Advisory Services Pte. Ltd. 3 Church Street #08-01 Samsung Hub Singapore 049483

Dr Lee Tsu-Der Non-Executive Non-Independent Director

Auditors

Mr Jerry Lee Yin Chia Non-Executive Non-Independent Director Mr Sam Chong Keen Non-Executive Non-Independent Director Audit Committee Mr Christopher Chong Meng Tak (Chairman) Dr Wang Kai Yuen Mr Jerry Lee Yin Chia Mr Sam Chong Keen Mr Lai Hock Meng Nominating Committee Dr Wang Kai Yuen (Chairman) Mr Christopher Chong Meng Tak Mr Jerry Lee Yin Chia Remuneration Committee Dr Wang Kai Yuen (Chairman) Mr Sam Chong Keen Mr Lai Hock Meng

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Foo Kon Tan Grant Thornton Certified Public Accountants 47 Hill Street #05-01 Singapore Chinese Chamber of Commerce & Industrial Building Singapore 179365 Audit Partner-in-Charge Mr Robin Chin Sin Beng Partner-in-charge since financial year ended 31 July 2006 Principal Bankers United Overseas Bank Limited The Development Bank of Singapore Ltd Malayan Banking Berhad Company Registration No. 199902058Z

Group Structure

Xpress Holdings Ltd

100%

100%

100%

Xpress Print (Pte) Ltd

Precise Media Group Limited

Xpress Print (Shenzhen) Co. Ltd.

76% Xpress Print (Australia) Pty Ltd

100% Print Planner (Hong Kong) Limited

100% Xpress Print (Vietnam) Co., Ltd

30% Xpress Holdings (Korea Branch Office)

50% Shenzhen Xpress Wisdom Translation Co., Ltd

100% Xpress Print (KL) Sdn Bhd

100% Print Planner (Shanghai) Co., Ltd

100% Xpress Print (Shenzhen) Co., Ltd - Xiamen Branch

100% Xpress Print (H.K.) Limited

100% Print Planner (Shenzhen) Co., Ltd

100% Xpress Print (Shenzhen) Co., Ltd - Wuhan Branch

80% Xpress Media Pte Ltd

100% Shenzhen Xpress Print Technology Co., Ltd

100% Xpress Print (Shenzhen) Co., Ltd - Changsha Branch

100% Print Planner (Chengdu) Co., Ltd

100% Xpress Print (Shenzhen) Co., Ltd - Guangzhou Branch

100% Xpress Media Philippines Inc.

100% Xpress Print (Taiwan Branch Office)

Shenzhen Jiaxinda Printing Co., Ltd

100% Beijing Jiaxinda Hengzhi Printing Co., Ltd

100% Print Planner (Beijing) Co., Ltd

100% Xpress Print (Shenyang) Co., Ltd

Xpress Holdings Ltd Annual Report 2008 | 7

Chairman’s Statement

Strong Management Sound Business Model... Dedicated to Enhancing Shareholder Value Dr Wang Kai Yuen Independent Non-Executive Chairman

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Chairman’s Statement We delivered yet another strong year of both revenue and profit growths driven by strong management practices as well as a clear business strategy that consistently exceeds customers’ needs. Underscoring our commitment to shareholders, the board has committed a first and final dividend payout of 0.13 cent per share, up 8.3% from a year ago. Dear shareholders, Year 2008 was an exciting year for Xpress as we laid the fundamentals in preparation for our continual growth. Despite the soft macroeconomic conditions, the Group continued to see healthy growth in both revenue and net profit for FY2008 and delivered a set of sterling results. Financial Performance It was a bountiful year, as the Group secured RMB340 million worth of recurring orders from leading China publishers. These large orders, which were partly recognised in FY2008, boosted the revenue to S$61.3 million from S$35.9 million, equivalent to a 70.7% year-on-year growth. Riding on this strong revenue growth and an exceptional gain of S$3.0 million from the sale and leased back of the Group’s building, net profit attributable to shareholders for FY2008 grew 44.4% to S$10.2 million from S$7.0 million a year ago. The two key pillars of our continued success are our strong management practices backed by capable leaders with clear strategic focus and our unique Print Station business model which allows us to offer enhanced value to customers cross diversified locations. Corresponding to the higher net profit, Xpress’ fully diluted earnings per share rose 37.0% to 0.74 Singapore cent in FY2008 compared to 0.54 Singapore cent in FY2007. Net asset value per ordinary share was higher at 8.0 Singapore cents as at 31 July 2008 compared to 7.4 Singapore cents as at 31 July 2007. Dividend As a public listed corporation dedicated to corporate governance and social responsibility, Xpress continuously

enhance shareholder value by improving earnings and dividend payout. Having improved our dividend payout year after year since FY2005, the Board is pleased to propose a one-tier tax-exempted first and final dividend of 0.13 Singapore cent per ordinary share, up 8.3% from a year ago. Outlook Operating conditions have become increasingly challenging, but we see the situation as an opportunity to fine-tune and consolidate our operations to better cope with increased paper and labour costs. To streamline operations, we developed a strategy leveraging on our Print Station network and split-printing capabilities to launch innovative products and create additional revenue streams. With these strategies, I am confident that Xpress will overcome obstacles and grow from strength to strength in FY2009 and beyond. Acknowledgement In February 2008, our Executive Director, Mr Poh Eng Seng, was appointed as the Group’s CEO, taking over from Mr Sam Chong Keen who had helmed the Group for the previous two years. We would like to take this opportunity to thank Mr Sam for his contribution to the Group during his tenure and welcome Mr Poh to his new role. Mr Sam will continue to serve as our Non-Executive and NonIndependent Director. Besides leadership change, we also have new faces joining the Board during the year under review. Mr Lai Hock Meng, a financial industry veteran, was appointed as Independent Director. Mr Darlington Tseng and Mr Victor Khoo were appointed as Executive Directors. They are the Group’s Director of Business Development and Director of Sales and Marketing, respectively. We would like to extend a warm welcome to all our new Directors. In closing, I would like to thank our shareholders, valued customers and business partners for their continued support. To our dedicated Management and staff, I wish to express my heartfelt appreciation for their selfless dedication that has helped Xpress to continually distinguish itself as the print solution provider of choice. Dr Wang Kai Yuen Non-Executive Chairman 20 October 2008

Xpress Holdings Ltd Annual Report 2008 | 11

Board of Directors DR WANG KAI YUEN was appointed as an Independent Director on 8 June 1999 and, subsequently, Chairman on 25 March 2002. Dr Wang chairs the Nominating Committee and Remuneration Committee and is a member of the Audit Committee. Dr Wang was a Member of Parliament for the Bukit Timah Constituency from December 1984 until 2006. He was the Chairman of Ministry of Community Development’s Feedback Unit from 2002 until his retirement from politics in 2006. In 2005, he served as the founding Chairman for Aids Business Alliance, an initiative of Health Promotion Board to promote awareness of HIV/AIDS at the work place. Dr Wang Kai Yuen Independent Non-Executive Chairman

He is currently the Center Manager of Fuji Xerox Singapore Software Centre with 150 professionals. In that capacity, he interacts with business and product development divisions in the United States, China and Japan of the global office equipment company. Dr Wang is familiar with international business practices and corporate finance and governance. He has wide business and political contacts in China having led many grassroots delegations to visit numerous cities and state governments. He also holds directorships of other public listed companies including A-Sonic Aerospace Ltd, Asian Micro Holdings Ltd, China Aviation Oil (S) Corporation Ltd, ComfortDelGro Corporation Ltd, Cosco Corporation (Singapore) Ltd, Ezion Holdings Ltd, Hiap Hoe Ltd, HLH Group Ltd, Koon Holdings Ltd and Matex International Ltd, among others. Dr Wang graduated in 1972 with First Class Honours Bachelor degree in Electrical and Electronics from the National University of Singapore. He holds a Master of Science in Electrical Engineering and a PhD in Engineering from Stanford University, United States of America. POH ENG SENG was appointed as Chief Executive Officer on 16 February 2008. He is also the Group’s Executive Director since 26 February 2007. Prior to this, Mr Poh was Director of Strategic Planning and Business Development from July 2006 where he is critical in the development and execution of the Group’s growth strategy as it expands its geographical footprints.

Poh Eng Seng Chief Executive Officer / Executive Director

Before joining Xpress, Mr Poh was with global logistics specialist DHL Express for 17 years from 1989-2006 holding senior executive position covering general management (Singapore, Mongolia, and North Korea) and strategic planning/business development (Asia Pacific, South East Asia, Greater China, and Korea). He also held senior positions in Singapore’s public transport and mass rapid transit projects with PRMTA and SMRT Ltd from 1980-1989, and Changi Airport Development Division of Public Works Department from 1976-1980. He concurrently holds directorships in Singapore Pools Pte Ltd and Run Service Pte Ltd. Mr Poh graduated with an Honours degree in Civil Engineering from the University of Singapore in 1976 under a Government Merit Scholarship, and a Master of Science degree in Civil Engineering from Massachusetts Institute of Technology (USA) in 1980 under an ITT International Fellowship.

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Board of Directors

DARLINGTON TSENG TE-LIN was appointed as Executive Director on 1 March 2008. He joined Xpress on 2 July 2007 as Director of Business Development for Greater China. In his current role as Director of Business Operations, he is involved in managing the development of the Group’s service offerings and tapping on growing markets in the Asia Pacific region. To sustain the Group’s continuing growth, he is spearheading the re-engineering of operations to strengthen our business model, while enhancing customer service and attracting and nurturing talent.

Darlington Tseng Te-Lin Executive Director

Prior to joining Xpress, Mr Tseng was a Senior Sales Executive with BASF Taiwan Ltd. from 2005-2007. He gained extensive knowledge of the region’s business climate during his tenure with BASF’s regional business unit, where he collected vast market analyses and formulated strong marketing strategies. From 1998-2002, Mr Tseng was an Assistant Sales Manager with AGI Corporation where he helped the company increase its annual turnover by 20% through drastic expansion of the overseas markets, and successfully set up the specialty chemical producer’s new manufacturing plant in Mexico. Mr Tseng graduated with Honours in Beijing International MBA from Peking University. VICTOR KHOO CHOON MENG was appointed as Executive Director on 1 March 2008. He is also the Director of Sales and Marketing responsible for overseeing the sales and marketing of the Group’s core products, including financial and commercial printings. Mr Khoo manages sales team as well as directly involves in acquiring, servicing and retaining key strategic accounts.

Victor Khoo Choon Meng Executive Director

During his tenure with Xpress, Mr Khoo has been exposed to strategic planning, sales and senior management roles. He has standardised Xpress’ sales and customer service methodologies, ensuring consistent products and services are offered across all Print Stations. One of his key achievements was to spearhead Xpress’ Asset Management business, which continues to be a key product under financial printing. Mr Khoo first joined Xpress in 1996 as an Account Manager, servicing the Group’s financial printing clients. Prior to joining Xpress, Mr Khoo worked as a Project Executive with IPC Corporation. His role was to market information technology solutions to government agencies. Mr Khoo graduated from Murdoch University, Western Australia, with a Bachelor of Commerce degree in Finance and Marketing.

Xpress Holdings Ltd Annual Report 2008 | 13

Board of Directors

Christopher Chong Meng Tak Independent Director

CHRISTOPHER CHONG MENG TAK was appointed as an Independent Director on 5 December 2001. Mr Chong brings with him significant knowledge of the capital markets and expertise on Corporate Governance. He co-founded ACH Investments Pte Ltd, a specialist corporate advisory firm, and sits on several boards including ASL Marine Ltd, Koda Holdings Ltd, Lorenzo International Ltd and Sky China Petroleum Engineering Services Ltd which are listed on the Singapore Exchange, and GLG Corp Ltd & Koon Holdings Ltd, listed on the Australian Securities Exchange. Prior to this, Mr Chong was the Chief Executive Officer and an award-winning analyst of HSBC James Capel Securities (Singapore) Pte Ltd. He was formerly an Executive and the Research Director for Kay Hian James Capel Ltd. Mr Chong holds a First Class Honours Bachelor of Science degree from the University College of Wales, a MBA degree from the London Business School and is a member of the Institute of Chartered Accountants of Scotland. He is also a member and ex-Hon Treasurer of the Hong Kong Institute of Investment Analysts, a Fellow of the Hong Kong Institute of Certified Public Accountants, a Fellow of the Singapore Institute of Directors, a Fellow of the Australian Institute of Directors and a Master Stock Broker of the Australian Securities & Derivatives Industry Association. LAI HOCK MENG was appointed as an Independent Director on 1 March 2008. Currently the Managing Director of Tembusu Partners Pte Ltd, Mr Lai has more than 23 years of experience in asset management, treasury management, private banking, investment banking and private equity investments. With his two decades of experience in the global financial industry, Mr Lai brings to the Group his extensive knowledge of the world’s financial and banking system.

Lai Hock Meng Independent Director

Mr Lai is also a fellow of UK Chartered Institute of Marketing and a Chartered Financial Analyst (CFA) of The CFA Institute in the United States of America. He had previously worked with Monetary Authority of Singapore, Deutsche Bank, Societe Generale, Citigroup Private Bank and OCBC Bank. Mr Lai graduated with a Bachelor of Arts Honours degree in Economics from the University of Cambridge in England. DR LEE TSU-DER was appointed as Non-Executive Non-Independent Director on 15 December 2004. Dr Lee provides strategic development and investment guidance to the Group. From 1999-2003, Dr Lee served as General Manager of H&Q Asia Pacific (China). Currently, he is the Vice Chairman of H&Q Asia Pacific (Taiwan). Dr Lee brings to the Group extensive business experience and market knowledge of China, Taiwan and Hong Kong. Dr Lee formerly served as the Chairman for Starbucks Coffee Beijing Limited, and Chairman of Shan Dong Kexing Biotech Company.

Dr Lee Tsu-Der Non-Executive Non-Independent Director

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Board of Directors

With a medical background, Dr Lee joined H&Q Asia Pacific (Taiwan) in 1995 and served as the Chief Advisor for its China Investments. From 1995-1998, Dr Lee played important roles in various key investments in China covering Pharmaceutical, Biotech, Media, and Consumer Goods industry. Dr Lee is currently serving as Independent Director for Hsu Fu Chi International Ltd. Dr Lee obtained his medical degree in dentistry from Taipei Medical University in Taiwan. He is now serving as the Chairman of the Taipei Medical University. JERRY LEE YIN CHIA was appointed as Non-Executive Non-Independent Director on 15 December 2004. He brings to the Group extensive multinational financial knowledge and experience. Mr Lee has worked in various locations with focus on Corporate Finance and M&A. Leveraging on his cross-border financial service experience, Mr Lee has completed several sizeable investment and acquisitions in China. Mr Lee has a Bachelor degree in Finance from New York University and a MBA degree from Peking University in Beijing. Mr Jerry Lee is the son of Dr Lee Tsu-Der, a shareholder of Dermei International Co Ltd. Jerry Lee Yin Chia Non-Executive Non-Independent Director

SAM CHONG KEEN was appointed as Non-Executive Non-Independent Director on 16 February 2008, and served as Chief Executive Officer of the Group from 2006-2008. Between 1997-2002, he led two Singapore Exchange Mainboard-listed companies - as Executive Vice Chairman and Chief Executive Officer of Lion Teck Chiang Ltd, and Managing Director of Lion Asiapac Ltd. He was formerly the Managing Director of Comfort Group Ltd and Vicom Ltd, two companies he had led in taking public. Mr Sam’s prior experience includes, among others, appointment as General Manager of Intraco Ltd. Sam Chong Keen Non- Executive Non-Independent Director

Mr Sam began his career in 1977 in the Ministry of Trade and Industry and left a year later to join the National Trades Union Congress (NTUC). He spent 10 years with the Trade Union movement holding various responsibilities such as Assistant Director (Cooperatives and Business Ventures), Secretary for Co-operatives and Deputy Director (Co-operatives) and General Manager of NTUC Comfort. He has served on various government boards and committees, including the Central Provident Fund Board. He was also appointed as Political Secretary to the Minister for Education from 1988-1991. Mr Sam, a former Singapore Government scholar, holds a Bachelor of Arts with Honours (Engineering Science & Economics) and a Master of Arts degree from University of Oxford, as well as a Diploma from the Institute of Marketing, UK. His directorships include Lion Asiapac Ltd, Stamford Tyres Corporation Ltd and Jade Technologies Holdings Ltd.

Xpress Holdings Ltd Annual Report 2008 | 15

Executive Directors

Darlington Tseng Te-Lin Director Business Operations

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Poh Eng Seng Chief Executive Officer

Victor Khoo Choon Meng Director Sales & Marketing

Key Management

Fong Kah Kuen Founder & Chief Operating Officer

Adeline Chee Choon Lee Head Human Resources

Eleanor Fong Sau Kwan Executive Director Xpress Print Pte Ltd

Thomas Leow Quek Kien Group Financial Controller

Foong Sow Peng Operations Director Xpress Print Pte Ltd

Wu Wei Dong Chief Executive Officer China Operations

Xpress Holdings Ltd Annual Report 2008 | 17

Division Heads BOB LIM is the Head of Business Development team responsible for the Group’s regional investments and project roll-outs. With more than 10 years of experience in business development, strategic planning and administration management, he also has extensive regional working experience in Asia, particularly China and Vietnam. Prior to joining the Group in 2006, he worked for Print Planner (Hong Kong) Limited for over four years since 2002 and served as General Manager in Group Corporate Planning for China Operations. Bob Lim Head Business Development

He graduated with a Bachelor of Science degree in Economics and Management Studies from University of London in 1997.

RONNIE YO NGAN KIA is the Group Senior Finance Manager, and works together with Group Financial Controller in overseeing the financial and accounting matters of the Group. He has 10 years of corporate accounting and auditing work experience with public listed companies. In addition to his professional CPA and ACCA qualifications, he graduated with a Bachelor of Science degree in Economics (Banking and Finance) from University of London in 1997 and a Master of Science degree in Accounting and Finance from United Kingdom’s De Montfort University in 1999. Ronnie Yo Ngan Kia Senior Manager Finance

Ronnie joined the Group on 14 May 2007.

LOW SEOW HUA is the Head of Infrastructure and Technology. He is responsible for the strategic planning, implementation and management of the Group’s IT infrastructure, Management Information System and pre-press technology. He joined the Group on 17 April 1995. Mr Low graduated with a Bachelor of Engineering degree in Electrical from Nanyang Technological University in 1992 and a Technician Diploma in Electronic Engineering from Ngee Ann Polytechnic in 1987. Low Seow Hua Head Infrastructure and Technology

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Division Heads

PETER TOO LEE FOONG is the General Manager of Print Operations. He is in charge of the daily print operations. He brings to the Group his in-depth knowledge and operational experience in print production. Mr Too is one of the pioneers of Xpress having joined the company in 1986.

Peter Too Lee Foong General Manager Print Operations

LIM SHIN EE is the Head of Central Desk, spearheading the division which centrally co-ordinates all business and operational activities within the Group’s network. Her responsibilities include streamlining the operations processes, and ensuring a more cost-effective and timely management of procurement activities, design, printing and fulfilment solutions for the Group’s large base of clients in different global markets. Ms Lim relocated to China for four years, where she was the Deputy Chief Operating Officer of the Group’s subsidiary – Precise Media Group, overseeing its sales, marketing and print operation activities. Lim Shin Ee Head Central Desk

She graduated with a Bachelor of Business degree in Marketing from the University of Newcastle (Australia) in 1997.

LINA CHUA is the Director of Xpress Print. One of the pioneers of Xpress, she has been with the company for more than two decades. Ms Chua joined the company in 1987, and is knowledgeable in the overall process and workflow of the print management industry.

Lina Chua Director Xpress Print Pte Ltd

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CEO’s Statement

Charting the Vision Making it a Reality

Poh Eng Seng Chief Executive Officer

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CEO’s Statement “Since 2006, Xpress has built an admirable network of printing facilities, which stands testament to the success of our regional expansion strategies. This year, the Group is well poised to reap the benefits of our earlier capital investments, and intends to focus on consolidating our operations as well as generating revenue and cash flow from our well-established facilities.” Dear shareholders, I am proud to be leading a talented and forward-looking team which is dedicated to achieving continued success for the Group. In the year under review, Xpress has been developing its business in a very competitive industry environment, ensuring that we have to continuously refine and sharpen our unique total print management model within our 20-location network, while deftly managing the build-up of cost pressures in energy and raw materials. Nonetheless, Xpress once again delivered a strong set of results for FY2008. Operations Review Due to record levels of inflation and the current financial turbulence, FY2008 was a challenging year for the Group. However, by being steadfast in our commitment to providing unparalleled customer service and developing innovative products tailored to meet clients’ changing needs, we achieved a commendable revenue growth of 70.7% in FY2008. Vietnam Operations Our “first mover” Vietnam subsidiary commenced operations in September 2007, and is the first foreign company to receive a license for the provision of specialised financial print services. Leveraging on 30 years of experience in international markets as well as well-established technology, we were fast to penetrate the Vietnam market as a provider of innovative, high-

quality, fast turnaround financial print solutions serving predominantly financial institutions and companies listed on the Ho Chi Minh City Stock Exchange and Hanoi Securities Trading Centre. Our strong capabilities in design, project management and print consultancy were recognised when our Vietnam clients won awards across all categories in the country’s first Vietnam Annual Report Awards in June 2008. In addition, our work for VietFund Management’s Vietnam Growth Investment Fund Annual Report 2007 clinched a prestigious Gold Award at the widely acclaimed International ARC Awards ceremony in New York City. Besides these achievements, Xpress has built up a growing network of repeat customers, which translates into recurring revenue for the Group. China Operations Xpress’ decision to focus on China’s time-sensitive printing market back in 2006 yielded another set of encouraging results as revenue contribution from China almost tripled to S$40.8 million in FY2008, up from S$16.6 million a year ago. The Group’s China operations contributed 66.6% of FY2008 revenue, and accounted for 95.3% of the revenue growth. The main driver of Xpress’ continued strong growth in China is our unique one-stop print business model which leverages on our wide network of Print Stations and print facilities capable of offering split-printing service to clients having large print projects. This had led to signing of two large-value Memoranda of Understanding (“MOUs”). In January 2008, the Group signed MOUs worth at least RMB200 million annually, with seven well-known Chinese publishers, including Xinhua Financial Media Limited. These major deals were closely followed by MOUs worth RMB140 million annually, signed in May 2008 with six premier publishers from Hunan Province. Print Stations The Print Station concept – a conveniently located onestop facility which offers our complete range of advanced pre-press solutions including translation, was well-received by our customers. This allows them to crystallise their design concepts rapidly, know the real-time status of their printing jobs and ensure that their reports are delivered on time to the right destination. To reach out to potential clients, we expanded our Print Station operations in

Xpress Holdings Ltd Annual Report 2008 | 23

CEO’s Statement

Malaysia, as well as set up six Print Stations in Ho Chi Minh City, Vietnam and Wuhan, Xiamen, Changsha, Guangzhou and Shenyang in China. On-Site Print Stations Our Print Station success led to some large customers demanding dedicated on-site services. Following the successful launch of On-Site Print Station concept to three major customers, Xpress set up another 12 On-Site Print Stations in the premises of our customers in the publishing business, largely as part of the MOUs which we have signed. Staffed by Xpress’ creative design team, this unique model provides services such as creative design, translation, layout, photo retouching, electronic imposition and highly accurate colour proofing directly into clients’ offices. By helping publishers enhance efficiency and shorten project management time, our On-Site Print Stations further strengthen the Group’s business partnership with these important clients, thus reinforcing our market leadership position. Financial Review Xpress saw revenue rise to a record S$61.3 million in FY2008, an increase of 70.7% from S$35.9 million in FY2007. For FY2008, the cost of raw materials and consumables increased 133.3% to S$30.1 million due to increased sales revenue, higher paper prices and the emphasis of the Group’s new China business strategy focusing more on time-sensitive commercial printing which uses relatively more paper. As a result, gross profit margin was slightly lower at 51.3%.

million from S$7.0 million a year ago. Excluding exceptional gains, the Group’s profit from operation, on a like-for-like basis, grew 29.9% to S$7.2 million in FY2008 from S$5.6 million in FY2007. In line with our higher net profit, Xpress’ fully diluted earnings per share grew 37% to 0.74 Singapore cent from 0.54 Singapore cent, while net asset value per ordinary share was 8.0 Singapore cents as at 31 July 2008 compared to 7.0 Singapore cents a year ago. Cash and cash equivalents increased to S$12.8 million as at 31 July 2008 from S$3.3 million as at 31 July 2007. The additional cash was mainly from sale of property, plant and equipment as well as the Group’s convertible bond issue. Total shareholders’ equity increased by S$8.7 million to S$111.3 million in FY2008 from S$102.6 million in previous year. Outlook and Prospects Paper prices rose approximately 50% over the past 12 months, while inflation in China, where two-thirds of our business come from, exceeded 5% for 12 consecutive months through July 2008 before slowing to 4.9% in August. Meanwhile, financial markets in the region have not been spared from the adverse effects of the global credit crunch, now developing into a global recession. High inflation and global financial turmoil will continue to challenge all players in the printing industry. While current environment is certainly not ideal for us, our competitive print management model could present some unique opportunities for Xpress.

Staff cost was marginally higher at S$12.0 million in FY2008 as compared to S$10.6 million in FY2007. As a result of higher costs arising from new Print Stations and increased rental costs as we sold and leased back our Singapore headquarters building, a S$4.6 million increase in operating expenses was incurred.

We will capitalise on our unique business model and large customer base to ensure we stay competitive and profitable. Within the Group, our order book remains healthy, bolstered by strong orders from our network of repeat customers for time-sensitive commercial printing in countries such as Vietnam and Singapore and the above mentioned MOUs signed with China publishers.

Despite the higher costs incurred in FY2008, Xpress’ net profit attributable to shareholders (including an exceptional gain of S$3.0 million) rose 44.4% to S$10.2

As the environment becomes more challenging, we see a growing trend of small and medium-sized print players losing their customers to large printers with

24 | Xpress Holdings Ltd Annual Report 2008

CEO’s Statement

strong financial backing. Capitalising on this trend, we believe that there will be opportunities to expand our geographical reach and increase our market share through acquisitions and strategic investment opportunities. Future Plans Since 2006, Xpress has built an admirable network of printing facilities, which stands testament to the success of our regional expansion strategies. This year, the Group is well poised to reap the benefits of our earlier capital investments, and intends to focus on consolidating our operations as well as generating revenue and cash flow from our well-established facilities. Going forward, for future success and sustainability, we will continue to hone our competitive strengths in the niche market segments focusing on the following platforms which will provide a strong differentiating factor in the market: (1) Expanding our business and deepening our penetration further in China and other markets, by leveraging our geographical network of unique Print Stations including dedicated On-Site Print Stations and printing facilities.

(4) Developing and upgrading our Central Desk further to become a more advanced global control hub facility to provide more effective central planning, co-ordinating and monitoring functions to support all print solution projects in the network. (5) Deploying more advanced technologies to drive our product innovations, increase communication effectiveness, introduce Enterprise Resource Planning system, and build creative design tools and galleries. (6) Developing and retaining human talent, to ensure we have a cross-border team of dedicated, skilful, and competitive employees capable of delivering market-leading services that will win and retain customers. Poh Eng Seng Chief Executive Officer

(2) Building strategic alliances and partnerships with potential business partners who can offer complementary benefits, not just in the existing Asian markets but also in our future markets – North America, Europe and Middle East, so that we can achieve our goal to be a global print solution service provider. (3) Continually innovating of our products and services in all markets, driven by our relentless focus on anticipating and exceeding clients’ needs. Our success in utilising our time-sensitive print capabilities to now meet the requirements of commercial clients means that by continuing to offer innovative products and services we can break new and untapped markets.

Xpress Holdings Ltd Annual Report 2008 | 25

Making the Customer King

Victor Khoo Choon Meng Director Sales and Marketing

Sales and Marketing The customer is king; and in the world of printing, this king lives in a highly competitive domain. Changes in technology, demands of customers, last-minute changes in look and feel, and fluctuating cost of delivery and paper all threaten to make the ruler lose his crown. Through our unique business model and dedicated customer service, Xpress has emerged as a key lieutenant of these 'kings' – our customers across the region. Leveraging on our technological knowhow and our commitment to deliver enhanced value to customers, Xpress has consistently sought to enhance print solutions to help our customers solve problems. And what are their concerns? Print customers seek eleventh-hour customisation, lower cost, speedy delivery, confidentiality as well as access to a host of related services such as translation, creative design and desktop publishing. In a paradigm shift in the world of printing, Xpress first rolled out its unique Print Station model in FY2007, followed a year later with the revolutionary On-Site Print Station. Print Station The uniqueness of the Print Station is that it has become a critical link in the customer's workflow process. Through technology, the customer can remotely monitor and control the entire print process, beginning from conceptualisation to final colour proof before relaying the final print order to a print factory in close proximity – less than 18 hours by road transport – to the end-customers. To date, Xpress has established 20 Print Stations spread across the region. The Print Station model allows customers to dramatically reduce turnaround time and cost of delivery. In effect, through technology, we have facilitated the death of distance. On-Site Print Station Taking this even further, Xpress recently unveiled its On-Site Print Station. This enhanced service offering effectively allows Xpress to set up the Print Station in the client’s office. By locating our staff and our technology in the premises of our clients, we allow our clients to access the entire array of print-related solutions and services as if it is an essential part of their own operations. In other words, we have brought the design house, translators, writers and the print factory to their location. Customers can talk to print service providers who can in turn work

on changes and monitor the print process over each other's shoulders, working side by side as a cohesive team. All these breakthroughs have unleashed significant cost advantages and resource savings for our clients. These have in turn allowed them to optimise their resources to achieve greater productivity and profitability. An added advantage is that both Print Stations and On-Site Print Stations allow customers to call 'on-tap' additional resources such as translation and copywriting when needed – anytime. By giving our customers such a distinctive head start, Xpress has itself raised the entry barriers to its competitors. No other print solution provider has come so fast, so far to deliver so much value. Behind these technological breakthroughs lies our unwavering quest to offer enhanced value to customers. We seek to constantly redefine the concept of value – be it speed, cost or quality. The thread which binds the customers and us is our commitment. By so doing, we have developed a strong sense of trust among our customers. Over the next few years Xpress will continue to fine-tune our Print Stations and On-Site Print Stations to achieve even greater efficiencies and economies of scale, as well as profitability at each geographical location. Beyond these developments on the technological front, Xpress has also unveiled new print products such as listed company yearbooks, directories and time-sensitive commercial printing. Indeed, commercial printers which previously did not insist on speed printing now find that enhanced turnaround time is as critical for them as for financial printing clients. This has in turn helped us to win even more commercial printing clients, helping us to enlarge and enhance our product range and balance our product mix more favourably. Technology and commitment, form and substance have come together in a seamless offering, making the customer the king of all his print domain, and Xpress its indispensable lieutenant.

Xpress Holdings Ltd Annual Report 2008 | 27

Product Managers Financial Research Division

Limitations and Disclaimer This publication has been prepared by First NZ Capital Securities Limited (“FNZCS”) for distribution to clients of FNZCS on the basis that no part of it will be reproduced, altered in any way, transmitted to, copied to or distributed to any other person without the prior express permission of FNZCS. The investment views and recommendations in this publication do not constitute specific advice (whether of an investment, legal, tax, accounting or other nature) to any person and therefore may not be suitable for all investors. We recommend that recipients seek advice from their usual advisor before taking any action. The information is published in good faith and has been obtained from sources believed to be reliable, accurate and complete at the time of preparation, but its accuracy and completeness is not guaranteed. To the fullest extent permitted by law, no liability or responsibility is accepted for any loss or damage arising out of the use of or reliance on the information provided including without limitation, any loss of profit or any other damage, direct or consequential. Information, opinions and estimates contained herein reflect a judgement at the date of publication by FNZCS and are subject to change without notice. Research may include material sourced from Credit Suisse Group. Credit Suisse Group shall have no liability to FNZCS or clients or prospective clients of FNZCS or any other person in relation to such research material. The price, value and income derived from investments may fluctuate in that values can go down as well as up and investors may get back less than originally invested. Past performance is not indicative of future results, and no representation or warranty, express or implied, is made regarding future performance. Reference to taxation or the impact of taxation does not constitute tax advice. The levels and bases of taxation may change. Where an investment is denominated in a foreign currency, changes in rates of exchange may have adverse effect on the value, price or income of the investment. FNZCS, its employees and persons associated with FNZCS may (i) hold securities mentioned in this publication (or related securities) as principal for their own account, (ii) may have provided investment advice or investment services in relation to such securities within the last twelve months, and (iii) may have other financial interests, including as a shareholder of FNZCS, in the matters mentioned herein. Investors should assume that FNZCS, its related companies and affiliated persons and Credit Suisse Group, with whom First NZ Capital has a strategic alliance, does and seeks to do investment banking business with companies covered in its research reports. This publication is intended for distribution only to market professional, institutional investor and retail investor clients in New Zealand and other jurisdictions to whom, under relevant law, this publication lawfully may be distributed. It may not be distributed in any other jurisdiction or to any other persons. First NZ Capital Securities Limited is a NZX Firm.

New Zealand Equity Monitor India – Telecom

www.iiflcap.com

October 2008 New Zealand Equity Monitor

Adapting to the demands of time-sensitive document productions, we integrate and optimise resources with production capabilities to deliver a comprehensive array of documents for leading institutions, corporations, funds and investments companies.

Market Outlook Company Analysis Market Data

A Disclosure Document is available from First NZ Capital Securities Limited on request, free of charge. Copyright: First NZ Capital Securities Limited and its related companies, 2008. All rights reserved.

Credit squeeze, tower freeze 4Q2008

Global Product Manager, Financial Research & Corporate Finance

October 2008

Riduwan Zhang

India – Telecom

Contact Details

With technology at the forefront of our development to ensure data management, workflow controls, cost efficiencies and print quality, we have the resources and expertise to offer:  Total project management  Pre-press, including proofing  Design concept and layout  Print production  Delivery and distribution

Corporate Finance Division

Qualitas Medical Group…

Financial Highlights

A Growing Regional Primary Healthcare Services Group

Overview

ROXY-PACIFIC HOLDINGS LIMITED

Time is of the essence for corporate finance printing, and we have the flexibility and expertise to handle the corporate finance clients’ requirements and changes.

4Q2008

Heads I build, tails you lease

ROXY-PACIFIC

ROXY-PACIFIC

HOLDINGS LIMITED

Our Business Model

OUR BUSINESS

A HOMEGROWN SPECIALTY PROPERTY AND HOSPITALITY GROUP

Our Network of Clinics

HOLDINGS LIMITED 50 East Coast Road #03-11 Roxy Square Singapore 428769 Tel : (65) 6440 9878 Fax : (65) 6440 9123

MALAYSIA Qualitas Medical Group Limited

REGION

From editorial support to design and pre-press, we have a dedicated team that works round-the-clock to required timelines while maintaining highest level of confidentiality. Our Corporate Finance products include: IPO red herrings and prospectuses  Merger and acquisition documents  Information Memoranda  Offer documents  Shareholders' circulars  Forms 

Asset Management Division

Jeffry Lautan Global Product Manager, Asset Management

A provider of choice for fund managers, we understand the value of information as the basis of making investment decisions. We work with fund managers to package and deliver the most accurate and relevant information to the investors. Our advanced technology capabilities like automation and digital templates streamline process, reduce timeline, improve cost efficiency and ensure timely delivery. Leveraging on our industry knowledge and network, we have the expertise in producing:  Prospectuses  Annual/Bi-annual reports  Monthly/Quarterly factsheets  Brochures/ Posters/Direct-mailers/Sales kits  White paper research publications

28 | Xpress Holdings Ltd Annual Report 2008

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纽约银行

Product Managers

AnnualReport Report Division Division Annual QUỸ ĐẦU TƯ TĂNG TRƯỞNG VIỆT NAM (VF2)

TSIT WING INTERNATIONAL HOLDINGS LIMITED VIETNAM GROWTH INVESTMENT FUND Annual Report 2006

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TRANSFORMATIONS DREAMS

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We develop annual reports with strategic themes to deliver clients' key messages to shareholders through professional publishing consultancy and produce well-designed annual reports to establish good investor relations.

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Our equity management services include:  Shareholder research and print consultancy  Concept, design and layout  Copywriting and editing  Remote printing and split-printing  Delivery, logistics and distribution

Commercial Printing Division Annual Report Division

ANNUAL REPORT 2007

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newsletters and periodicals  Annual reports  Textbooks and manuals  Stationeries

Large Volume Printing Division Introduction of newer and wider products and services range, and mass marketing is fuelling new demands for information and publications for the broad market.

Gu Yiming Global Product Manager, Large Volume Printing

Our unique quick turnaround print value chain and global network of resources harness the speed and multiple print locations capability to maintain a competitive edge, while ensuring the highest service and print quality for publications and periodic print projects. Our range of Large Volume print services include: Magazines  Periodicals  Journals  Books  Marketing collaterals 

Xpress Holdings Ltd Annual Report 2008 | 29

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30 | Xpress Holdings Ltd Annual Report 2008

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BNP PARIBAS AGRICULTURE (SGD) FUND TSIT WING INTERNATIONAL HOLDINGS LIMITED Annual Report 2006

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The information contained in this document is strictly for distributor use only and should not be disseminated to external parties and/or public. No part of this document may be copied, reproduced or otherwise modified in any manner without the prior written consent of BNP Paribas Asset Management Singapore Limited. Please also refer to the Disclaimer on the last page of this document.

Xpress Holdings Ltd Annual Report 2008 | 31

Efficient Network Delivering First-Class Service

Darlington Tseng Te-Lin Director Business Operations

32 | Xpress Holdings Ltd Annual Report 2008

Business Operations Since joining Xpress in 2007 as the Director of Greater China Business Development, I have recently stepped into the role as Director of Business Operations. The integral mission of the team is to capture the growing financial print demand in the Asia Pacific region with the setup of 20 regional Print Stations to keep Xpress on a path of sustainable growth. In response to challenges in a competitive environment, the team has been re-engineering processes to strengthen our unique business model, while enhancing customer service and attracting and nurturing talent. Re-engineering With Print Stations increasing in numbers and global spread, the workflow has been transformed to a seamless process targeted to improve efficiency after evaluating all elements. The refined process was implemented in consultation with process owners and functional heads, who participated in the development of the handbook – a manual providing guidelines on reporting channels, forms, and information relating to functional and administrative protocols. A customised Enterprise Resource Planning (ERP) system is in the process and is on track to roll out within a year. This will facilitate the timely sharing of integrated data among departments, and assist in the effective control and efficient planning of resources.

In addition, the use of technologies like ISO12647-2 colour management, automated typeset, interactive design gallery and video conferencing have further enhanced efficiency. Talent Development Acknowledging human talent are vital to the success of the Group, we continue to offer competitive training and incentives to attract, retain and develop high-performance teams. We seek to attract talented professionals who share the same objectives and are willing to relocate to support our split-print business. Besides offering good career prospects, we also provide training opportunities at our Singapore or China headquarters, and opportunities to work in their preferred locations. The acceptance of location or new work scope arrangement helps to foster team spirit and enthusiasm among staff, benefitting Xpress with new creative ideas and concepts. Talents are also identified for a jumpstart career path to go through the complete management trainee programme in Singapore headquarters. In spite of turbulent business environment, we have remained focused in our directions, strategies, and product diversification to higher value-added service while remaining adaptable to, and aware of, global changes.

Fortifying the Print Station Model The On-Site Print Stations, which build upon the firstgeneration Print Stations, are designed to meet the needs of customers with personalised service and quality products in a fast-changing business environment. These stations provide immediate value-added services to boost our relationships with clients. Further investments in Shanghai and Kuala Lumpur facilities were made to raise production capacity and print quality. Logistics solutions are also continuously assessed and consolidated to ensure smooth deliveries to multiple destinations.

Xpress Holdings Ltd Annual Report 2008 | 33

Business Development

Bob Lim Head Business Development

Set up in 2006, the Business Development and Strategic Planning team plays an important role to support the Group’s expansion strategies. The main functions of the department are: Product Development To develop new products and services to create stronger differentiation in the market that will improve and extend the product life cycle of the current offerings to attract new customers while retaining the existing ones. To expand Print Stations network globally –including dedicated On-Site Print Stations. Mergers & Acquisitions To focus on mergers, acquisitions and joint ventures by identifying and exploring potential business partners for strategic collaborations to expand our network as well as services to meet our global customers’ needs. Corporate Services To provide support services for corporate compliance, interacting with regulatory authorities and agencies to explore and secure government grants/incentives. To conduct market research on countries, sectors and industries to provide updated information for strategic planning, business reviews and budgeting decisions. Priority activities to drive continuous profitable growth are: Developing key strategies to support Xpress’ global expansion plan  Deploy Print Stations to more than 30 strategic locations by 2009 to increase our customer reach.

34 | Xpress Holdings Ltd Annual Report 2008

Expand our network of Authorised Printers from four to seven by 2010 to support split-printing capability  Seek strategic alliances with potential global print partners in India, the Middle East, Europe and North America. 

Developing new products and services  Identify critical investments in technology to enhance core products and services.  Plan and implement innovative technology driven tools – Graphic Design Gallery (GDG) and Annual Report Gallery (ARG) to enhance our competitive edge. Securing government grants and incentives  Identify and secure grants and support from the authorities for major projects to defray our investment costs and increase our competitiveness. Streamlining and standardising business processes  Produce the corporate handbook with detailed standardised operating procedures and guidelines to ensure consistency in business and operational practices.  Update handbook regularly as changes and improvements are made. Developing post-press strategic logistics plan  Design a logistics plan to strategically strengthen our business model by mapping and improving international, intra and inter-city logistics network so as to deliver a high level of customer service.

Central Desk Split Printing - key unique selling proposition of Xpress... Cuts Cost, Saves Time Print Factories/ Authorised Printers

Delivery Fulfilment

Print Location 1

Final Destination 1

Print Location 2

Final Destination 2

Print Location 3

Final Destination 3

Electronic Transmission Customers

Central Desk

Print Stations Electronic Transmission

Electronic Transmission

Xpress’ regional network of Authorised Printers Split-printing approach brings benefits of shorter time and delivery distance, reduced cost and increased reliability

Lim Shin Ee Head Central Desk

The Group’s main Central Desk facility located in Singapore headquarters plays a pivotal role in the management of its unique print business model within its international network of Print Stations and print factories. It provides central scheduling, resources allocation, co-ordinates and monitors progress and status of all print projects covering the entire process from pre-press, to printing and post-press, including delivery fulfilment. Its key functions serving the network are: Central allocation and co-ordination of print jobs  For efficient control of printing projects, the Central Desk decides on the optimal solution for each print job in accordance with defined job specifications.  Optimise workflow schedules, process management, and production, including split-print management. Costing and pricing controls  Maintains a standardised costing database.  Computes and prescribes costing, and determines optimal competitive quotations.  Ensures all costs and quotations are acceptable for the job specifications, significantly reducing inaccuracy. Central procurement of key materials  Key materials like papers, films, plates etc are procured centrally for economies of scale and quality control.

Ensures lower costs and stable supply of materials, thereby providing more competitive quotations and higher quality of print products.  Allows Xpress to maintain consistency in print colour and quality across split-printing locations. 

Managing Authorised Printers  Selects and manages outsourced printers and other partners to ensure consistent print and delivery quality standards.  Optimise manpower resources and production capacities while minimising cost. Co-ordinates delivery logistics  Understand clients' preference for a central contact point for project status information, the Central Desk oversees and manages post-press delivery solutions by giving advice on the best available logistics and solutions, and provides status updates to clients. The future development plan is to expand and upgrade Central Desk's facility and capacity to cope with the growing business volume and the complexities of different job specifications. Moving ahead, the plan is to expand the scope of Central Desk to incorporate additional sub-regional and local ‘Central Desks’.

Xpress Holdings Ltd Annual Report 2008 | 35

Infrastructure and Technology

Low Seow Hua Head Infrastructure and Technology

Information technology and infrastructure, as an enabler, continues to remain the cornerstone of Xpress' success in delivering market leading time-sensitive print solutions. Xpress' unique print management model relies on the application of technology advancement in information and communication solutions, colour management systems and graphic arts software tools. This has enabled the Group to integrate, manage and monitor the operations of its print value chain from pre-press to print and delivery fulfilment efficiently. To deliver the highest level of service throughout its crossborder network of 20 locations, the Group continues to invest in advanced technologies and systems to modernise its hardware, design and print production workflow efficiency. One of the key priorities is the on-going implementation of the new Enterprise Resource Planning (ERP) system – a fully integrated system to replace existing Production Information System (PIS) and Oracle Financial System. These will contribute to the strengthening of Central Desk control and optimisation of resource and capabilities allocation within its network. Plans are in place to link up all Xpress offices, Print Stations and print facilities with dedicated private networks for data transfers, video conferencing, management information system, ERP and remote helpdesk support.

36 | Xpress Holdings Ltd Annual Report 2008

Xpress is one of few companies in the region to attain Process Standardisation for Offset Printing (PSO) ISO12647-2 certification with implementation of standardisation in printing process control utilising advance measuring instrument and software tools. The certification provides Xpress with professional knowledge in colour management across multiple print locations, productions and PDF creations to facilitate internal controls and delivers high quality print standards. The IT team continues to focus on automating data management, charting and layout work for higher speed and quality consistency. Future development priorities to support the business growth include: Study and implement best practices and guidelines Explore new and advanced pre-press capabilities  Build a team of internal PSO certified experts  Conduct regular internal PSO audits  Introduction of Smart Publishing – a parallel workflow application allowing teams of writers, editors, designers and digital image artists to work simultaneously in a secured environment  

Human Resources Global Staff Strength

Qualification Profile

as at 31 July 2008

as at 31 July 2008

2%

35%

16%

26%

53% 27% 2%

Adeline Chee Choon Lee Head Human Resources

The success of Xpress’ unique business mode lies in its human capital and their dedicated commitment to delivering a strong differentiating factor in the market. Our cross border team of multi-national management and workforce in almost 10 countries provides a stimulating work environment tapping on the attributes and capabilities of our combined team from different cultural, academic and work backgrounds. To ensure that Xpress’ future growth and success is sustainable - recruiting, developing and retaining the right people - will remain a priority.

24% 7%

6% 2%

China

University Degree Holders

Hong Kong

Diploma Holders

Malaysia

Higher NITEC/Technical Holders

Philippines

'A' or 'O' Level Holders

Singapore

Others

Vietnam

higher level of standardisation, superior customer service quality and better product knowledge. Emphasis will also be on sharing of best demonstrated practices (BDPs) and fostering of effective communication between business units. Apart from the various in-house training, talents identified for a jumpstart career path will go through a management trainee programme in Singapore headquarters to prepare them for future management roles. Teambuilding and Staff Welfare

Training and Development Beyond finding the right people, we continue to run skills development programmes at different levels for employees to learn and acquire new knowledge, technologies and work experience in a global environment. This will be vital for both the individual and the organisation to realise their full potential and therefore able to contribute to achieving the vision of the company. One of these programmes is the Group’s staff exchange program which provides opportunities for sales staff, graphic designers and production staff from different parts of the network to undergo training at the Singapore headquarters for a period of three to six months. This will help them to familiarise with the detailed workings of the Group's business model and operational procedures across its network. Such exchange programme will lead to

Staff welfare and teambuilding programmes were organised during the year to foster teamwork, promote healthy and balanced lifestyle and to build closer management-employee working relationship. Highlights of the year were the participation of the annual SGX Bull Run 2007 by joint team of staff and senior management, and a team of multi-functional staff from headquarters participating in an Outward Bound team building program in Pulau Ubin which focused on building trust, perseverance and problem-solving. In February 2008, the Xpress Family Day 2008 was organised in Sentosa for the Group's employees and families. For staff welfare, the company organised the annual SATA staff health checks. Team building programmes within functional teams were also organised.

Xpress Holdings Ltd Annual Report 2008 | 37

Print Stations Singapore Robinson Point Print Station, strategically located in the heart of the Central Business District, is our flagship Print Station serving professionals such as lawyers, auditors, issue managers and others in the area. This provides easy access to getting time-sensitive work turnaround in a comfortable environment within close proximity. Mary Lim General Manager

The station offers pre-press services from design, document layout, digital correction and conversion to printing. Meeting rooms attended by our Customer Service personnel, complete with computers and copiers, are also available for proof-reading and private conferences.

Australia

Adelene Lim General Manager

Australia Print Station functions as the marketing arm of Xpress Print Singapore, with account servicing support located in Melbourne while design and production are backed by Singapore headquarters. Its clients include financial institutions, commercial enterprises, design houses and multi-national corporations with presence in the major cities of Australia and New Zealand.

Malaysia

Alison Wee General Manager

In its 18th year in Malaysia, the Kuala Lumpur Print Station has revamped its business to align with the Group’s Print Station global expansion plan. The strategic relocation of the station to the Central Business District continues to support the listed companies with the provision of fast turnaround, high-volume print solutions. The operation in Malaysia is in line with the Group’s future plan to extend its services to the Islamic finance and corporate industry, and the development of its network into the Middle East region.

38 | Xpress Holdings Ltd Annual Report 2008

Print Stations

Philippines

Agnes Sarmiento General Manager

The Philippines Print Station adopts the same business concept following the success of other Print Stations. The station has provided the Group with creative talents to support both its local and overseas operations. Leveraging on Xpress expanding geographical footprints, the station which traditionally serves a targeted segment has gradually progressed to a more diversified role meeting the objectives of the Print Stations. Through the benefits of regional training programmes, the station is prepared to take on more businesses with increased market opportunities.

Vietnam The Print Station in Ho Chi Minh City, set up in 2007, is the latest addition to the network to capture the anticipated growth following Vietnam’s entry into the WTO.

Kenny Lim General Manager

Within the first year of operation, Annual Reports designed and printed by Xpress won awards in all categories of the Vietnam’s 2007 Annual Report Awards – a tribute to our quality and excellence. One of the Group’s designed Annual Reports was awarded the prestigious Gold Award for Best Annual Report Cover Design/Photo for Banking and Financial Services Sector in the Eastern Hemisphere by International ARC Award organised by Mercomm Inc. Encouraged by the growing client base and market recognition of its service and capability, the Group will continue to explore growth in other key cities such as Hanoi and Danang.

Hong Kong

Yvonne Cheung General Manager

Modelled after Singapore, the Print Station in Hong Kong was set up in 2007 to offer similar professional services to time-sensitive projects demanded by professional agencies. The deployment of dedicated staff on-site provides competitive comprehensive print management services for some of our global financial research clients. The office, supported by our nearby Shenzhen printing plant, also bridges cross-border companies with branch offices in China and Singapore. With continuous growth in China and the region, the station is poised to take on more commercial printing projects and in-house translation services.

Xpress Holdings Ltd Annual Report 2008 | 39

Print Stations China Xpress achieved good growth rate in FY2008. While sustaining the increase in financial and commercial printing, the timely expansion of traditional publication printing increased our revenue source. Our unique one-stop print management service has gained popularity and recognition among customers giving us a competitive edge. This has also opened the door for us to set up an On-Site Print Station in the premises of one Hunan’s leading publishers.

Wu Wei Dong CEO, China Operations

The sales revenue for FY2008 is RMB43 million, up 102% compared to a year earlier. Total assets increased 143% to RMB108 million while net assets rose 21% to RMB14 million compared to last year. In FY2008, we expanded the Print Station network to five new cities in China – Guangzhou, Changsha, Wuhan, Xiamen, and Shenyang – and increased the number of major clients by another 20. In less than two years, our Print Station presence has strategically expanded to the following major cities: Shenzhen, Guangzhou, Chengdu, Changsha, Xiamen, Shenyang, Shanghai, Beijing, and Wuhan. The provision of fast, efficient and high-quality service further reinforces our growth opportunity and long-term client relationships. A number of contracts were signed in FY2008. In January 2008, a three-year RMB200 million print management agreement was signed with seven China major publishers. Another RMB300 million print management contract was signed with six Hunan publishers in May 2008. An exploration trip was also organised for Bank of China Securities to reinforce our commitment to the China print industry. To further increase competitiveness and standardise processes, sales and productivity training were conducted. In addition, an ERP system to streamline operations is in the pipeline for 2009. With stronger foundations in place, the China market is poised for further growth.

Beijing

Li Shu General Manager

Print Planner (Beijing) Co., Ltd Room 102, Block B Risheng Business Center Yongan Dongli, Jianguo Menwai Street Chaoyang District, Beijing China 100022 Tel : (86) (10) 6567 8282 Fax : (86) (10) 6567 8181 Email : [email protected]

Changsha

Liao Xing General Manager

Xpress Print (Shenzhen) Co., Ltd - Changsha Branch Block M3 Hi-Tech Industrial Development Zone Yinpeng Nanlu, Changsha City, Hunan China 410013 Tel : (86) (731) 228 2328 Fax : (86) (731) 228 3328 Email : [email protected]

Chengdu

Ma Li General Manager

Print Planner (Chengdu) Co., Ltd Room 201, Block B1 Luoma Jiari Square Gao Sheng Qiao East Road, Wuhou District Chengdu, Sichuan China 610041 Tel : (86) (28) 8510 9833 Fax : (86) (28) 8510 9834 Email : [email protected]

40 | Xpress Holdings Ltd Annual Report 2008

Print Stations Guangzhou

Lin Xiao Ming General Manager

Xpress Print (Shenzhen) Co., Ltd - Guangzhou branch Room 622, Block A Huaxia Hotel 8 Qiaoguang Road, Guangzhou China 510015 Tel : (86) (20) 8336 5388 Fax : (86) (20) 8336 5328 Email : [email protected]

Shanghai

Sun Jian Jun General Manager

Print Planner (Shanghai) Co., Ltd Room 2005 Longyu Bldg, 1036 Pudong South Road Pudong New District, Shanghai, China 200120 Tel : (86) (21) 5888 3218 Fax : (86) (21) 5888 3219 Email : [email protected]

Shenyang

Jing Ye General Manager

Xpress Print (Shenyang) Co., Ltd Room 103, 21 Beijing Street, Shenhe District Shenyang, Liaoning China 110013 Tel : (86) (24) 2253 2128 Fax : (86) (24) 2251 7068 Email : [email protected]

Shenzhen

Maggie Wei General Manager

Xpress Print (Shenzhen) Co., Ltd 109-110 Zone A Gouwu Gongyuan North Mintian Road, Futian District China 518048 Tel : (86) (755) 8830 2828 Fax : (86) (755) 2531 3766 Email : [email protected]

Wuhan

Zhang Zheng Lin General Manager

Xpress Print (Shenzhen) Co., Ltd - Wuhan Branch Room 05, 30/F International Trade Center 568 Jianshe Road, Jianghan District, Wuhan China 430022 Tel : (86) (27) 6885 0766 Fax : (86) (27) 6885 0786 Email : [email protected]

Xiamen Xpress Print (Shenzhen) Co., Ltd - Xiamen Branch Room 403, Zhongxin Huiyang Building 57 Hubin North Road, Siming District Xiamen, Fujian China 361012 Tel : (86) (592) 533 2238 Fax : (86) (592) 511 8909 Cheng Xiao Ping Email : [email protected]

General Manager

Xpress Holdings Ltd Annual Report 2008 | 41

Investor Relations

Regular proactive, timely and transparent disclosures of clear and accurate updates for informed investment decisions. Xpress’ investor relations programme is a focal and integral part of its commitment to uphold high standards of corporate transparency and governance. The management maintains long-term active relationship with the investing public and community through regular dialogues to provide updates on strategic developments and progress. In addition to the results announcements as part of the regulatory mandatory reporting cycle, post-results meeting were held with analysts and the media to augment their understanding of the Group’s financial results, business directions, ongoing strategies and the industry trends. These are excellent platforms for the management to share our intrinsic value, growth drivers and competitive strengths with potential and existing investors as well as analysts and media. During the year under review, meetings were held with shareholders, analysts and investors. These complement our regular corporate and financial results announcements and news releases. These public broadcasts are available on the corporate website – www.xpressholdings.com

42 | Xpress Holdings Ltd Annual Report 2008

The Group also leveraged on the media to increase public awareness and its equity. Some highlights of our investor relations activities include: Analysts/Media Briefings The management meets with analysts, investors and media regularly to present updates of its financial and operations performance, growth strategies and new initiatives. In FY2007, Xpress held briefings on major activities like the launch of its Print Station facility in Kuala Lumpur, Malaysia. Publications and Newspapers Xpress’ Chief Operating Officer, Mr Fong Kah Kuen, was featured in the February issue of Smart Investor – a monthly investment guide magazine. The article ‘Xpress Holdings Marches Ahead’ tells of the Group’s foray into China’s fast-growing financial and media printing market. Our CEO, Mr Poh Eng Seng, was interviewed by Saigon Times Weekly – one of Vietnam’s leading English language business and economic magazine, on the Group’s successful venture and development plans in Vietnam. The Group’s announcements and news releases received media attention– The Straits Times, The Business Times, Lianhe Zaobao, Zaobao Sunday, The Edge Singapore, Bloomberg, Today and Malaysia’s Nanyang News.

Investor Relations

Broadcast Programmes

Public Seminar

Xpress was featured in Money Week – a popular local Chinese business finance programme providing insights and analyses the business world. The dialogue interview of Mr Sam – one of our Board of Directors and our CEO between the period from 1997-2002, was aired in July 2007.

Mr Fong was one of the key speakers at the Lianhe Zaobao’s China Market Seminar held on 22 September 2007. The Group’s new China strategies, and the market’s opportunities and challenges were discussed.

Mr Fong was also featured in a two-episode exclusive interview with Ms Tung Soo Hua, the popular host of Money Week, in October 2008. The Group’s progression through the years was showcased in the opening feature of Public Insight, a TV programme targeting investors. A 60-second edited version was televised on Bloomberg and CNBC Pacific Feed. Public Launches The successful launch of Kuala Lumpur Print Station in Malaysia on 6 June 2008 was attended by major Malaysian media. An interactive session with the media updated them on the Company’s progress and its success in time-sensitive financial and commercial printing.

Xpress Print (Vietnam) was invited by Dragon Capital Group, KPMG and VietFund Management to partake in a conference attended by more than 150 members of the Vietnam Association of Listed Companies in Ho Chi Minh City on 23 November 2007. Mr Poh, together with Ivan Goh, our Global Product Manager for Annual Report, provided valuable insights into the production of annual reports and how it can deliver the desired massages. Mr Poh also participated in the panel discussion. At Today-HP Total Care Seminar held at Hort Park on 27 August 2008, Mr Fong shared his secret winning recipe on customer service to an enthusiastic crowd. Looking ahead, the Group will continue active investor communication and ensure the disclosure of pertinent information in a timely and professional manner.

On 28 September 2007, an official launch of the Print Station concept was held in Singapore at the Fullerton Hotel to a crowd of investors, analysts, and media.

Xpress Holdings Ltd Annual Report 2008 | 43

Internal Communications

第4版/2008年8月

ISSuE 4/AuguSt 2008

The Group reports events and pertinent information relating to the company through its internal newsletter - Xpressian, and Print Station's newsletter - Xpression.

XPRESSIAN 速印人

A PublIcAtIoN by XPRESS HoldINgS ltd

27 June 2008

速印控股有限公司出版物

Malaysia

Founder & COO’s

Assurance

■ Customer Focus

Dear Customers,

■ Perseverance

Today, we are expanding. In Malaysia, we have upgraded our facilities and new machineries to continue to bring our service level to another greater height. As we embark on this expansion to serve you better, I assure you the Xpress’ spirit of customer service will remain unchanged.

■ Personal Excellence ■ Agility

country Manager Reports

■ Integrity

News Brief ■ Teamwork

Xpress’ Milestones

New Hires

Our entry into post-WTO Vietnam was in response to the growing demand by the Vietnam business community for more specialist time-sensitive financial print services. The demands came not just from the local companies but also from our existing large base of global and regional financial and commercial clients in Asia Pacific. Our first 10 months of operations in Vietnam from our “Print Station” in Vo Thi Sau Street in HCMC has been most encouraging and eventful.

Mr KK Fong

When I first started the business in Malaysia 18 years ago, I gained your support due to our unstinting customer service. Xpress’ success has been brought on with hard work, long hours but also the imaginative use of technology and also the willingness to experiment and suffer setbacks. In Xpress, we not only meet but anticipate your needs, surpassing your expectations upon the delivery of your reports.

■ Responsibility

7 July 2008

Message from Xpress Group CEO

We enjoyed excellent support from the authorities as well as opportunities to work with prominent, leading organisations like Dragon Capital, KPMG, Association of Listed Companies in Vietnam in promoting higher standards of annual reports, etc., to meet the changing demands of the equities market. On behalf of the Xpress team, I wish to thank all our supporters, associates and all our valued clients – both listed and non-listed companies for their collaboration and support given to Xpress. We are particularly pleased that in our first year, our 2007 annual report clients clinched honours in all 4 categories – 1st Prize :SACOMBANK, 2nd Prize : FPT, 3rd Prize : VINAMILK and Award for Best Design/Styling : PV DRILLING. Our heartiest congratulations to each of them and look forward to working with them further raise the quality of annual reports. We will strengthen our relationship with customers by offering a wider range of our print products - annual reports, asset management reports, IPO prospectuses, circulars and corporate communications collaterals. Clients can benefit from Xpress Print Vietnam’s unique print management model which enables it to leverage the Group’s regional print station network in 20 locations served by a number of strategically located print facilities with split-printing capability.

经理总结报告 新闻摘要

Our team led by General Manager, Kenny Lim, looks forward to meeting you to discuss competitive, effective print solutions for your various printing needs. Thank you very much.

速印控股的里程碑

Poh Eng Seng CEO, Xpress Holdings Ltd

最新雇佣情况

Disclaimer: For Internal Circulation Only

Xpress, February 2008

Xpress, August 2008

Xpress, June 2008

Xpress, July 2008

Xpress' management and employees engaging in social activities to foster bonding and team spirit.

44 | Xpress Holdings Ltd Annual Report 2008

COO’s Message

Grooming Leaders Ensuring Continuity

Fong Kah Kuen Founder & COO

Number of Long Service Staff

Number of Long Service Staff by Function

19% 11

5

5

23

8

1

42

5

1 10

6 20

12

24

Number of Long Service Staff by Department

8

2 10

5 - 10 years

Key Executive

Production

Central Desk

11 - 15 years

Head of Department

HR & Admin

Infrastructure & IT

more than15 years

Manager

Pre-press

Finance

Supervisor

Sales & Customer Service

Business Development

Others

46 | Xpress Holdings Ltd Annual Report 2008

Founder & COO’s Message Succession planning is vital to the future growth of Xpress. We have put in place a comprehensive programme to attract and groom talent to take the Group to the next level. With about 460 employees under our wing, we at Xpress have always prided ourselves on being a well-structured company. For the past 30 years, the Group has overcome numerous hurdles, and sustained ourselves through various demanding periods. In view of the Group’s commendable results amid the global financial turbulence, I am confident that Xpress will remain a leader in Asia Pacific’s printing industry. Having said that, we believe that our ability to deliver enhanced shareholder value and outstanding results will, to certain extent, depend on our capability to attract and retain talents, especially at senior management level. Knowing the importance of having a strong management team, I have been developing a business continuity plan for the Group since the time I rejoined Xpress and personally led the Group’s expansion into new geographical markets.

At the general level, we have a well-planned Global Talent Management scheme – a stimulating, dynamic and varied human resource programme designed to identify talents, realise their full potential and accelerate their growth. Through this scheme, we hope to continue in our journey towards talent discovery, and form a team of capable, energetic employees and visionaries. Whether they are fresh graduates with a passion to excel or experienced professionals seeking breakthroughs in their careers, the Group wishes to give these individuals a platform in which they can be nurtured and groomed to be our future leaders. I am delighted that for the past year, I have observed tremendous progress from this talent pool, who has delivered notable outcomes for all tasks assigned to them. With a fitting structured training programme in place, I am another step nearer to the day when I have the freedom to focus on imparting my technical knowledge to the younger staff. I am convinced that Xpress will be able to take on all challenges and conquer all obstacles to excel and become one of the world’s leading print solution providers.

Since 2007, besides bringing in new talents to take up senior positions in Xpress and the Group’s subsidiaries, we have identified upcoming talents and are grooming them to assume strategic roles within the Group. They are given the opportunity to understand different core functions, take on overseas assignments as well as appointments to newly created functions, to groom them into leaders who have in-depth local knowledge and global capabilities. By now, these young talent have taken over a major part of the Group’s daily operations.

Xpress Holdings Ltd Annual Report 2008 | 47

Financial Highlights

48 | Xpress Holdings Ltd Annual Report 2008

Revenue

61.3

(S$’million)

35.9

61.3

28.2 19.8

04

21.8

05

06

07

08

million Revenue Profit After Tax

10.2

(S$’million)

7.0 6.0

10.2

1.6

04

2.0

05

06

07

08

million Profit After Tax Shareholders’ Equity (S$’million)

102.6

111.3

84.3

111.3

14.1 16.0

million Shareholders’ Equity 04

05

06

07

08

Xpress Holdings Ltd Annual Report 2008 | 49

Performance Summary

Includes $35.5m (FY 2006: $16.6m) turnover from PMG Increase mainly due to higher sales of scrap materials in FY 08. Costs increase mainly due to: 1. Higher paper costs and; 2. Increased revenue and sales and; 3. Change in the product mix towards Time-Sensitive Commercial Printing which generally uses more paper than Financial Printing. Increased staff costs is mainly due to: 1. General inflation and; 2. Higher commission payouts to sales staff for the higher revenue targets achieved and; 3. Higher overtime payouts to production staff to meet increased production activities and; 4. Bonus payouts to key performing employees. Other operating expenses increased mainly due to: 1. Higher marketing, travelling, rental and other related expenses due to opening of print stations and; 2. Increased rental costs arising from sale and leaseback of the Group’s leasehold building in Singapore; 3. Higher legal, audit and other professional fees; and 4. Additional allowances for doubtful receivables. The Group recognised a gain of $3.0 million from the sale of a leasehold building in FY 08. Share of JXD’s results declined mainly due to the absence of the one-off exceptional gain from disposal of shortterm quoted securities of $0.86m that was recorded in FY 07. Includes over-provision of current tax in respect of prior years amounting to $75k (FY 2007: $395k)

50 | Xpress Holdings Ltd Annual Report 2008

Consolidated Income Statement

(Year ended 31 July 2008)

FY 2008 $’000

FY 2007 $’000

61,290

35,907



Revenue:

1,110

634

Total revenue 62,400

36,541

Other income

Costs and expenses Changes in inventories of finished goods and work-in-progress 267

(36)

Raw materials and consumables used

(30,127)

(12,911)

Staff costs

(12,001)

(10,638)

(2,696)

(2,210)

(10,459)

(5,858)

2,994

662

Depreciation Other operating expenses Non-operating income

720

1,726

(49)

(212)

Interest income

110

76

Finance cost

(848)

(249)

10,311

6,891

Share of associate’s results Foreign currency losses

Profit before taxation Taxation Profit after taxation

(95)

79

10,216

6,970

10,234

7,087

(18)

(117)

Attributable to: Equity holders of the parent Minority interests

10,216

6,970

Performance Summary

Consolidated Balance Sheets ( At 31 July 2008)



Group 2007 $’000

ASSETS Non-Current Goodwill on consolidation 64,484 Property, plant and equipment 20,477 Investment in associate 8,105 Available-for-sale financial assets 366 Deferred tax assets 24 93,456 Current Inventories 238 Trade and other receivables 22,941 Due from related parties 540 Cash and bank balances 3,323 27,042 Total Assets

120,498

Group 2008 $’000

64,484 18,470 8,825 334 24 92,137 505 37,427 12,813 50,745 142,882

EQUITY Capital and reserves Share capital Reserves Equity attributable to equity holders of the Company

88,272 13,960

88,285 22,687

102,232

110,972

Minority Interests 400 Total Equity 102,632 LIABILITIES Non-Current Interest-bearing borrowings 3,296 Finance lease liabilities 299 Deferred tax liabilities 1,634 5,229 Current Trade and other payables 6,764 Due to a related party 23 Interest-bearing borrowings 3,983 Finance lease liabiliites 356 Income tax payable 1,511 12,637 Total Liabilities 17,866 TOTAL EQUITY AND LIABILITIES 120,498

377 111,349

10,928 1,894 1,634 14,456 10,975 3,769 859 1,474 17,077 31,533 142,882

Goodwill arising from acquisition of PMG

Decrease is mainly due to sale of leasehold building partially offset by purchase of new printing machines. Refers to investment in JXD (includes share of post-acquisition profits)

Includes advance payment of $14.0m (FY 2007: nil) to paper suppliers to secure future paper supply to the Group at current prices.

Increase is mainly due to remaining proceeds from sale of leasehold building and issuance of convertible bonds after redeeming certain long-term loans and payment for purchase of new printing machines for expanded operations.

The long-term loan outstanding at FY 2007 was fully redeemed in FY 2008. The interest-bearing borrowings at end of FY 2008 refers to the liability component of the Convertible Bonds issued.

Increase is mainly due to new property, plant and equipment purchased under finance lease arrangements.

Increase is mainly due to procurement of printing production materials and machineries to support the growing business volume.

Xpress Holdings Ltd Annual Report 2008 | 51

Financial Summary Year ended Jul-08 $’000

Year ended Jul-07 $’000

Change $’000

Change %

61,290

35,907

25,383

70.7%

4,214

1,372

2,842

207.1%

Profit before taxation

10,311

6,891

3,420

49.6%

Net profit attributable to equity holders of the parent

10,234

7,087

3,147

44.4%

The Group INCOME STATEMENT Revenue Interest and other income

BALANCE SHEET 142,882

120,498

22,384

18.6%

Non-current

92,137

93,456

(1,319)

-1.4%

Current

50,745

27,042

23,703

87.7%

Total Assets :

Total Borrowings* :

17,450

7,934

9,516

119.9%

Non-current

12,822

3,595

9,227

256.7%

4,628

4,339

289

6.7%

14,083

9,932

4,151

41.8%

1,634

1,634

12,449

8,298

4,151

50.0%

88,285

88,272

13

0.0%

Current Other Liabilities : Non-current Current

-

0.0%

SHAREHOLDERS’ EQUITY Share capital

22,687

13,960

8,727

62.5%

110,972

102,232

8,740

8.5%

377

400

(23)

-5.8%

Earnings per share (cents) - basic and diluted

0.74

0.54

0.20

37.0%

Reserves

Minority Interests FINANCIAL RATIOS Net tangible assets per share (cents)

3.36

2.73

0.63

23.1%

Working capital ratio (times)

2.97

2.14

0.83

38.9%

Dividend cover (times)

4.66

3.50

1.16

33.3%

* Total borrowings include bank loans and overdraft, and finance lease liabilities.

52 | Xpress Holdings Ltd Annual Report 2008

5-Year Financial Highlights 2004 $’000

2005 $’000

2006 $’000

2007 $’000

2008 $’000

19,776 795

21,839 2,025

28,210 6,142

35,907 6,891

61,290 10,311

785 1,580 (50)

(13) 2,012 (177)

(162) 5,980 (1,031)

79 6,970 117

(95) 10,216 18

1,530

1,835

4,949

7,087

10,234

Gross dividends Final (paid and proposed)

308

371

1,294

2,026

2,195

Net dividends Final (paid and proposed)

246

297

1,061

1,661

1,800

17,743 2 11 6,971 5,950 4,708

16,865 2 11 8,414 6,144 3,114

64,484 18,599 6,373 383 325 23,022 24,852 3,987

64,484 20,477 8,105 24 366 27,042 12,637 5,229

64,484 18,470 8,825 24 334 50,745 17,077 14,456

6,158 5,596 1,915 400

6,189 5,669 3,597 579

75,738 8,120 489

88,272 13,960 400

88,285 22,687 377

0.25 0.05 2.22

0.30 0.06 2.50

0.52 0.10 1.50

0.54 0.12 2.73

0.74 0.13 3.36

12.0% 0.4 1.2 1.1

12.6% 0.2 1.4 1.3

10.0% 0.1 0.9 0.9

7.6% 0.1 2.1 2.1

9.6% 0.2 3.0 3.0

5.0

4.94

3.82

3.50

4.66

Revenue Profit before income tax Taxation Profit after tax Minority interests Net profit attributable to equity holders of the parent

Group Balance Sheet Goodwill on consolidation Property, plant and equipment Investment in associate Deferred tax assets Available-for-sale financial assets Club membership Other non-current assets Current Assets Current Liabilities Non-current Liabilities Shareholders’ Equity - Share capital - Share premium - Reserves Minority Interests Per Share Data (Singapore cents) Earnings per share (cents) - basic and diluted Net Dividend (Final) Net Tangible Assets Financial Ratios Return on Average Shareholders’ Equity Debt Equity Ratio (Times) Current Ratio (Times) Quick Ratio (Times) Dividend Cover (Times)

Xpress Holdings Ltd Annual Report 2008 | 53

Risk Management The management recognises that there are inherent risks in the Group’s business and acquisitions that had been made to expand its business in the PRC and in the other global markets. These risks were carefully assessed, consulted upon and addressed, so that they can be mitigated to the best of our ability to ensure they do not adversely affect operations and results. Our risk management system serves as a comprehensive framework to safeguard our competitive positioning in the region and protect the interest of our shareholders.

Fluctuations in Paper Prices

Global Macroeconomic Environment

The Group has been monitoring closely the volatile fluctuations in paper prices that affects the printing industry, and has thus searched for alternative arrangements to maintain competitiveness and profitability. With our large business volume, the Group is in an advantageous position to negotiate with reliable paper merchants to forecast, plan and procure paper supplies at competitive fixed rates, especially for projects that have been contracted for extended periods. This allows us to secure constant supply of paper at reasonable prices and ensure our services and delivery performance remain high. Hence, the risk of customers switching to other providers will be limited.

The Group is exposed to the various political, economic, market and security risks that confront our global expansion of Print Stations in countries such as Malaysia, Philippines, Vietnam, Hong Kong, the PRC and Australia. The earlier effects of rising inflation and then the current global credit crunch and recession will have some uncertainties affecting the demand and supply aspects of the printing industry. These may potentially affect our operations as well as the operations of our customers and/or suppliers. On the back of these unfavourable business sentiments, the Group is bracing itself for the expected slower demand for some of its financial print products. As part of our strategy to mitigate these risks, the Group has adopted timely measures to cushion the impact of weaker demand for financial printing through its continuing business diversifications into time sensitive commercial printing and providing dedicated on-site print station services for its major existing clients. These strategies have proven favourable. We will continue to monitor closely the changes in the US and Asian economics as well as the PRC macroeconomic environments so that appropriate adjustments to our customer and product mixes, level of service and investments can be made to ensure our continual growth. Our pace of physical expansion into new markets will be scaled down if the external environment remains weak, but we will prioritise our focus on consolidating the strengths of our existing network infrastructure and generating business growth from existing customers through more value-added services...

54 | Xpress Holdings Ltd Annual Report 2008

Paper constitutes approximately 40% of the production expenses, excluding direct labour costs. The printing industry has been vulnerable to the risk of rising paper prices which is determined by demand and supply circumstances on the global and local markets. Increase in paper prices is likely to result in higher production costs, thereby affecting profitability and operating margins if all or a substantial portion of the increased costs cannot be passed on to the customers.

Managing Operational Risks We have continually integrated risk management into our business operations. These include strengthening current planning and control systems, setting corporate guidelines and developing operations handbooks, upgrading IT systems, improving our monthly business reporting and review procedures of business units, functional groups, and executive committee to report to the Board. These practices are regularly reviewed to enhance their effectiveness to ensure that appropriate processes and procedures can be put in place to prevent, manage and mitigate the risks. Each management tier, from corporate headquarters to local ground level, is responsible for identifying and managing operational risks in their functional areas.

Risk Management

Managing Investment Risks Risk evaluation is an integral part of our investment strategy. The group relies on a framework based on a sound financial modelling and analysis for evaluating new projects. All investment proposals are subjected to a rigorous evaluation process that includes thorough market research, testing and benchmarking against the Group’s weighted average cost of capital and due diligence. The key financial projection assumptions are reviewed and sensitivity analyses are conducted on key variables. The potential risks associated with proposed projects and the issues that may prevent their smooth implementation or projected outcomes are identified during the preliminary stage. Management has to seek the approval of the newly formed Investment and Risk Management Committee of the Board of Directors for any investments exceeding a minimum amount (initially set at S$100,000) per unbudgeted investment or divestment before final approval is sought from the Board. Post project appraisals are conducted to draw learning points for future projects.

Xpress Holdings Ltd Annual Report 2008 | 55

Corporate Governance The Board of Directors (the “Board”) is committed to ensuring high standards of corporate governance to protect the interests of shareholders and adheres to the principles and guidelines set out in the Code of Corporate Governance 2005 (the “Code”). Where there are deviations from the Code, appropriate explanations are provided. A. Board Matters The Board’s Conduct of its Affairs Principle 1: Every company should be headed by an effective Board to lead and control the company. The Board is collectively responsible for the success of the company. The Board works with Management to achieve this and the Management remains accountable to the Board. The Board oversees the processes for evaluating the adequacy of internal controls, risk management, financial reporting and compliance. It also approves the broad policies, group strategies and financial objectives of the Company. Major acquisitions were also approved at Board level. To facilitate effective management, certain functions have been delegated by the Board to various Board Committees. The Board Committees operate under clearly defined terms of reference. The Chairman of the respective Committees will report to the Board on the outcome of the Committee meetings. The Board conducts regular scheduled meetings during the year. Ad-hoc meetings are convened when circumstances require. Article 99(2) of the Company’s Articles of Association permits meetings of the Directors to be conducted by means of telephone conference or other methods of simultaneous communication by electronic or telegraphic means. A record of the Directors’ attendances at Board and Board Committee meetings during the financial year ended 31 July 2008 is disclosed as follows:

Board

Audit Committee No. of meetings Attendance

Nominating Committee No. of meetings Attendance

Remuneration Investment and Risk Committee Management Committee# No. of No. of meetings Attendance meetings Attendance

Name of Director

No. of meetings

Attendance

Dr Wang Kai Yuen

5

5

4

4

2

2

5

5

0

0

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Mr Poh Eng Seng

5

5

Not Applicable

Mr Christopher Chong Meng Tak

5

5

4

4

2

2

5

3

0

0

Mr Sam Chong Keen 1

5

4

4

0

Not Applicable

Not Applicable

5

1

Not Applicable

Not Applicable

Dr Lee Tsu-Der

5

2

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Mr Jerry Lee Yin Chia

5

4

4

3

2

2

5

3

0

0

Mr Khoo Choon Meng 2

5

2

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Mr Darlington Tseng Te-Lin 3

5

2

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Not Applicable

Mr Lai Hock Meng

5

1

4

0

Not Applicable

Not Applicable

5

1

0

0

4

# The Investment and Risk Management Committee was formed on 10 March 2008 1 Mr Sam Chong Keen was appointed as a member of the Audit Committee and Remuneration Committee on 10 March 2008 2 Mr Khoo Choon Meng was appointed as a Director on 1 March 2008 3 Mr Darlington Tseng Te-Lin was appointed as a Director on 1 March 2008 4 Mr Lai Hock Meng was appointed as a Director on 1 March 2008 and a member of the Audit Committee and Remuneration Committee on 10 March 2008

56 | Xpress Holdings Ltd Annual Report 2008

Corporate Governance At meetings and as and when necessary, the Directors are provided with regular updates on changes in the relevant laws and regulations to enable them to make well-informed decisions. Where possible and when opportunity arises, the Directors will be invited to locations within the Group’s operating businesses to enable them to obtain a better perspective of the business and enhance their understanding of the Group’s operations. The Company will consider formulating training programmes, if the need arises. Board Composition and Guidance Principle 2: There should be a strong and independent element on the Board, which is able to exercise objective judgement on corporate affairs independently, in particular, from Management. No individual or small group of individuals should be allowed to dominate the Board’s decision making. The Board has maintained a strong and independent element, with three out of the nine directors being independent and making up one-third of the Board. The Board comprises the following members: Executive Directors Mr Poh Eng Seng Mr Darlington Tseng Te-Lin (appointed on 1 March 2008) Mr Khoo Choon Meng (appointed on 1 March 2008) Non-Executive Directors Dr Wang Kai Yuen (Chairman, Independent) Mr Christopher Chong Meng Tak (Independent) Mr Lai Hock Meng (Independent) (appointed on 1 March 2008) Dr Lee Tsu-Der Mr Jerry Lee Yin Chia Mr Sam Chong Keen (remain as a Director following his retirement as CEO on 16 February 2008) The Company has a good balance of directors who have extensive business, financial, accounting and management experience. The objective judgement of the independent and non-executive directors on corporate affairs and their experience and contributions are valuable to the Company. The profiles of the directors are set out on page 12 of this annual report. The Board’s structure, size and composition is reviewed annually by the Nominating Committee who is of the view that the current size of the Board is appropriate, taking into account the nature and scope of the Group’s operations, to facilitate effective decision making. The Nominating Committee is satisfied that the Board comprises directors who as a group provide core competencies such as accounting, finance, business and management experience, industry knowledge, strategic planning experience and customer-based experience and knowledge to lead the Company effectively.

Xpress Holdings Ltd Annual Report 2008 | 57

Corporate Governance Chairman and Chief Executive Officer Principle 3: There should be a clear division of responsibilities at the top of the company – the working of the Board and the executive responsibility of the company’s business – which will ensure a balance of power and authority, such that no one individual represents a considerable concentration of power. The Company practises a clear division of responsibilities between the Chairman and the Chief Executive Officer (“CEO”) since its listing on the Singapore Exchange Limited in 1999. This ensures an appropriate balance of power between the Chairman and the CEO and thereby allows for increased accountability and greater capacity of the Board for independent decision-making. The Chairman and the CEO are not related to each other. The primary role of the Chairman, who performs a non-executive function, is to lead the Board effectively in all aspects, promote high standards of corporate governance and ensure that the directors receive accurate, timely and clear information. The Chairman also encourages regular and effective communications between the Board and Management, among the directors, and the shareholders. The CEO implements the Board’s strategic directions and ensures compliance with regulatory standards and corporate governance guidelines. The CEO also manages the daily running of the Group’s operations. Board Membership Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board. The Nominating Committee (“NC”) is established for the purposes of ensuring that there is a formal and transparent process for all Board appointments. The NC comprises the following three members, majority of whom are independent non-executive directors:Dr Wang Kai Yuen (Chairman) Mr Christopher Chong Meng Tak (Member) Mr Jerry Lee Yin Chia (Member) The NC has adopted written terms of reference defining its membership, administration and duties. Some of the duties and responsibilities of the NC include: a) to make recommendations to the Board on all board appointments having regard to the director’s contribution and performance; b)

determining annually whether or not a director is independent; and

c) deciding whether a director is able to and has adequately carried out his duties as a director of the Company in particular where the director concerned has multiple board representations. Each member of our NC shall abstain from voting on any resolution in respect of his re-nomination as a director. The search and nomination process for new directors, if any, will be through search companies, contacts and recommendations that go through the normal selection process, to cast its net as wide as possible for the right candidates. The Company’s Articles of Association requires one-third of the Directors or the number nearest to one-third, other than the Managing Director to retire by rotation at every Annual General Meeting (“AGM”).

58 | Xpress Holdings Ltd Annual Report 2008

Corporate Governance Board Performance Principle 5: There should be a formal assessment of the effectiveness of the Board as a whole and the contribution by each Director to the effectiveness of the Board. The  NC  has  established  processes and objective performance criteria for evaluating  the effectiveness of the Board.  A Board performance evaluation exercise  is conducted on an annual basis and the findings are presented to the NC and the Board. The Chairman of the NC would act on the results of the performance evaluation and where appropriate, propose new members be appointed to the Board or seek the resignation of directors, in consultation with other members of the NC. Each member of the NC shall abstain from voting on any resolution in respect of his performance as a director. Notwithstanding that some of the Directors have multiple board representations, the NC is satisfied that each Director is able to and has been adequately carrying out his duties as a director of the company. The Board and the NC have endeavoured to ensure that Directors appointed to the Board possess the experience, knowledge and expertise critical to the Group’s business. Access to Information Principle 6: In order to fulfill their responsibilities, Board members should be provided with complete, adequate and timely information prior to Board meetings and on an on-going basis. Management provides the Board with adequate and timely information as well as a review of the Group’s performance prior to the Board meetings. The Board has separate and independent access to the Group’s senior management and company secretary, should they have any queries on the affairs of the Group. Should the Directors, whether as a group or individually, require independent professional advice, the company will bear the expenses incurred if such advice is required to enable the directors to discharge their duties professionally. Prior to each Board and Board committee meeting, notice of meeting is issued to the Board and Board Committee members containing information on the agenda and documents to be reviewed. The Company Secretary attends all Board meetings and is responsible for ensuring that Board procedures are followed and that applicable rules and regulations (in particular the Companies Act and the SGX-ST Listing rules) are complied with. B. Remuneration Matters Procedures for Developing Remuneration Policies Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration packages of individual directors. No director should be involved in deciding his own remuneration. The Remuneration Committee (“RC”) is established for the purposes of ensuring that there is a formal and transparent process for developing policy and fixing the remuneration packages of individual directors. On 10 March 2008, some changes were made to the composition of the RC. Messrs Sam Chong Keen and Lai Hock Meng were appointed as members of the RC in place of Messrs Christopher Chong Meng Tak and Jerry Lee Yin Chia. As a result, the RC comprises the following three members, majority of whom are independent non-executive directors:

Xpress Holdings Ltd Annual Report 2008 | 59

Corporate Governance Dr Wang Kai Yuen (Chairman) Mr Sam Chong Keen (Member) Mr Lai Hock Meng (Member) The RC has adopted written terms of reference defining its membership, administration and duties. Some of the duties and responsibilities of the RC include: a) recommending to the Board a framework of remuneration for the Board and key executives; b) determining specific remuneration packages which should cover all aspects of remuneration including but not limited to directors’ fees, salaries, allowances, bonuses, options and benefits in kind for each Executive Director, the CEO and senior management including but not limited to senior executives, divisional directors and those reporting directly to the Managing Director, Chairman, CEO and employees related to the executive directors and controlling shareholders of the Group; c) reviewing and recommending to the Board the terms of renewal of service contracts of Directors; d) the RC’s recommendations would be made in consultation with the Chairman of the Board and submitted for endorsement by the entire Board; e) administers the Company’s Executive Share Option Scheme; f) to retain such professional consultancy firm as the committee may deem necessary to enable it to discharge its duties hereunder satisfactory; and g) considering the various disclosure requirements for Directors’ remuneration, particularly those required by regulatory bodies such as the SGX-ST, and ensure that there is adequate disclosure in the financial statements to ensure and enhance transparency between the Company and relevant interested parties. No Director shall participate in decisions on his own remuneration. Level and Mix of Remuneration Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the directors needed to run the company successfully but the company should avoid paying more for this purpose. A significant proportion of executive directors’ remuneration should be structured so as to link rewards to corporate and individual performance. It is the Group’s policy to set a level of remuneration that is appropriate to attract, retain and motivate the directors. The independent non-executive directors receive directors’ fees in accordance with their level of contribution, taking into account factors such as effort and time spent and responsibilities of the directors. The Board may, if it considers necessary, consult experts on the remuneration of non-executive directors and would recommend the remuneration of the non-executive directors for approval at the Annual General Meeting (“AGM”). The RC regularly reviews the level of remuneration to ensure that it is appropriate as compared to other listed companies of similar size. In view of the expanded scope of work of the non-executive directors, the RC recommended to the Board to revise the basic fee for each non-executive director from $25,000 to $30,000 per annum with effect from the financial year ended 31 July 2008. The fees for non-executive directors are set in accordance with a remuneration framework recommended by the Singapore Institute of Directors. It comprises two components – basic fee and committee fee. They are paid only after obtaining approval from shareholders at the AGM. Executive directors do not receive fees for sitting on the Board and Board committees.

60 | Xpress Holdings Ltd Annual Report 2008

Corporate Governance Fee structure for non-executive directors $ Basic fee Board chairmanship AC chairmanship Other committee chairmanship Committee membership

30,000 15,000 10,000 3,000 1,000

Disclosure on Remuneration Principle 9: Each Company should provide clear disclosure of its remuneration policy, level and mix of remuneration, and the procedure for setting remuneration in the company’s annual report. It should provide disclosure in relation to its remuneration policies to enable investors to understand the link between remuneration paid to directors and key executives, and performance. A breakdown showing the level and mix of each individual Director’s remuneration for the financial year ended 31 July 2008 is disclosed in the table below: Name of Directors Sam Chong Keen Poh Eng Seng Khoo Choon Meng2 Darlington Tseng3 Dr Wang Kai Yuen Dr Lee Tsu-Der Jerry Lee Yin Chia Christopher Chong Peter Lai Hock Meng4

Remuneration band ($) $250,000 to $499,999

$0 to $249,999

Salary (%) #

Bonus (%)

Fees (%)

Total (%)

0 26

0 0

100 100

94 93 0 0 0 0

6 7 0 0 0 0

0 0 100 100 100 100

100 100 100 100 100 100

0

0

0

0

100 74

1

Note: (#) 1 2 3 4

includes leave pay, shared-based payments, car benefits, employer’s CPF. This is the fair value of Mr Sam Chong Keen’s remuneration paid in shares. Khoo Choon Meng was appointed as Executive Director on 1 March 2008, as such the remuneration covered the period 1 March to 31 July 2008. Darlington Tseng Te-Lin was appointed as Executive Director on 1 March 2008, as such the remuneration covered the period 1 March to 31 July 2008. Peter Lai Hock Meng was appointed as Independent Director on 1 March 2008.

Details of share options granted to the directors are set out in the Directors’ Report on page F 02 to F 06 of this annual report. The Company has not disclosed the remuneration of its key executives as it is not in the best interests of the Company and the employees to disclose such details due to the sensitive nature of such information. There is no immediate family member of a director or the CEO whose remuneration exceeds S$150,000 during the financial year.

Xpress Holdings Ltd Annual Report 2008 | 61

Corporate Governance C. Accountability and Audit Accountability Principle 10: The Board should present a balanced and understandable assessment of the company’s performance, position and prospects. One of the Board’s principal duties is to protect and enhance the long-term value and returns to the shareholders of the Company. The accountability of the Board to the shareholders is demonstrated through the presentation of the periodic financial statements as well as the timely announcements and news releases of significant corporate developments and activities so that the shareholders can have a detailed explanation and balanced assessment of the Group’s financial position and prospects. The Management presents to the Audit Committee the interim and full-year results. The Audit Committee reviews the results and recommends them to the Board for approval. The Board approves the results and authorizes the release of the results to the SGX-ST and the public via SGXNET as required by the SGX-ST Listing Manual. Audit Committee Principle 11: The Board should establish an Audit Committee (“AC”) with written terms of reference which clearly set out its authority and duties. On 10 March 2008, Messrs Sam Chong Keen and Lai Hock Meng were appointed member of the AC. As a result, the AC comprises the following five members, majority of whom are independent non-executive directors:Mr Christopher Chong Meng Tak Dr Wang Kai Yuen Mr Jerry Lee Yin Chia Mr Sam Chong Keen Mr Lai Hock Meng

(Chairman) (Member) (Member) (Member) (Member)

The profile of each member of the AC is set out on page 12 of this report. The Board is of the view that the members of the AC are appropriately qualified, having accounting or related financial management expertise or experience as the Board interprets such qualification, to discharge their responsibilities. As a sub-committee of the Board of Directors, it assists the Board in discharging their responsibility to safeguard our assets, maintain adequate accounting records, and develop and maintain effective systems of internal control, with the overall objective of ensuring that our management creates and maintains an effective control environment in our Group. The AC will also review and supervise the internal audit functions of the Group. Our AC will provide a channel of communication between our Board, our management and our external auditors on matters relating to audit. Our AC has adopted written terms of reference defining its membership, administration and duties. Duties and responsibilities of the AC include: a) review with the external auditors the audit plan, their evaluation of the system of internal accounting controls, their letter to management and the management’s response;

62 | Xpress Holdings Ltd Annual Report 2008

Corporate Governance b) review the interim and annual financial statements and balance sheet and profit and loss accounts before submission to our Board for approval, focusing in particular on changes in accounting policies and practices, major risk areas, significant adjustments resulting from the audit, compliance with accounting standards and compliance with the Listing Manual and any other relevant statutory or regulatory requirements; c) review the scope and results of the audit and its cost effectiveness and the independence and objectivity of the external auditors. Where the auditors also supply a substantial volume of non-audit services to the Company, the AC would keep the nature and extent of such services under review, seeking to balance the maintenance of objectivity and value for money; d) review the internal control procedures and ensure co-ordination between the external auditors and our management, and review the assistance given by our management to the auditors, and discuss problems and concerns, if any, arising from the interim and final audits, and any matters which the auditors may wish to discuss in the absence of our management at least annually; e) review and discuss with the external auditors any suspected fraud or irregularity, or suspected infringement of any relevant laws, rules or regulations, which has or is likely to have a material impact on our Group’s operating results or financial position, and our management’s response; f) consider the appointment or re-appointment of the external auditors and matters relating to the resignation or dismissal of the auditors; g) review interested person transactions (if any) falling within the scope of Chapter 9 of the Listing Manual; h)

review potential conflicts of interest, if any;

i) undertake such other reviews and projects as may be requested by the Board, and will report to the Board its findings from time to time on matters arising and requiring the attention of the AC; and j) generally undertake such other functions and duties as may be required by statute or the Listing Manual, or by such amendments as may be made thereto from time to time. In the event that any Director has a personal material interest in any contract or proposed contract or arrangement, he will abstain from reviewing that particular transaction or voting on the particular resolution. Apart from the duties listed above, the AC shall commission and review the findings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore law, rule or regulation which has or is likely to have a material impact on our Company’s operating results and/or financial position. In performing its functions, the AC has explicit authority to investigate any matter within its terms of reference, having full access to and co-operation by management and full discretion to invite any director or executive officer to attend meetings, and reasonable resources to enable it to discharge its function properly. In accordance with the Code, the AC has in place a ‘whistle-blowing’ policy to provide arrangements whereby concerns on financial improprieties or other matters raised by ‘whistle-blowers’ may be investigated and appropriate follow up action taken.

Xpress Holdings Ltd Annual Report 2008 | 63

Corporate Governance Internal Controls Principle 12: The Board should ensure that the Management maintains a sound system of internal controls to safeguard the shareholders’ investments and the company’s assets. The Board ensures that Management maintains a sound system of internal controls to safeguard shareholders’ interest and the Group’s assets, and to manage risks. The Board also acknowledges that no cost effective internal control system will preclude all errors and irregularities. A system is designed to manage rather than eliminate the risk of failure to achieve business objectives, and can provide only reasonable and not absolute assurance against material misstatement or loss. With the assistance of the Internal Auditors and through the Audit Committee, the Board reviews the effectiveness of the key internal controls, provides its perspective on management control and ensures that the necessary corrective actions are taken on a timely basis. There are procedures in place for both the internal and external auditors to report independently conclusions and recommendations to Management and the Audit Committee. In addition to the above measures and systems in place, bearing in mind the guidance of Principle 12 of the Code, the Board, on 10 March 2008, established the Investment and Risk Management Committee (“IRMC”) to assist the Board in fulfilling its oversight responsibilities in investment and risk management. The IRMC comprises the following four members, three of whom are independent non-executive directors:Dr Wang Kai Yuen (Chairman) Mr Chong Meng Tak, Christopher (Member) Mr Lai Hock Meng (Member) Mr Jerry Lee Yin Chia (Member) The IRMC has adopted written terms of reference defining its membership, administration and duties. Some of the duties and responsibilities of the IRMC include: a) consider, evaluate, review and, if deemed fit, recommend to the Board proposed investments, acquisitions and disposal of assets of the Company and its subsidiaries exceeding a defined threshold amount (initially set at S$100,000) per unbudgeted investment or divestment; b) review and recommend to the Board proposed investments and acquisitions of the Company and its subsidiaries which do not fall within the Company’s core businesses but which are considered strategic investments for the long-term prospects of the Company; c)

reviewing, evaluating and approving the risk profile and risk mitigation strategies of each investment;

d) reviewing, evaluating and approving procedures governing Company’s investment activities and ensuring all decisions comply with all applicable laws, regulations and guidelines relating thereto; and e) monitoring the processes of investment management to ensure that they are being implemented in a professional and controlled manner according to plan.

64 | Xpress Holdings Ltd Annual Report 2008

Corporate Governance Internal Audit Principle 13: The Company should establish an internal audit function that is independent of the activities it audits. The Company has outsourced its internal audit function. The scope of internal audit is to:    

Review the effectiveness of the Group’s internal controls; Provide assurance that key business and operational risks are identified and managed; Internal controls are in place and functioning as intended and Operations are conducted in an effective and efficient manner.

The internal auditors are able to meet the standards set by nationally or internationally recognized bodies, including the Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors. The annual internal audit plan is prepared in consultation with, but independently of Management, and submitted to the AC for approval. The internal auditors report directly to the AC. Communication with Shareholders Principle 14: Companies should engage in regular, effective and fair communication with shareholders. The Company endeavours to communicate regularly, effectively and fairly with its shareholders. Timely, as well as, detailed disclosure is made to the public in compliance with SGX-ST guidelines. The Company does not practice selective disclosure. All price sensitive information is announced on the SGXNET on a timely basis. Shareholders are kept informed of developments and performance of the Group through announcements published via SGXNET and the press when necessary as well as in the annual report. Other announcements are also made on an ad-hoc basis where applicable as soon as possible to ensure timely dissemination of the information to shareholders. Principle 15: Companies should encourage greater shareholder participation at AGMs, and allow shareholders the opportunity to communicate their views on various matters affecting the Company. All shareholders of the company receive the annual report of the company and notice of AGM within the mandatory period. Participation of shareholders is encouraged at the company’s general meetings. To facilitate voting by shareholders, the company’s article allows shareholders to appoint not more than two proxies to attend and vote at the same general meeting. The Board of Directors (including the Chairman of the respective Board committees), Management, as well as the external auditors will attend the Company’s AGM to address any questions that shareholders may have. D. Dealings In Securities The Company has adopted an Internal Compliance Code on Securities Transactions to Directors and key employees (including employees with access to price-sensitive information to the Company’s shares by these persons) of the Group setting out the code of conduct on transactions in the Company’s shares by these persons, the implications of insider trading and the recommendations of the Best Practices Guide issued by the Singapore Exchange Securities Trading Limited.

Xpress Holdings Ltd Annual Report 2008 | 65

Corporate Governance The Internal Compliance Code also prohibits dealings in securities of the Company by directors and employees during the period commencing at least 4 weeks before the announcement of the half-year and full-year financial results, and two weeks before the announcement of the first and third quarter results and ending on the date of the announcement. E. Interested Person Transactions The Board had reviewed all interested person transactions for the financial year ended 31 July 2008 and was satisfied that the transactions were conducted at arm’s length and do not require any immediate announcement or obtain shareholder approval as defined under the Listing Rules. F. Material Contracts Pursuant to Rule 1207(8) of the Listing Manual, the company confirms that there was no material contract entered into between the company and its subsidiaries which involved the interests of any director or controlling shareholder, either still subsisting at the end of the financial year or if not then subsisting, which was entered into since the end of the previous financial year.

66 | Xpress Holdings Ltd Annual Report 2008

Contents Directors’ Report

F 02

Statement by Directors

F 07

Auditors’ Report

F 08

Balance Sheets

F 09

Consolidated Income Statement

F 10

Statement of Changes in Equity

F 11

Consolidated Cash Flow Statement

F 12

Notes to the Financial Statements

F 13

Statistics of Shareholders

F 61

Notice of Annual General Meeting

F 63

Proxy Form

Directors’ Report The directors submit this annual report to the members together with the audited consolidated financial statements of the Group and balance sheet and the statement of changes in equity of the Company for the financial year ended 31 July 2008. DIRECTORS The directors in office at the date of this report are: Dr Wang Kai Yuen Poh Eng Seng Darlington Tseng Te-Lin Khoo Choon Meng Chong Meng Tak, Christopher Lai Hock Meng Dr Lee Tsu-Der Jerry Lee Yin Chia Sam Chong Keen

(Chairman) (Chief Executive Officer) (Appointed on 1 March 2008) (Appointed on 1 March 2008) (Appointed on 1 March 2008)

ARRANGEMENTS TO ACQUIRE SHARES OR DEBENTURES During and at the end of the financial year, neither the Company nor any of its subsidiaries was a party to any arrangement the object of which was to enable the directors to acquire benefits through the acquisition of shares in or debentures of the Company or of any other corporate body. DIRECTORS’ INTEREST IN SHARES OR DEBENTURES According to the Register of Directors’ Shareholdings kept by the Company for the purposes of Section 164 of the Companies Act, Chapter 50, particulars of interests of directors who held office at the end of the financial year (including those held by their spouses or infant children) in shares and share options of the Company and its related corporations are as follows: Holdings in the name of the director, spouse and/or infant children

The Company Ordinary shares fully paid Dr Wang Kai Yuen Chong Meng Tak, Christopher * Sam Chong Keen Darlington Tseng Te-Lin (Appointed on 1 March 2008) Khoo Choon Meng (Appointed on 1 March 2008)

At beginning of the year / Date of appointment

At end of the year

845,000 15,032,830 15,000,000 11,153,000 360,000

845,000 15,032,830 5,000,000 11,153,000 360,000

Other holdings in which the director is deemed to have an interest

Dr Lee Tsu-Der **

F 02 | Xpress Holdings Ltd Annual Report 2008

At beginning of the year / Date of appointment

At end of the year

137,943,313

137,943,313

Directors’ Report DIRECTORS’ INTEREST IN SHARES OR DEBENTURES (Cont’d) Holdings in the name of the director, spouse and/or infant children At beginning of the year / Date of appointment

At end of the year

Options to subscribe for ordinary shares exercisable between 01.03.2008 and 28.02.2017 at an exercise price of $0.1783 per share Poh Eng Seng

2,000,000

2,000,000

Options to subscribe for ordinary shares exercisable between 10.03.2009 and 09.03.2018 at an exercise price of $0.120 per share Poh Eng Seng Darlington Tseng Te-Lin Khoo Choon Meng

– – –

6,000,000 2,000,000 2,000,000

*

Chong Meng Tak, Christopher has a total beneficial interest in 15,032,830 shares out of which 5,132,830 shares are held in the name of a nominee.

**

Dr Lee Tsu-Der is deemed to be interested in the 137,943,313 shares held by Dermei International Co. Ltd (“DICL”) in the Company by virtue of his controlling interest in DICL.

There was no change in any of the above-mentioned interests in the Company between the end of the financial year and 21 August 2008. DIRECTORS’ BENEFITS Since the end of the previous financial year, no director has received or has become entitled to receive a benefit under a contract which is required to be disclosed under Section 201(8) of the Companies Act, Cap. 50, except as disclosed above and that certain directors received remuneration from related corporations in their capacity as directors and/or executives of those related corporations. SHARE OPTIONS a)

Pursuant to the approval by the members of the Company at the Extraordinary General Meeting held on 25 June 2001, the Company adopted an Xpress Holdings Executives’ Share Option Scheme 2001 (“SOS”). It provides an opportunity for the executives of the Group who have contributed significantly to the growth and prosperity of the Group to participate in the equity of the Company.

b)

Following the adoption of the revised Terms of Reference of the Remuneration Committee (“RC”), the SOS is now administered by the RC. The members of the RC are as follows: Dr Wang Kai Yuen (Chairman) Lai Hock Meng (Appointed on 10 March 2008) Sam Chong Keen (Appointed on 10 March 2008)

Xpress Holdings Ltd Annual Report 2008 | F 03

Directors’ Report SHARE OPTIONS (Cont’d) c)

The number of options available under the SOS shall not exceed 15% of the total issued shares of the Company on the day preceding the relevant date of grant. Options granted under the SOS to full-time employees and Executive Directors of the Group, shall be subject to an option period of 10 years, such period commencing from the date of grant and expiring on the day immediately preceding the 10th anniversary of the date of grant. The Non-Executive Directors of the Group shall be subject to an option period of 5 years, such period commencing from the date of grant and expiring on the day immediately preceding the 5th anniversary of the date of grant. The options are exercisable on the 1st anniversary of the date of grant. Unissued ordinary shares of the Company under options are as follows: Date of grant 25.06.2001 25.06.2001 07.12.2001 07.12.2001 02.05.2003 30.06.2003 11.12.2003 04.12.2006 01.03.2007 01.08.2007 10.03.2008

Balance at 01.08.2007

Addition

Lapsed during the year

Exercised during the year

Balance at 31.07.2008

230,000 236,000 350,000 83,000 26,000 400,000 615,000 4,400,000 3,300,000 – –

– – – – – – – – – 1,000,000 8,000,000

– – – 18,000 – – 48,000 300,000 – – –

– 12,000 – – 26,000 – 236,000 – – – –

230,000 224,000 350,000 65,000 – 400,000 331,000 4,100,000 3,300,000 1,000,000 8,000,000

9,640,000

9,000,000

366,000

274,000

18,000,000

Exercise price

Expiry date

$0.0754 $0.0723 $0.0500 $0.0550 $0.0283 $0.0550 $0.0733 $0.1783 $0.1650 $0.1767 $0.1200

24.06.2011 24.06.2011 06.12.2011 06.12.2011 01.05.2013 29.06.2013 10.12.2013 03.12.2016 28.02.2017 31.07.2017 09.03.2018

During the financial year, a total of 274,000 ordinary shares were issued at prices ranging from $0.0283 to $0.0733 per share, as indicated above. The proceeds of approximately $13,000 were credited to share capital. The weighted average exercise price of the options exercised during the year was $0.0672 (2007: $0.0682). The weighted average remaining contractual life of share options outstanding at the end of the period is 8.6 years (2007: 7.6 years).

F 04 | Xpress Holdings Ltd Annual Report 2008

Directors’ Report SHARE OPTIONS (Cont’d) d)

Information of directors of the Company participating in the SOS are as follows:

Name of participants Dr Wang Kai Yuen Poh Eng Seng Darlington Tseng Te-Lin Khoo Choon Meng

Aggregate Aggregate options options granted since granted since commencement commencement of SOS to the Options granted of SOS to the beginning of the during the end of the financial year financial year financial year 150,000 2,000,000 – –

– 4,000,000 2,000,000 2,000,000

150,000 6,000,000 2,000,000 2,000,000

Aggregate options exercised since commencement of SOS to the end of financial year

Aggregate options outstanding at end of the financial year

(150,000) – – –

– 6,000,000 2,000,000 2,000,000

e)

Since the commencement of the SOS, no participant under the SOS has been granted 5% or more of the total options available under the Scheme.

f)

These options do not entitle the holder to participate, by virtue of such holdings, to any right to participate in any share issue of any other corporation. Except as disclosed above, there were no unissued shares of the Company or its subsdiaries under option granted by the Company at the end of the financial year.

AUDIT COMMITTEE The Audit Committee (“AC”) comprises the following non-executive directors: Chong Meng Tak, Christopher (Chairman) Dr Wang Kai Yuen Jerry Lee Yin Chia Sam Chong Keen (Appointed on 10 March 2008) Lai Hock Meng (Appointed on 10 March 2008) The Audit Committee performs the functions specified by section 201B of the Companies Act, the Listing Manual and the Best Practices Guide of the Singapore Exchange Securities Trading Limited (“SGX-ST”), and the Code of Corporate Governance. These members of the AC have had many years of experience in senior management positions in both the financial and industrial sectors. They have sufficient financial management expertise and experience to discharge the AC’s functions. The Audit Committee meets at least twice a year to perform the following key functions: •

recommend to the Board of Directors the external auditors to be nominated, approve the compensation of the external auditors, and review the scope and results of the audit, and its cost-effectiveness;

•

review with the other committees, management and the external auditors, significant risk or exposures that exist and assess the steps management has taken to minimise such risks to the Company;

•

review with the external auditors the findings of the annual audit;

Xpress Holdings Ltd Annual Report 2008 | F 05

Directors’ Report AUDIT COMMITTEE (Cont’d) •

review with management annually: -

significant internal audit observations during the year and management’s responses; the effectiveness of the Company’s internal controls over management, business and technology systems practices; and any changes required in the planned scope of the audit plan and any difficulties encountered in the course of the audits;

•

review legal and regulatory matters that may have a material impact on the financial statements, related exchange compliance policies, and programmes and reports received from regulators; and

•

report activities and minutes of the AC to the Board of Directors with such recommendations as the AC considers appropriate.

The Audit committee is satisfied with the independence and objectivity of the external auditors and has recommended to the Board of Directors that the auditors, Foo Kon Tan Grant Thornton, Certified Public Accountants, be re-appointed as auditors at the forthcoming Annual General Meeting of the Company. AUDITORS The auditors, Foo Kon Tan Grant Thornton, Certified Public Accountants, have expressed their willingness to accept re-appointment.

On behalf of the Directors

WANG KAI YUEN Chairman Dated: 20 October 2008

F 06 | Xpress Holdings Ltd Annual Report 2008

POH ENG SENG Chief Executive Officer

Statement by Directors In the opinion of the Directors, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company as set out on pages F09 to F60 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 July 2008 and of the results, changes in equity and cash flows of the Group and changes in equity of the Company for the financial year then ended and at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the Directors

______________________ WANG KAI YUEN Chairman Dated: 20 October 2008

______________________ POH ENG SENG Chief Executive Officer

Xpress Holdings Ltd Annual Report 2008 | F 07

Independent Auditors’ Report to the members of Xpress Holdings Ltd We have audited the accompanying financial statements of Xpress Holdings Ltd (“the Company”) and its subsidiaries (“the Group”), which comprise the balance sheets of the Group and the Company as at 31 July 2008, the consolidated income statement and statement of changes in equity of the Group and the Company and the cash flow statement of the Group for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial Reporting Standards. This responsibility includes: (a)

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 income statement and balance sheet and to maintain accountability of assets;

(b)

selecting and applying appropriate accounting policies; and

(c)

making accounting estimates that are reasonable in the circumstances.

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

the consolidated financial statements of the Group and the balance sheet of the Company are properly drawn up in accordance with 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 July 2008 and the results, changes in equity of the Group and of the Company and cash flows of the Group for the financial year ended on that date; and

(b)

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

Foo Kon Tan Grant Thornton Public Accountants and Certified Public Accountants Singapore, 20 October 2008

F 08 | Xpress Holdings Ltd Annual Report 2008

Balance Sheets at 31 July 2008

2008

Group 2007

2008

Company 2007

$’000

$’000

$’000

$’000

64,484 18,470 – 8,825 – 334 24

64,484 20,477 – 8,105 – 366 24

– 536 78,733 6,122 3,918 – 24

– 396 78,637 6,122 – – 24

92,137

93,456

89,333

85,179

505 37,427 – – 12,813

238 22,941 – 540 3,323

– 343 8,941 – 6,281

– 672 5,638 2 321

50,745

27,042

15,565

6,633

142,882

120,498

104,898

91,812

88,285 22,687

88,272 13,960

88,285 4,114

88,272 2,672

Equity attributable to equity holders of the Company Minority interests

110,972 377

102,232 400

92,399 –

90,944 –

Total equity

111,349

102,632

92,399

90,944

10,928 1,894 1,634

3,296 299 1,634

10,928 263 –

– 118 –

14,456

5,229

11,191

118

10,975 – – 3,769 859 1,474

6,764 – 23 3,983 356 1,511

887 363 – – 58 –

549 179 – – 22 –

17,077

12,637

1,308

750

31,533

17,866

12,499

868

142,882

120,498

104,898

91,812

Note Assets Non-Current Goodwill Property, plant and equipment Investment in subsidiaries Investment in associate Due from subsidiaries Available-for-sale financial assets Deferred tax assets Current Inventories Trade and other receivables Due from subsidiaries Due from related parties Cash and bank balances

3 4 5 6 7 8 17

9 10 7 11 12

Total assets Equity Capital and reserves Share capital Reserves

Liabilities Non-Current Interest-bearing borrowings Finance lease liabilities Deferred tax liabilities

Current Trade and other payables Due to subsidiaries Due to a related party Interest-bearing borrowings Finance lease liabilities Income tax payable Total liabilities Total equity and liabilities

13 14

15 16 17

18 7 11 15 16

The accompanying notes form an integral part of these financial statements Xpress Holdings Ltd Annual Report 2008 | F 09

Consolidated Income Statement Year ended 31 July 2008

Revenue Other income

2008

2007

Note

$’000

$’000

20 21(a)

61,290 1,110

35,907 634

62,400

36,541

(36) (12,911) (10,638) (2,210) (5,858) 662 1,726 (212) 76 (249)

Total revenue Costs and expenses Changes in inventories of finished goods and work-inprogress Raw materials and consumables used Staff costs Depreciation Other operating expenses Non-operating income Share of associate’s results Foreign currency losses Interest income Finance cost

22 (a) 22 (b)

267 (30,127) (12,001) (2,696) (10,459) 2,994 720 (49) 110 (848)

Profit before taxation Taxation

21 (f) 23

10,311 (95)

6,891 79

Profit after taxation

10,216

6,970

Attributable to: Equity holders of the parent Minority interests

10,234 (18)

7,087 (117)

10,216

6,970

0.74 0.74

0.54 0.54

21(b) 4 21(c) 21(d) 21(e)

Earnings per share (cents) - Basic - Diluted

24 24

The accompanying notes form an integral part of these financial statements F 10 | Xpress Holdings Ltd Annual Report 2008

Statements of Changes in Equity Year ended 31 July 2008

Group 2007

Company 2008 2007

$’000

$’000

$’000

$’000

88,272 – 13

75,738 12,500 34

88,272 – 13

75,738 12,500 34

–

–

–

–

88,285

88,272

88,285

88,272

RESERVES Equity component of convertible bonds At 1 August Issue of convertible bonds

– 1,617

– –

– 1,617

– –

At 31 July

1,617

–

1,617

–

(176)

145

–

–

(1,131)

(321)

–

–

(514)

–

–

–

Net expense recognised directly in equity

(1,645)

(321)

–

–

At 31 July

(1,821)

(176)

–

–

–

135

–

2008 Note SHARE CAPITAL At 1 August Issue of new shares Issue of shares under share option scheme Transfer from share premium account upon implementation of Companies (Amendment) Act 2005 At 31 July

Currency Translation Reserve At 1 August Translation differences relating to financial statements of foreign subsidiaries Translation loss arising on monetary items forming part of net investment in foreign operations

Share Option Reserve At 1 August Transfer to Accumulated Profit - share options cancelled or lapsed Share option expense

135 21(d)

(10) 182

– 135

(10) 182

– 135

307

135

307

135

Dividend Reserve At 1 August Dividend paid Dividend proposed

– – –

1,035 (1,035) –

– – –

1,035 (1,035) –

At 31 July

–

–

–

–

At 31 July

Accumulated profits At 1 August Dividend paid Transfer from Share Option Reserve Net profit for the year

14,001 (1,661) 10 10,234

6,940 (26) – 7,087

2,537 (1,661) 10 1,304

2,133 (26) – 430

At 31 July

22,584

14,001

2,190

2,537

TOTAL RESERVES

22,687

13,960

4,114

2,672

110,972

102,232

92,399

90,944

400

489

–

–

(5)

28

–

–

Net (expense)/income recognised directly in equity Share of (loss)/profit for the year

(5) (18)

28 (117)

– –

– –

Total recognised income and expense for the year

(23)

(89)

–

–

TOTAL ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT MINORITY INTEREST At 1 August Currency translation differences

At 31 July TOTAL EQUITY

377

400

–

–

111,349

102,632

92,399

90,944

The accompanying notes form an integral part of these financial statements Xpress Holdings Ltd Annual Report 2008 | F 11

Consolidated Cash Flow Statement Year ended 31 July 2008

Note

2008

2007

$’000

$’000

Operating Activities Profit before taxation

10,311

6,891

Adjustments for: Interest expense Interest income Depreciation of property, plant and equipment Property, plant and equipment written off Share of results of associate Gain on disposal of property, plant and equipment - net Share option expense

848 (110) 2,696 10 (720) (2,994) 182

249 (80) 2,210 14 (1,726) (671) 135

10,223 (267) (13,946) 4,211

7,022 36 (7,720) (375)

Cash generated from/(used in) operations Income tax paid

221 (95)

(1,037) (57)

Cash flows generated from/(used in) operating activities

126

(1,094)

Operating profit before working capital changes Inventories Trade and other receivables Trade and other payables

Investing Activities Interest received Purchase of property, plant and equipment (Note A) Proceeds from disposal of property, plant and equipment Cash flows generated from/(used in) investing activities Financing Activities Interest paid Repayment of finance lease instalments Proceeds from convertible bond Proceeds from loans and borrowings Repayment of loans and borrowings Proceeds from issuing shares Due to a related party Deposits pledged Dividend paid to equity holders of the Company Cash flows generated from/(used in) financing activities Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Net effect of exchange rate changes in consolidating subsidiaries Cash and cash equivalents at end of year

12

110 (9,165) 13,921

80 (4,144) 742

4,866

(3,322)

(373) (475) 12,125 3,769 (3,631) 13 (23) (2,401) (1,661)

(212) (460) – 2,000 (1,780) 34 (1,586) – (1,062)

7,343

(3,066)

12,335 (327) (1,596)

(7,482) 7,543 (388)

10,412

(327)

Notes: A.

Property, plant and equipment Acquisition of property, plant and equipment with an aggregate cost of approximately $11.66 million (2007 $4.14 million) was settled by cash of $9.17 million (2007: $4.14 million). The balance of $2.49 million (2006: Nil) was acquired through finance lease arrangements.

The accompanying notes form an integral part of these financial statements F 12 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements These notes form an integral part of the financial statements. The financial statements were authorised for issue by the directors on 20 October 2008. 1

CORPORATE INFORMATION Xpress Holdings Ltd is incorporated in the Republic of Singapore with its principal place of business and registered office at No. 1 Kallang Way 2A, Communications Techno Centre, Singapore 347495. The Company is listed on the Singapore Exchange Securities Trading Limited. The principal activity of the Company is that of investment holding. The principal activities of significant subsidiaries are set out in note 5 to the accompanying financial statements.

2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 2.1

Basis of preparation The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”) including related Interpretations promulgated by the Accounting Standards Council (“ASC”). The financial statements have been prepared on the historical basis except for certain financial assets and financial liabilities which are measured at fair value. The preparation of financial statements requires management to make judgement, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgement about carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected. The critical accounting estimates and assumptions used and areas involving a high degree of judgement are described below: Allowance for doubtful receivables Allowance for doubtful receivables of the Group is based on an evaluation of the recoverability of trade and other receivables. A considerable amount of judgement is required in assessing the ultimate realisation of these receivables, including their current creditworthiness, past collection history of each customer and ongoing dealings with them. If the financial conditions of the counterparties with which the Group contracted were to deteriorate, resulting in an impairment of their ability to make payments, additional allowance may be required.

Xpress Holdings Ltd Annual Report 2008 | F 13

Notes to the Financial Statements 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 2.1

Basis of preparation (Cont’d) Impairment of goodwill The Group determines whether goodwill is impaired at least on an annual basis. This requires an estimation of the value in use of the cash generating unit to which the goodwill is allocated. Estimating the value in use requires the Group to make an estimate of the expected future cash flows from the cash generating unit and also to choose a suitable discount rate to calculate the present value of those cash flows. These assumptions and estimates are disclosed in Note 3. Depreciation of property, plant and equipment Property, plant and equipment are depreciated on a straight-line basis over their estimated useful lives. Management estimates the useful lives of property plant and equipment to be within the range as indicated in the accounting policy for property and equipment and depreciation. 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. Impairment of investment in subsidiaries and associates Determining whether investments in subsidiaries and associates are impaired requires an estimation of the value-in-use of that investment. The value-in-use calculation requires the Group to estimate the future cash flows expected from the cash-generating units and an appropriate discount rate in order to calculate the present value of the future cash flows. Management has evaluated the recoverability of the investment based on such estimates. Income tax The Group has exposure to income taxes in numerous jurisdictions. Significant judgement is required in determining the capital allowances and deductibility of certain expenses during the estimation of the provision for income tax. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax issues based on estimates of whether additional taxes will be due. When the final tax outcome of these matters is different from the amounts that were initially recognised, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made. Share-based Payments Equity-settled share-based payments are measured at fair value at the date of grant. The assumptions of the valuation model used to determine fair values are set out in Note 19.

F 14 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 2.1

Basis of preparation (Cont’d) Interest Bearing Borrowing The Company determines the fair value of the liability component and the equity component of the convertible bonds issued by using the market interest rate for existing borrowing. The liability component of the interest bearing borrowings are subsequently carried at an amortized cost until the liability is fully discharged on conversion or redemption of the bonds. The difference between the proceeds from the bond issue and the fair value of the liability component of the bonds is considered the equity component which would be reflected as part of equity. The Company has used an external valuer to determine the liability component and the equity component of the convertible bonds. In determining the fair values, the valuer has used certain assumptions and estimates. In relying on the valuation report the management has exercised their judgment and is satisfied that the assumptions and estimates used by the valuer are reasonable. Finance Lease liabilities The management use the weighted average effective interest rate in determining the present value of the minimum lease payments. Based on management’s judgment the minimum lease payments payable as at the balance sheet date does not significantly differ from their present values.

2.2

Adoption of new or revised FRS The Group adopted all the new and revised FRSs and INT FRSs that are relevant to its operations and effective for annual periods beginning on or after 1 August 2007, namely: FRS FRS INT INT INT

1 (Amendments) 107 FRS 108 FRS 109 FRS 110

Presentation of Financial Statements relating to Capital Disclosures Financial Instruments: Disclosures Scope of FRS 102 Reassessment of Embedded Derivatives Interim Financial Reporting and Impairment

The adoption of FRS 107 resulted in an expansion of the disclosures in these financial statements regarding the Group’s financial instruments. The Group has also presented information regarding its objectives, policies and processes for managing capital as required by the amendments to FRS. Details of financial instruments and capital disclosures are presented in note 29 to the financial statements. The adoption of these new and revised FRSs and INT FRSs did not result in changes to the Group’s and Company’s accounting policies and has no material effect on the amounts reported for the current or prior years. Except for changes mentioned above, the accounting policies set out below have been applied consistently by the Group and have been applied consistently to all periods presented in these financial statements.

Xpress Holdings Ltd Annual Report 2008 | F 15

Notes to the Financial Statements 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 2.3

FRS not effective Certain new accounting standards and interpretations have been issued and are mandatory for accounting periods beginning on or after the Group’s opening period of 1 August 2007 in relation to the current financial year under review. The Group’s assessment of the impact of adopting those standards, amendments and interpretations that are relevant to the Group is set out below: FRS 23 FRS 108 INT FRS 111

-

Borrowing Costs (Revised) Operating Segments FRS 102 – Group and Treasury Share Transactions

Consequential amendments were also made to various FRSs and INT FRSs as a result of these new or revised standards. The initial application of these FRS or INT FRS is not expected to have any material impact on the Group’s financial statements. The Group has not considered the impact of accounting standards issued after the balance sheet date. 2.4

Consolidation Business combinations The consolidated financial statements relate to the Company and its subsidiaries (together referred to as the “Group”) and the Group’s interests in associate. The results of subsidiaries acquired or disposed of during the year are included in the consolidated income statement from the effective date of acquisition or up to the effective date of disposal, as appropriate. Acquisitions of subsidiaries are accounted for using the purchase method. The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest. Any excess of the cost of the business combination over the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities represents goodwill. The goodwill is accounted for in accordance with the accounting policy for goodwill as described in note 2.5. Any excess of the group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of business combination is recognised in the income statement on the date of acquisition. Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the group. They are presented in the consolidated balance sheet within equity, separately from the parent shareholders’ equity, and are separately disclosed in the consolidated income statement.

F 16 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 2.4

Consolidation (Cont’d) Accounting for subsidiaries and associates Investments in subsidiaries and associates are stated in the Company’s balance sheet at cost less accumulated impairment losses. The accounting policies for subsidiaries and material associates are adjusted to be consistent with the policies adopted by the Group, only where it is material. Subsidiaries Subsidiaries are entities controlled by the Group. Control exists when the Group has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. Associates Associates are those entities in which the Group has significant influence, but not control, over their financial and operating policies. Associates are accounted for using the equity method. The consolidated financial statements include the Group’s share of the income and expenses of associates, after adjustments to align the accounting policies with those of the Group where it is material, from the date that significant influence commences until the date that significant influence ceases. When the Group’s share of losses exceeds its interest in an associate, the carrying amount of that interest (including any long-term investments) is reduced to zero and the recognition of further losses is discontinued except to the extent that the Group has incurred legal or constructive obligations or made payments on behalf of an associate. Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in the consolidated income statement. Transactions eliminated on consolidation Intra-group balances, and any unrealised income or expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements. Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the Group’s interest in the associate. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Xpress Holdings Ltd Annual Report 2008 | F 17

Notes to the Financial Statements 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 2.5

Goodwill Goodwill arising on the acquisition of a subsidiary represents the cost of acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the subsidiary recognised at the date of acquisition. Goodwill is initially recognised as an asset at cost and is subsequently measured at cost and tested for impairment as described in note 2.15. On disposal of a subsidiary, the amount of goodwill attributable to the disposed subsidiary is included in the determination of the profit or loss on disposal. The Group’s policy for goodwill arising on the acquisition of an associate are described under “Associates” in note 2.4.

2.6

Foreign currency transactions and translation Functional currency The individual financial statements of each Group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements of the Group and the balance sheet of the Company are presented in Singapore dollar, which is the functional currency of the Company and the presentation currency for the consolidated financial statements. All financial information presented in Singapore dollars has been rounded to the nearest thousand, unless otherwise stated. Foreign currency transactions Transactions in foreign currencies are translated to the respective functional currencies of the Group entities at the exchange rate at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated to the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are translated to the functional currency at the exchange rate at the date on which the fair value was determined. Foreign currency differences arising on translation are recognised in the income statement except for (i)differences arising on the translation of monetary items that in substance form part of the Group’s net investment in a foreign operation (see below), (ii)available-for-sale equity instruments and (iii)financial liabilities designated as hedges of the net investment in a foreign operation (see note 2.8). The foreign currency translation differences arising from items (i), (ii) and (iii) are recognised in the statement of changes in equity.

F 18 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 2.6

Foreign currency transactions and translation (Cont’d) Foreign subsidiaries and associates The assets and liabilities of foreign operations are translated to Singapore dollars at exchange rates prevailing at the reporting date. The income and expenses of foreign operations are translated to Singapore dollars at average exchange rates. All resulting currency translation differences are recognised in currency translation reserve in equity. Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate. Foreign exchange differences are recognised in the currency translation reserve. When a foreign operation is disposed of, in part or in full, the relevant amount in the currency translation reserve is transferred to the income statement. Net investment in a foreign operation Exchange differences arising from monetary items that in substance form part of the Company’s net investment in foreign operation are recognised in the Company’s income statement. Such exchange differences are reclassified to equity in the consolidated financial statements. When the net investment is disposed of, the cumulative amount in equity is transferred to the consolidated income statement as an adjustment to the profit or loss arising on disposal.

2.7

Property, plant and equipment Property, plant and equipment are stated at cost or valuation less accumulated depreciation and impairment losses, if any. The cost of property, plant and equipment includes expenditure that is directly attributable to the acquisition of the items. Dismantlement, removal or restoration costs are included as part of the cost of property, plant and equipment if the obligation for dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset. Cost may also include transfers from equity of any gains/losses on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset when it is probable that future economic benefits, in excess of the originally assessed standard of performance of the existing asset, will flow to the Group. All other subsequent expenditure is recognised as an expense in the period in which it is incurred.

Xpress Holdings Ltd Annual Report 2008 | F 19

Notes to the Financial Statements 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 2.7

Property, plant and equipment (Cont’d) Depreciation Depreciation is charged so as to write off the cost or valuation of the assets over their estimated useful lives, using the straight-line method, using the following bases: Leasehold building Machinery Motor vehicles Office equipment Fixtures and fittings

60 years or remaining lease period, whichever is lower 10 years 6 years 3 to 10 years 3 to 10 years

Depreciation methods, useful lives and residual values are reviewed, and adjusted as appropriate, at each reporting date. Fully depreciated assets are retained in the financial statements until they are no longer in use. Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or, if there is no certainty that the lessee will obtain ownership by end of the lease term, the asset shall be fully depreciated over the shorter of the lease term and its useful life. Disposal The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amounts of the asset and is recognised in the income statement. 2.8

Financial instruments Non-derivative financial instruments Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, cash and cash equivalents and financial liabilities. The Group’s financial liabilities comprise bank borrowings, finance lease liabilities and trade and other payables. Non-derivative financial instruments are recognised initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs. Subsequent to initial recognition, non-derivative financial instruments are measured as described below. A financial instrument is recognised if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognised if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or transfers substantially all the risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, ie, the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognised if the Group’s obligations specified in the contract expire or are discharged or cancelled. Cash and cash equivalents comprise cash balances and bank deposits. Bank overdrafts that are repayable on demand and which form an integral part of the Group’s cash management are included as a component of cash and cash equivalents for the purpose of the cash flow statement.

F 20 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 2.8

Financial instruments (Cont’d) Available-for-sale financial assets The Group’s investments in equity securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than for impairment losses and foreign exchange gains and losses on available-for-sale monetary items, are recognised directly in equity. When an investment is derecognized, the cumulative gain or loss in equity is transferred to the income statement. Investments at fair value through profit or loss An instrument is classified as at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated as fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value. Upon initial recognition, transaction costs attributable to these investments are recognised in the income statement when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognised in the income statement. Others Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses. Derivative financial instruments The Group has no significant exposure to the financial risks of changes in foreign exchange rates arising from its activities. The Group does not employ the use of any derivative instrument for hedging or speculative purposes. The significant interest rate risk arises from bank loans and borrowings. The Group’s policy is to manage its interest cost using a mix of fixed and variable rate debt and obtain the most favourable interest rates available without increasing its foreign currency exposure. The use of financial derivatives is governed by the Group’s policies approved by the board of directors, which provide written principles on the use of financial derivatives consistent with the Group’s risk management strategy. The Group did not use any derivative financial instruments during the year. Hedge of net investment in a foreign operation Foreign currency differences arising on the translation of a financial liability designated as a hedge of a net investment in a foreign operation are recognised in the Company’s income statement. Such differences are reclassified to the foreign currency translation reserve in the consolidated financial statements, to the extent that the hedge is effective. To the extent that the hedge is ineffective, such differences are recognised in the income statement. When the hedged net investment is disposed of, the cumulative amount in equity is transferred to the income statement as an adjustment to the profit or loss on disposal.

Xpress Holdings Ltd Annual Report 2008 | F 21

Notes to the Financial Statements 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 2.8

Financial instruments (Cont’d) Impairment of financial assets A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-forsale financial asset is calculated by reference to its current fair value. Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in the income statement. Any cumulative loss in respect of an available-for-sale financial asset recognised previously in equity is transferred to the income statement. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost and available-for-sale financial assets that are debt securities, the reversal is recognised in the income statement. For available-for-sale financial assets that are equity securities, the reversal is recognised directly in equity. Intra-group financial guarantees Financial guarantees are classified as financial liabilities. Financial guarantees are recognised initially at fair value. Subsequent to initial measurement, the financial guarantees are stated at the higher of the initial fair value less cumulative amortisation and the amount that would be recognised if they were accounted for as contingent liabilities. When financial guarantees are terminated before their original expiry date, the carrying amount of the financial guarantees is transferred to the income statement. Share capital Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity. Where share capital recognised as equity is repurchased (treasury shares), the amount of the consideration paid, including directly attributable costs, net of any tax effects, is presented as a deduction from equity. Where such shares are subsequently reissued, sold or cancelled, the consideration received is recognised as a change in equity. No gain or loss is recognised in the income statement.

F 22 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 2.8

Financial instruments (Cont’d) Convertible bonds Convertible bonds that can be converted into share capital where the number of shares issued does not vary with changes in the fair value of the bonds are accounted for as compound financial instruments. The gross proceeds from the bond issue are allocated separately between the liability component which represents the implied fair value of the financial liability and equity component which represents the implied fair value of the conversion rights.

2.9

Inventories Inventories are carried at the lower of cost and net realisable value. Cost is determined on a firstin first-out basis and includes freight and handling charges. Cost includes all costs of purchase, costs of conversion and other costs incurred in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business less the estimated costs necessary to make the sale. Work-in-progress comprises mainly uncompleted printing jobs. It is stated at the lower of cost and net realisable value. Cost includes materials, direct labour and variable production overheads. Provision is made for anticipated losses, if any, on work-in-progress when the possibility of loss is ascertained.

2.10 Provisions A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the liability. 2.11 Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases. The Group as lessee Assets held under finance leases are recognised as assets of the Group at their fair value at the inception of the lease or, if lower, at the present value of the minimum lease payments. The corresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Lease payments are apportioned between finance charges and reduction of the lease obligation so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly to profit or loss. Rentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. Contingent rentals arising under operating leases are recognised as expenses in the period in which they are incurred.

Xpress Holdings Ltd Annual Report 2008 | F 23

Notes to the Financial Statements 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 2.11 Leases (Cont’d) The Group as lessee (Cont’d) In the event that lease incentives are received to enter into operating leases, such incentives are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction of rental expense on a straight-line basis, except where another systematic basis is more representative of the time pattern in which economic benefits from the leased asset are consumed. The Group as lessor Rental income from operating leases is recognised on a straight-line basis over the term of the relevant lease unless another systematic basis is more representative of the time pattern in which use benefit derived from the leased asset is diminished. Initial direct costs incurred in negotiating and arranging an operating lease are added to the carrying amount of the leased asset and recognised on a straight-line basis over the lease term. 2.12 Finance costs Interest expense and similar charges are recognised in the income statement using the effective interest method, except to the extent that they are capitalised as being directly attributable to the acquisition, construction or production of an asset which necessarily takes a substantial period of time to be prepared for its intended use or sale. 2.13 Employee benefits Pension obligations The Group and the Company participate in the defined contribution national pension schemes as provided by the laws of the countries in which it has operations. In particular, the Singapore incorporated companies in the group contribute to the CPF, a defined contribution plan regulated and managed by the Government of Singapore, which applies to the majority of the employees. The contributions to national pension schemes are charged to the income statement in the period to which the contributions relate. Employee entitlements to annual leave are recognised when they accrue to employees. Accrual is made for the estimated liability for unconsumed leave as a result of services rendered by employees up to the balance sheet date. Employee share option scheme The Company also has an employee share option plan for the granting of non-transferable options. The Group issues equity-settled share-based payments to certain employees. Equity-settled sharebased payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity-settled share-based payments is expensed on a straight-line basis over the vesting period, based on the group’s estimate of shares that will eventually vest and adjusted for the effect of non marketbased vesting conditions. When the options are exercised, equity is increased by the amount of the proceeds received.

F 24 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 2.14 Income taxes The liability method of tax effect accounting is adopted by the Company. Current taxation is provided at the current taxation rate based on the tax payable on the income for the financial year that is chargeable to tax. Deferred taxation is provided at the current taxation rate on all temporary differences existing at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Deferred tax liabilities are recognised for all taxable temporary differences (unless the deferred tax liability arises from goodwill or the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction, affects neither the accounting profit nor taxable profit or loss). Deferred income tax is provided on all temporary differences arising on investment in subsidiaries and associates, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future. Deferred tax assets are recognised for all deductible temporary differences to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences can be utilized (unless the deferred tax asset arises from goodwill or the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss). The statutory tax rates enacted at the balance sheet date are used to determine deferred income tax. Group tax relief is available for the Singapore incorporated holding company and all its Singapore incorporated subsidiaries with at least 75% equity ownership, directly or indirectly (excluding any foreign shareholdings in the ownership chain) held by Singapore incorporated companies within the Group. Current year’s unabsorbed tax losses and capital allowances are available to be set off against taxable profits of profitable subsidiaries within the Group in accordance with the rules. Loss carry-back is available with effect from Year of Assessment 2006. Current year unabsorbed capital allowances and trade losses of up to $100,000 incurred can be carried back and be set off against the assessable income of the year of assessment immediately preceding the year in which the capital allowance or trade loss arose. The loss carry-back will be given on due claim and subject to satisfaction of the substantial shareholding test and some business test. 2.15 Impairment of non-financial assets The carrying amount of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, the assets’ recoverable amounts are estimated. Goodwill and intangible assets with indefinite useful life and intangible assets not yet available for use are tested for impairment annually and as and when indicators of impairment are identified.

Xpress Holdings Ltd Annual Report 2008 | F 25

Notes to the Financial Statements 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 2.15 Impairment of non-financial assets (Cont’d) An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognised in the income statement unless it reverses a revaluation surplus previously credited to equity, in which case it is charged to equity. Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to the cash-generating units (group of units) and then, to reduce the carrying amount of the other assets in the unit (group of units) on a pro-rata basis. The recoverable amount of an asset is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows 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. For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. An impairment loss in respect of goodwill is not reversed in subsequent periods. In respect of other assets, impairment losses in prior periods are assessed at each reporting date for any indications that the losses have decreased or no longer exist. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. 2.16 Revenue recognition Revenue is recognised when the services have been rendered. Revenue excludes goods and services taxes and is arrived at after deduction of trade discounts. No revenue is recognised if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods. Interest income is recognised on a time-apportioned basis using the effective interest method. Rental income is recognised on a straight-line basis over the lease term. Lease incentives, if any, are recognised as an integral part of total lease income. Penalty payments on early termination, if any, are recognised when incurred. Contingent rents are mainly determined as a percentage of tenant’s revenue during the month and/or based on the landlord’s traffic movement during the month. These leases are for terms of two to three years with options to review at market rates thereafter. 2.17 Segment reporting A segment is a distinguishable component of the group within a particular economic environment (geographical segment) and to a particular industry (business segment) which is subject to risks and rewards that are different from those of other segments.

F 26 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont’d) 2.17 Segment reporting (Cont’d) Inter-segment pricing is determined on an arm’s length basis. Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items mainly comprise income-earning assets and revenue, interest-bearing loans, borrowings and expenses, and corporate assets and expenses. Segment capital expenditure is the total cost incurred during the period to acquire segment assets that are expected to be used for more than one period. Segment information is presented in respect of the group’s geographical and business segments. The primary format, business segments, is based on the group’s management and internal reporting structure. In presenting information on the basis of business segments, segment revenue and segment assets are based on the nature of the products or services provided by the group. Information for geographical segments is based on the geographical location of the principal places of business.

3

GOODWILL Group

Goodwill on consolidation, at cost – at beginning and end of year

2008

2007

$’000

$’000

64,484

64,484

The goodwill acquired in a business combination is allocated, at acquisition, to the cash-generating units (“CGU”) that are expected to benefit from that business combination. At the balance sheet date, the carrying value of goodwill on consolidation of approximately $64.5 million (2007: $64.5 million) is wholly attributable to the acquisition of printing companies in the People’s Republic of China (“PRC”). The recoverable amount of the printing companies in the PRC is determined on a value in use basis using financial budgets approved by the management covering the next five years until FY 2013. The cash flow projections represent the expected print media income less related costs and are based on past experience and expectations for these printing companies in general. Cash flows are projected using the estimated growth rate of 8% (2007: 8%) per annum. The growth rate used is based on historical growth and past experience and does not exceed the currently estimated long-term average growth rate for the business in which the CGU operates. A pre-tax discount rate of 8% (2007: 8%) has been applied to the cash flow projections. The Group believes that any reasonably possible changes in the above key assumptions applied are not likely to materially cause the recoverable amount to be lower than its carrying amount.

Xpress Holdings Ltd Annual Report 2008 | F 27

Notes to the Financial Statements 4

PROPERTY, PLANT AND EQUIPMENT Leasehold building

Office Machinery Motor vehicles equipment

$’000

Cost At 1 August 2006 Exchange differences Additions Disposals Reclassification Written off

12,000 – – – – –

8,375 33 2,556 (1,367) 206 –

1,193 3 108 (90) – –

6,464 25 710 (16) 1,055 (149)

5,251 (21) 770 (1) (1,261) (101)

33,283 40 4,144 (1,474) – (250)

At 31 July 2007

12,000

9,803

1,214

8,089

4,637

35,743

12,000 – – (12,000) –

9,803 (1) 8,689 (1,434) –

1,214 7 956 (139) (11)

8,089 (23) 1,056 (269) (17)

4,637 (44) 961 (2) –

35,743 (61) 11,662 (13,844) (28)

–

17,057

2,027

8,836

5,552

33,472

886 – 222 – – –

4,781 2 712 (1,330) 3 –

196 1 202 (60) – –

5,117 15 766 (11) 552 (149)

3,704 (9) 308 – (555) (87)

14,684 9 2,210 (1,401) – (236)

1,108

4,168

339

6,290

3,361

15,266

1,108 – 93 (1,201) –

4,168 – 1,307 (1,383) –

339 (1) 272 (68) (4)

6,290 (14) 772 (263) (14)

3,361 (10) 252 (2) –

15,266 (25) 2,696 (2,917) (18)

–

4,092

538

6,771

3,601

15,002

At 31 July 2007

10,892

5,635

875

1,799

1,276

20,477

At 31 July 2008

–

12,965

1,489

2,065

1,951

18,470

Accumulated depreciation At 1 August 2006 Exchange differences Depreciation for the year Disposals Reclassification Written off At 31 July 2007 At 1 August 2007 Exchange differences Depreciation for the year Disposals Written off At 31 July 2008

$’000

$’000

$’000

At 31 July 2008

$’000

Total

Group

At 1 August 2007 Exchange differences Additions Disposals Written off

$’000

Furniture and fittings

Carrying value

F 28 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 4

PROPERTY, PLANT AND EQUIPMENT (Cont’d) Motor vehicles Office equipment Company

$’000

$’000

Total $’000

Cost At 1 August 2006 Additions

474 2

3 10

477 12

At 31 July 2007

476

13

489

At 1 August 2007 Additions

476 254

13 15

489 269

At 31 July 2008

730

28

758

Accumulated depreciation At 1 August 2006 Depreciation for the year

9 80

3 1

12 81

At 31 July 2007

89

4

93

At 1 August 2007 Depreciation for the year

89 123

4 6

93 129

At 31 July 2008

212

10

222

Carrying amount At 31 July 2007

387

9

396

At 31 July 2008

518

18

536

(a)

During the financial year, the leasehold building held by a subsidiary at No. 1, Kallang Way 2A, Singapore 347495 was sold for $14.0 million to MacArthurCook Industrial Real Estate Investment Trust (“MacArthur”) and the group recorded a gain on disposal of property amounting to $3.0 million. On completion of the sale, the building was leased back at prevailing market rental rates on a seven year operating lease with an option to renew for another seven years upon expiry.

(b)

Details of the carrying amounts of property, plant and equipment secured under finance lease agreements are as follows: Group

Motor vehicle Plant and equipment

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

650 3,148

434 1,025

419 -

260 -

3,798

1,459

419

260

Xpress Holdings Ltd Annual Report 2008 | F 29

Notes to the Financial Statements 5

INVESTMENT IN SUBSIDIARIES 2008

2007

Company

$’000

$’000

Unquoted equity shares, at cost - Xpress Print (Pte) Ltd - Xpress Print (ShenZhen) Co. Ltd - Precise Media Group Limited - Xpress Print (Vietnam) Co., Ltd

16,500 1,993 66,590 150

16,500 1,993 66,590 54

Impairment loss

85,233 (6,500)

85,137 (6,500)

78,733

78,637

Details of subsidiaries held by the Company are as follows: Country of incorporation / business

Name of subsidiary

Group’s effective equity interest 2008

2007

%

%

Singapore

100%

100%

Providing general printing, multimedia and pre-press work

PRC

100%

100%

Providing general printing, multimedia and pre-press work

British Virgin Islands

100%

100%

Investment holding

Vietnam

100%

-

General printers

Held by subsidiaries Xpress Print (K.L.) Sdn Bhd

Malaysia

100%

100%

General printers

Xpress Media Pte Ltd

Singapore

80%

80%

General printers

Australia

76%

76%

Pre-press work

Hong Kong

100%

100%

General trading

Hong Kong

100%

100%

Provision of one-stop print-related services and printer consultancy services

PRC

100%

100%

Provision of pre-press production related technical support service

Held by Company Xpress Print (Pte) Ltd

Xpress Print (ShenZhen) Co. Ltd

Precise Media Group Limited Xpress Print (Vietnam) Co., Ltd

Xpress Print (Australia) Pty Ltd Xpress Print (H.K.) Limited

(1)

(2)

(3)

Print Planner (Hong Kong) Limited

Print Planner (Shanghai) Limited

F 30 | Xpress Holdings Ltd Annual Report 2008

Principal activities

Notes to the Financial Statements 5

INVESTMENT IN SUBSIDIARIES (Cont’d) Country of incorporation / business

Name of subsidiary

Group’s effective equity interest 2008

2007

%

%

PRC

100%

100%

Philippines

80%

80%

Print Planner (Chengdu) Limited

PRC

100%

100%

Provision of pre-press production related technical support service

Print Planner (Beijing) Limited

PRC

100%

100%

Provision of pre-press production related technical support service

Shenzhen Xpress Print Technology Co., Ltd

PRC

100%

100%

Provision of pre-press production related technical support service

Xpress Print (Shenyang) Co., Ltd

PRC

100%

-

Provision of pre-press production related technical support service

Print Planner (Shenzhen) Limited

Xpress Media Philippines Inc.

(4)

Principal activities

Provision of print-related services and printer consultancy services Pre-press work

Notes on Auditors: The subsidiaries are audited by Foo Kon Tan Grant Thornton, Singapore or its member firms either for statutory audit or consolidation purposes except for the subsidiaries that are indicated as follows: (1)

Audited by BDO Auditing and Accounting Financial Consulting Company, Ho Chi Minh City

(2)

Audited by Anderson Roscoe, Australia

(3)

Audited by Kingston C.P.A. Limited, Hong Kong

(4)

Audited by Fernandez, Santos & Lopez, Philippines

Xpress Holdings Ltd Annual Report 2008 | F 31

Notes to the Financial Statements 6

INVESTMENT IN ASSOCIATE Group

Unquoted shares, at cost Group’s share of pre-acquisition net assets Group’s share of post acquisition results Goodwill on acquisition Exchange differences

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

3,314 2,774 2,808 (71)

3,314 2,054 2,808 (71)

6,122 -

6,122 -

8,825

8,105

6,122

6,122

Details of the group’s associate are as follows:

Name of associate

Shenzhen Jiaxinda Printing Co., Ltd

Country of incorporation / business

PRC

Group’s effective equity interest 2008 2007 %

%

30%

30%

Principal activities

Provision of printrelated services

Summarised financial information in respect of the Group’s associate is set out below: 2008

2007

$’000

$’000

33,882 19,571 (20,856) (3,181)

30,053 24,143 (20,139) (7,040)

Net assets

29,416

27,017

Revenue Expenses

19,142 (17,015)

33,575 (27,049)

Non-current assets Current assets Current liabilities Non-current liabilities

Profit before tax Income tax expense

2,127 272

6,526 (772)

Profit after tax

2,399

5,754

The Group’s investment in associate is stated at cost as adjusted for post-acquisition changes in the Group’s share of net assets of the associate based on its unaudited management accounts, less any impairment in the value of the individual investment. The Group’s share of post-acquisition profits of the associate for the current financial year, after deducting the related share of associate’s tax of $81,600, was $719,700.

F 32 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 7

DUE FROM/TO SUBSIDIARIES Company 2008

2007

$’000

$’000

Non-current Amount due from – non-trade

3,918

Current Amount due from - trade Amount due from – non-trade Allowances for doubtful receivables

8,642 630 (331)

3,269 2,700 (331)

8,941

5,638

7 356

115 64

363

179

Amount due to - trade Amount due to – non-trade

-

Non-current amount due from subsidiaries are unsecured and has no fixed terms of repayment. Interest of 1% above the prevailing market interest rate is charged at the end of each financial year, as mutually agreed by the directors of either party. Current amounts due from/to subsidiaries are unsecured, interest-free and repayable on demand. 8

AVAILABLE FOR SALE FINANCIAL ASSETS Group

Unquoted equity shares, at cost Balance at 1 August Exchange difference Balance at 31 July

2008

2007

$’000

$’000

366 (32)

383 (17)

334

366

Unquoted equity shares held by the group were stated at cost as the management are of the view that they approximate their fair values at the balance sheet dates.

Xpress Holdings Ltd Annual Report 2008 | F 33

Notes to the Financial Statements 9

INVENTORIES Group 2008

2007

$’000

$’000

505

238

At cost: Raw materials and consumables

10

TRADE AND OTHER RECEIVABLES Group

Trade receivables Outside parties Allowance for doubtful trade receivables

Other receivables Sundry receivables Deposits Advance payment to paper suppliers Prepayments

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

15,679 (565)

16,704 (485)

-

135 -

15,114

16,219

-

135

2,756 2,741 14,032 2,784

1,255 3,906 1,561

226 117

62 31 444

22,313

6,722

343

537

37,427

22,941

343

672

The Group’s and Company’s trade and other receivables that are not denominated in the functional currencies of the respective entities are as follows: Group

United States dollars New Taiwan dollars Malaysian ringgit Australian dollars Hong Kong dollars New Zealand dollars Chinese Renminbi

F 34 | Xpress Holdings Ltd Annual Report 2008

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

100 181 135 336 214 103 137

-

-

217 259 180 13 167

Notes to the Financial Statements 10

TRADE AND OTHER RECEIVABLES (Cont’d) The following is an analysis of allowance for doubtful trade receivables: Group

Allowance for trade receivables At beginning of the year Amounts written off during the year Amounts recovered during the year Allowance made during the year Exchange difference

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

485 (24) (241) 349 (4)

440 (190) 233 2

-

-

565

485

-

-

The Group’s policy for key sources of estimation uncertainty in relation to allowance for doubtful receivables is set out in note 2.1. The table below is an analysis of trade receivables at 31 July: Group

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

11,855 3,259

7,149 9,070

-

-

15,114

16,219

-

-

485 (485)

-

-

-

-

-

-

15,114

16,219

-

-

Notes: (a) Aging of receivables that are past due but not impaired < 3 months 3 months to 6 months 6 months to 12 months > 12 months

1,002 1,727 288 242

1,786 1,533 2,242 3,509

-

-

Allowance made during the year

3,259

9,070

-

-

Not past due and not impaired Past due but not impaired (a)

Impaired receivables – individually assessed Less: Allowance for doubtful receivables

Total trade receivables

565 (565)

The carrying amounts of current trade and other receivables approximated their fair values at the balance sheet dates. Further details regarding the exposure to credit risk to trade receivables are disclosed in note 29 (c).

Xpress Holdings Ltd Annual Report 2008 | F 35

Notes to the Financial Statements 11

DUE FROM/TO RELATED PARTIES Group

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

Amount due from related parties – trade Amount due from an associate - trade

Amount due to a related party - non-trade

-

538 2

-

2

-

540

-

2

-

23

-

-

Amounts due from related parties (entities in which a substantial shareholder has significant interest) and an associate are unsecured, interest-free and repayable on demand. Amount due to a related party (a substantial shareholder of the Company) is unsecured, interest-free and are repayable on demand. 12

CASH AND CASH EQUIVALENTS Group

Cash on hand and at bank Fixed deposits Cash and cash balances

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

4,889 7,924

3,323 -

281 6,000

321 -

12,813

3,323

6,281

321

For the purpose of the consolidated cash flow statement, the consolidated cash and cash equivalents comprised the following: Group Note Cash and cash equivalents per consolidated cash flow statement Cash and cash balances (as above) Bank overdraft Fixed deposits pledged as security

15

2008

2007

$’000

$’000

12,813 (2,401)

3,323 (3,650) -

10,412

(327)

(a)

Cash and bank balances comprise cash held by the Group and bank deposits. The carrying amounts of these assets approximate their fair values.

(b)

The effective interest rate on fixed deposits and short-term deposits with average maturity of 6 months ranged from 1.15% to 6.10% (2007 - 3.2% to 5.5%) per annum.

(c)

The Group and the Company’s cash and bank balances are mainly denominated in the functional currencies of the respective entities.

F 36 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 13

SHARE CAPITAL

Issued and fully paid: At 1 August Issue of new shares (a) Issue of shares under share option scheme - note 19 (d) At 31 July

Group and Company No. of shares 2008 2008 2007

2007

’000

’000

$’000

1,384,246 -

1,294,388 89,286

88,272 -

75,738 12,500

274

572

13

34

1,384,520

1,384,246

88,285

88,272

$’000

(a)

The Company issued 89,285,714 shares at $0.14 per share to Bioactive Enterprises Limited as deferred payment for the acquisition of 40% shareholding interest in Precise Media Group Limited in FY 2006.

(b)

All issued shares are fully paid and have no par value. The Company has one class of ordinary shares which carries no right to fixed income. The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction. The Company is not subject to any externally imposed capital requirements.

(c)

The Group’s capital structure and its objectives when managing capital are disclosed in note 29 (h).

(d)

During the financial year, the Company issued 274,000 (2007: 572,000) shares to option holders. Additional information regarding share options exercised during the financial year is disclosed in note 19 (d).

(e)

At the end of the financial year, unissued ordinary shares of the Company granted to eligible employees and executives of the Group under equity-related compensation plans of the Company are as follows: No. of Unissued Shares

Xpress Holdings’ Executives’ Share Option Scheme 2001

14

2008

2007

18,000,000

9,640,000

RESERVES Group

Equity component of convertible bonds Currency translation reserve Share option reserve Accumulated profits

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

1,617 (1,821) 307 22,584

(176) 135 14,001

1,617 307 2,190

135 2,537

22,687

13,960

4,114

2,672

Xpress Holdings Ltd Annual Report 2008 | F 37

Notes to the Financial Statements 14

RESERVES (Cont’d) Movements in reserve for the Group and the Company are set out in the Statements of Changes in Equity. (a)

Equity component of convertible bonds The equity component of convertible bonds (note 15b) refers to the difference between the proceeds from the bonds issue and the fair value of the liability component of the bonds.

(b)

Currency translation reserve The currency translation reserve mainly comprises foreign exchange differences arising from the translation of the financial statements of foreign operations whose functional currencies are different from the functional currency of the Company.

(c)

Share option reserve The share option reserve comprises the cumulative value of employee services received for the issue of share options.

15

INTEREST-BEARING BORROWINGS Group

Non-current Convertible bonds (unsecured) Bank loan (secured)

Current Bank loan (secured) Bank overdraft (secured)

Total

(a)

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

10,928 -

3,296

10,928 -

-

10,928

3,296

10,928

-

3,769 -

333 3,650

-

-

3,769

3,983

-

-

14,697

7,279

10,928

-

Collateral for secured borrowings Fixed deposits of $2.4 million (Note 12) are pledged to banks as collateral for the short-term interest-bearing borrowings.

F 38 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 15

INTEREST-BEARING BORROWINGS (Cont’d) (b)

Convertible bonds On 4 September 2007, the Company entered into a Subscription Agreement with Credit Suisse (Singapore) Limited (“Credit Suisse”) whereby Credit Suisse has a right to subscribe for direct, unconditional and unsubordinated 1.0 per cent convertible bonds issued by the Company up to a nominal value of $25.0 million in 2 tranches of $12.5 million each. Upon issuance of Tranche 1 of the bonds which can be up to a nominal value of $12.5 million, Credit Suisse will grant the Company an option to issue to Credit Suisse tranche 2 of the bonds up to a further nominal value of $12.5 million. Such option may be exercised once only during the 60 day period from the date of conversion of the last of the Tranche 1 bonds. The Company issued tranche 1 of the convertible bonds amounting to a nominal value of $12.5 million. The bonds will mature four years from the date of issue at their original nominal value, or can be converted into shares of the Company at the holder’s option at an adjusted conversion price of $0.086 per share. Based on this adjusted conversion price, Credit Suisse can potentially convert the Tranche 1 bonds of $12.5 million into 145,348,837 ordinary shares of the Company. At 31 July 2008, there were no conversions of any Tranche 1 bonds into ordinary shares of the Company. According to the Subscription Agreement under the Right of Allotment of Additional Shares (“Right of Allotment”), Credit Suisse is also entitled to subscribe for additional new shares in the capital of the Company for every Tranche of bonds issued using a base price of $0.1646 as the issue price per share. At 31 July 2008, there were potentially 7,594,168 new shares that can be issued under the Right of Allotment for which none were subscribed by Credit Suisse. As the convertible bonds have complex conversion features which depend on uncertain events, it is not practicable to separately measure the fair value of the embedded derivative by using option pricing models. The Company accounted for the convertible bonds issue according to FRS 32 which requires the liability component of the bonds to be recognised at its fair value determined using a market interest rate for existing borrowings and subsequently carried at an amortised cost until the liability is fully discharged on conversion or redemption of the bonds. The difference between the proceeds from the bonds issue and the fair value of the liability component of the bonds is the equity component and reflected as part of reserves (note 14a). The carrying amount of the liability component of the convertible bonds at the balance sheet date is analysed as follows: Group and Company 2008 $’000 Fair value of liability component of convertible bonds issued on 4 September 2007, net of transaction costs Interest expense recognised during the financial year Interest repayments during the financial year

10,508 522 (102)

Liability component at 31 July (note 15)

10,928

Xpress Holdings Ltd Annual Report 2008 | F 39

Notes to the Financial Statements 15

INTEREST-BEARING BORROWINGS (Cont’d) (b)

Convertible bonds (Cont’d) The convertible bonds liability is recognised at amortised cost based on an effective interest rate of 4.75%. The resulting interest expense is recognised as finance costs in the income statement. Actual interest expense at 1.0 per cent coupon rate is repayable every six months until expiry on redemption or conversion of the bonds.

(c)

Interest rate risks The Group’s exposure to interest rate risk of bank borrowings is disclosed in note 29. During the financial year, weighted average effective interest rates of borrowings are as follows: Group 2008 6.52% 5.00% 2.94%

Term loans (secured) Bank overdraft (secured) Finance lease (secured)

(d)

16

2007 4.75% 5.00% 4.39%

The fair values of short-term bank borrowings, determined through discounted cash flows using discount rates based on borrowing rates which management believed would be available to the Group at the balance sheet date, approximated their carrying amounts. The bank borrowings at 31 July 2008 were on floating rate basis.

FINANCE LEASE LIABILITIES Group

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

974

402

69

24

1,479 697

314 24

139 176

117 27

Total minimum lease payments Less: Amounts representing future finance charges

3,150

740

384

168

Present value of minimum lease payments

2,753

655

321

140

859

356

58

22

Not later than one year Later than one year and not later than five years Later than five years

Instalments payable: Shown under current liabilities: Not later than one year

F 40 | Xpress Holdings Ltd Annual Report 2008

(397)

(85)

(63)

(28)

Notes to the Financial Statements 16

FINANCE LEASE LIABILITIES (Cont’d) Group

Shown under non-current liabilities: Later than one year and not later than five years Later than five years

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

1,291 603

278 21

115 148

94 24

1,894

299

263

118

2,753

655

321

140

The minimum lease payments payable at balance sheet date did not differ significantly from their present values. All finance lease liabilities are on a fixed repayment basis and there are no arrangements for contingent rental payments. The average effective borrowing is shown in note 15(c). Finance lease liabilities of the group were secured by the rights to the leased plant and equipment, and motor vehicles (note 4b) which would revert to the respective lessor in the event of default by a member of the Group. 17

DEFERRED TAX ASSETS / LIABILITIES Group Assets

Liabilities

Assets

$’000

$’000

$’000

Company Liabilities $’000

At 1 August 2006 Exchange difference Provided during the year

24

1,636 (2) -

24

-

At 31 July 2007

24

1,634

24

-

At 1 August 2007 and 31 July 2008

24

1,634

24

-

Deferred tax liabilities at 31 July were related to the following: Group

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

Deferred tax liabilities Accelerated tax depreciation

1,634

1,634

24

24

-

-

Deferred tax assets Provisions and expenses

24

24

No deferred tax liability is expected to crystallise within one year.

Xpress Holdings Ltd Annual Report 2008 | F 41

Notes to the Financial Statements 18

TRADE AND OTHER PAYABLES Group

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

Trade Outside parties

7,270

4,358

84

100

Others Accrued expenses Other payables Purchase of property, plant and equipment Provision for directors’ fees

2,617 527 403 158

2,093 147 8 158

645 158

219 72 158

3,705

2,406

803

449

10,975

6,764

887

549

The Group’s and Company’s trade and other payables that were not denominated in the functional currencies of the respective entities are as follows: Group

Australian dollars

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

-

8

-

-

The carrying amounts of current trade and other payables approximated their fair values at the balance sheet date. Further details of liquidity risks on trade and other payables are disclosed in note 29(f). 19

EQUITY COMPENSATION Share option scheme The Xpress Holdings Executives’ Share Option Scheme (“SOS”) was approved by its members at an Extraordinary General Meeting held on 25 June 2001. The SOS is administered by the Remuneration Committee which comprises the following directors: Dr Wang Kai Yuen (Chairman) Lai Hock Meng (Appointed on 10 March 2008) Sam Chong Keen (Appointed on 10 March 2008)

F 42 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 19

EQUITY COMPENSATION (Cont’d) Share option scheme (Cont’d) Other information regarding the SOS is set out below: (a)

Options granted shall be subject to an option period of 10 years, such period commencing from the date of grant and expiring on the day immediately preceding the 10th anniversary of the date of grant.

(b)

The Non-Executive Directors of the Group shall be subject to an option period of 5 years, such period commencing from the date of grant and expiring on the day immediately preceding the 5th anniversary of the date of grant.

(c)

The options vest one year from the date of grant.

(d)

Details of the options granted under the SOS for unissued ordinary shares of the Company during the financial year were as follows:

Date of grant 25.06.2001 25.06.2001 07.12.2001 07.12.2001 02.05.2003 30.06.2003 11.12.2003 04.12.2006 01.03.2007 01.08.2007 10.03.2008

Balance at 01.08.2007

Addition

Lapsed during the year

Exercised during the year

Balance at 31.07.2008

Exercise price

Expiry date

$0.0754 $0.0723 $0.0500 $0.0550 $0.0283 $0.0550 $0.0733 $0.1783 $0.1650 $0.1767 $0.1200

24.06.2011 24.06.2011 06.12.2011 06.12.2011 01.05.2013 29.06.2013 10.12.2013 03.12.2016 28.02.2017 31.07.2017 09.03.2018

230,000 236,000 350,000 83,000 26,000 400,000 615,000 4,400,000 3,300,000 -

1,000,000 8,000,000

18,000 48,000 300,000 -

12,000 26,000 236,000 -

230,000 224,000 350,000 65,000 400,000 331,000 4,100,000 3,300,000 1,000,000 8,000,000

9,640,000

9,000,000

366,000

274,000

18,000,000

During the financial year, a total of 274,000 ordinary shares were issued at prices ranging from $0.0283 to $0.0733 per share, as indicated above. The proceeds of approximately $13,000 were credited to share capital. The weighted average exercise price of the options exercised during the year was $0.0672 (2007: $0.0682). The weighted average remaining contractual life of share options outstanding at the end of the period is 8.6 years (2007: 7.6 years). Fair value of share options and assumptions The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The fair value of share options and assumptions determined using the Black-Scholes valuation model are set out below:

Xpress Holdings Ltd Annual Report 2008 | F 43

Notes to the Financial Statements 19

EQUITY COMPENSATION (Cont’d) Average fair value of share options and assumptions Date of grant of options

04.12.2006

01.03.2007

01.08.2007

01.03.2008

Average fair value at measurement date

$0.0345

$0.0259

$0.02499

$0.0215

Share price and exercise price at date of grant Exercise price at date of grant Expected volatility Risk free interest rate Expected dividend yield Vesting period

$0.1800 $0.1783 58.20% 3.625% 10.0% 1 year

$0.1550 $0.1650 58.48% 3.625% 10.0% 1 year

$0.1550 $0.1767 58.98% 3.625% 7.0% 1 year

$0.1050 $0.1200 71.06% 3.625% 7.0% 1 year

The share price and exercise price at date of grant are based on volume-weighted share price for 3 consecutive trading days prior to the grant date. The expected volatility is measured by the standard deviation of 36 months’ average intra-day high and low share prices prior to the grant. The risk free interest rates are based on the 10 years zero-coupon Singapore Government bond yields on the date of grant. Expected dividend yield is based on dividend payout over the 1 year volume-weighted average share price prior to the grant date. 20

REVENUE Group 2008

2007

$’000

$’000

61,290

35,907

Turnover: Print media services

Turnover represents invoiced sales for services rendered after allowance for trade discounts. Dividends and interest income are excluded from turnover of the Group. 21

PROFIT BEFORE TAXATION (a)

Other income Group

Rental income Miscellaneous income

F 44 | Xpress Holdings Ltd Annual Report 2008

2008

2007

$’000

$’000

271 839

246 388

1,110

634

Notes to the Financial Statements 21

PROFIT BEFORE TAXATION (Cont’d) (b)

Staff costs Group

−

−

−

−

(c)

Directors’ fees: directors of the Company directors of a subsidiary Directors’ remuneration other than fee directors of the Company directors of a subsidiary contributions to defined contribution plans Key management personnel (other than directors): salaries, wages and other related costs contributions to defined contribution plans Other than directors and key management personnel: salaries, wages and other related costs contributions to defined contribution plans

2008

2007

$’000

$’000

157 21

164 17

712 367 33

996 848 21

1,327 49

1,281 42

8,615 720

6,739 530

12,001

10,638

Other operating expenses Other operating expenses mainly comprise marketing, corporate and legal, building and general operating expenses.

(d)

Non-operating income Group

Gain on disposal of property, plant and equipment - net

(e)

2008

2007

$’000

$’000

2,994

662

Share of results of associate The Group’s share of results of associate comprises the following: Group

Net profit before exceptional gain Exceptional gain from sale of short-term quoted securities

2008

2007

$’000

$’000

720 720

871 855 1,726

Xpress Holdings Ltd Annual Report 2008 | F 45

Notes to the Financial Statements 21

PROFIT BEFORE TAXATION (Cont’d) (f)

Profit before tax In addition to those disclosed elsewhere in these financial statements, the following items have been included in arriving at profit from operations: Group Note Auditors’ remuneration – Non-audit fees – Other auditors – Current year – Prior year Depreciation of property, plant and equipment Exchange loss Operating lease rentals - offices, factories and warehouses Property, plant and equipment written off Allowance for doubtful debts, net - trade Share option expense

(g)

4

2008

2007

$’000

$’000

2,696 49 1,590 10 108 182

99 14 2,210 212 593 14 43 135

Compensation of directors and key management personnel The remuneration of directors and other members of key management of the Company during the year were as follows: Group

Short-term benefits Share-based payments Termination benefits

2008

2007

$’000

$’000

2,188 300 -

2,588 600 -

The number of directors of the Company as categorised into remuneration bands is as follows: 2008 $750,000 and above $500,000 to $749,999 $250,000 to $499,999 Below $250,000

F 46 | Xpress Holdings Ltd Annual Report 2008

2007 2 7

1 1 5

9

7

Notes to the Financial Statements 22

INTEREST INCOME AND FINANCE COST Group

(a)

2008

2007

$’000

$’000

Interest Income Interest income on fixed deposits

110

76

Interest income is derived from fixed deposits which bore interest rates ranging from 1.15% to 7.65% (2007 - 3.2% to 5.5%) per annum. (b)

23

Finance Costs Interest expense – Bank overdraft – Term loans – Finance lease − Convertible bonds Bank charges

17 254 55 522 -

46 165 37 1

848

249

TAXATION Group

Current tax expense – current year – over-provision in prior years

2008

2007

$’000

$’000

170 (75)

340 (395)

95

(55)

-

(24)

95

(79)

Profit before taxation

10,311

6,891

Tax calculated using Singapore tax rate of 18% (2007: 18%) Non-allowable items Utilisation of previously unrecognised tax benefits Deferred tax benefit not recognised Effects of tax rates in different tax jurisdictions Income not subject to tax Over-provision in prior years Tax effect of share of results of associate

1,856 4,026 (289) 684 (297) (5,680) (75) (130)

1,240 728 (27) 507 (101) (1,720) (395) (311)

Deferred tax expense – movements in temporary differences Total income tax expense / (credit)

Reconciliation of effective tax rate:

95

(79)

Xpress Holdings Ltd Annual Report 2008 | F 47

Notes to the Financial Statements 23

TAXATION (Cont’d) Singapore income tax was calculated at 18% (2007: 18%) of the estimated assessable profit for the year. Taxation for other countries was calculated at rates prevailing in the relevant countries between 16.5% to 35%. At the balance sheet date, the Group had unutilised tax losses and capital allowances of approximately $8.61 million (2007: $22.90 million) and nil (2007: $7.10 million) respectively which were available for carry forward and set-off against future taxable income, subject to agreement by the tax authorities and compliance with tax regulations prevailing in the respective countries in which the subsidiaries incurring the losses operate. Future tax benefits arising from these unutilised tax losses and capital allowances have not been recognised in the financial statements as there is no reasonable certainty of their recovery in future periods.

24

EARNINGS PER SHARE

Basic earnings per share is based on: Net profit attributable to equity holders of the parent

2008

2007

$’000

$’000

10,234

7,087

Number of shares (’000) Number of shares outstanding at the beginning of the year Weighted average number of shares issued under share option scheme and new shares issued

1,384,246

1,294,388

233

17,595

Weighted average number of shares in issue during the year

1,384,479

1,311,983

In calculating diluted earnings per share, the weighted average number of shares in issue during the year is adjusted for the effects of all dilutive potential ordinary shares: Number of shares (’000) Weighted average number of shares used in calculation of basic earnings per share Adjustment for potential dilutive ordinary shares

1,384,479 842

1,311,983 4,771

Weighted average number of shares in issue (diluted)

1,385,321

1,316,754

Options to convert Tranche 1 of the convertible bonds to ordinary shares of 145,348,837 at the adjusted conversion price of S$0.086 per share as at 31 July 2008 were not included in the computation of diluted earnings per share because it was anti-dilutive. The convertible bonds, which expire on 3 September 2011, are still outstanding as at 31 July 2008.

F 48 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 25

CONTINGENT LIABILITIES Group

Guarantees provided in respect of performance of contracts - secured Corporate guarantees given to a subsidiary - unsecured

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

1,683

642

-

-

-

-

4,027

5,327

The borrowings for which the above corporate guarantees have been given are charged at market interest rates. 26

COMMITMENTS At the balance sheet date, the Group had the following commitments: (a)

Capital commitments: Group 2008

2007

$’000

$’000

Capital expenditure contracted but not provided for: -

Purchase of plant and equipment

(b)

1,843

Operating lease commitments The Group as lessor The Group entered into commercial property leases on part of its leasehold building. Future minimum lease payments receivable under non-cancellable leases with remaining lease terms of between 1 and 3 years as of 31 July are as follows: Group

Lease payments receivable: Not later than one year Later than one year and not later than five years

2008

2007

$’000

$’000

206 378 584

220 393 613

Xpress Holdings Ltd Annual Report 2008 | F 49

Notes to the Financial Statements 26

COMMITMENTS (Cont’d) (b)

Operating lease commitments (Cont’d) The Group as lessee The commitments in respect of non-cancellable operating leases contracted for but not recognised as liabilities are payable as follows: Group

Lease payments payable: Not later than one year Later than one year and not later than five years Later than five years

2008

2007

$’000

$’000

1,955 5,439 1,921

631 969 1,584

9,315

3,184

Lease payments payable amounting to $8.32 million relates to the Company’s property that was sold to and leased back for a lease period of 7 years from MacArthur (note 4a). Upon expiry of the lease, the Company has an option to renew for another 7 years. The other operating lease commitments shall expire within 1 to 2 years. (c)

Proposed dividends After the balance sheet date, the Directors proposed the following dividends. These dividends have not been provided for in these financial statements. Group

Final dividend proposed of 0.13 cents (2007: 0.12 cents) per share: one-tier tax-exempt

27

2008

2007

$’000

$’000

1,800

1,661

BUSINESS SEGMENTS - GROUP Segment information The Group’s operating businesses are organised and managed separately according to the nature of products and services provided with each segment representing a strategic business unit that offers different products and services for different markets. The Print Media segment includes time-sensitive Stock Market Research Reports, Fund Management Reports, Annual Reports, IPO Prospectus, Trade Directors and Corporate Brochures and Collaterals. The Corporate and others segment includes general corporate income and expense items, and multimedia income in relation to website publishing and maintenance, CD-ROM and multimedia production. Segment accounting policies are the same as the policies described in Note 2. The Group generally accounts for inter-segment sales and transfers on terms agreed between the parties.

F 50 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 27

BUSINESS SEGMENTS - GROUP (Cont’d) Segment revenue and expense: Segment revenue and expense are the operating revenue and expense reported in the Group’s income statement that are directly attributable to a segment and the relevant portion of such revenue and expense that can be allocated on a reasonable basis to a segment. Segment assets and liabilities: Segment assets include all operating assets used by a segment and consist principally of operating receivables, inventories and property, plant and equipment, net of allowances and provisions. Capital expenditure includes the total cost incurred to acquire property, plant and equipment directly attributable to the segment. Segment liabilities include all operating liabilities and consist principally of accounts payable and accrued expenses. Segment liabilities do not include income tax liabilities. Inter-segment transfers: Segment revenue and expenses include transfers between business segments. Inter-segment sales are charged at cost plus a percentage profit mark-up. These transfers are eliminated on consolidation.

Print Media

Corporate and others

Eliminations

Consolidated

2008

2007

2008

2007

2008

2007

2008

2007

$’000

$’000

$’000

$’000

$’000

$’000

$’000

$’000

Sales to external customers Inter-segment sales Other revenue Unallocated revenue

61,233 455 4,104 -

35,818 1,327 -

57 7,528 -

203 4,376 45 -

(7,983) -

(114) (4,376) -

61,290 4,104 -

35,907 1,372 -

Segment revenue

65,792

37,145

7,585

4,624

(7,983)

(4,490)

65,394

37,279

9,301

5,202

1,138

216

10,439 (848) 720

5,414 (249) 1,726

Profit before income tax Income tax

10,311 (95)

6,891 79

Net profit for the year

10,216

6,970

121,220 8,825 12,837

109,046 8,105 3,347

142,882

120,498

10,975 1,474 1,634 17,450

6,763 1,511 1,634 7,958

31,533

17,866

Segment results Finance costs Share of results of associate

Assets and liabilities: Segment assets Investment in associates Unallocated assets

114,209 8,825

99,795 8,105

7,011 -

9,251 -

-

-

(4)

-

Total assets Segment liabilities Income tax payable Deferred tax liabilities Unallocated liabilities

10,127

6,215

848

548

-

-

Total liabilities Other information: Capital expenditure Depreciation expense

11,393

4,132

269

12

-

-

11,662

4,144

2,567

2,128

129

82

-

-

2,696

2,210

Xpress Holdings Ltd Annual Report 2008 | F 51

Notes to the Financial Statements 28

GEOGRAPHICAL SEGMENTS - GROUP Segment revenue Segment revenue is analysed based on the location of customers regardless of where the goods are produced. Segment assets and capital expenditure Segment assets and capital expenditure are analysed based on the geographical location of those assets. Capital expenditure includes the total costs incurred to acquire property, plant and equipment. Revenue

29

2008

2007

2008

Assets 2007

Capital expenditure 2008 2007

$’000

$’000

$’000

$’000

$’000

Singapore Malaysia Hong Kong Australia China Others

12,183 1,707 2,844 1,360 40,816 2,380

11,674 1,348 2,488 1,729 16,614 2,054

25,543 1,079 1,022 1,639 113,062 537

32,272 613 913 762 85,885 53

3,872 444 3 7,306 37

889 41 73 3,140 1

Total

61,290

35,907

142,882

120,498

11,662

4,144

$’000

FINANCIAL INSTRUMENTS (a)

Financial risk management objectives and policies Exposure to credit, interest rate and currency risk arises in the normal course of the Group’s business. The Group’s written risk management policies and guidelines set out its overall business strategies, tolerance of risk and general risk management philosophy. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. Natural hedging is preferred by matching assets and liabilities of the same currency. Derivative financial instruments are only used where necessary to reduce exposure to fluctuations in foreign exchange rates and interest rates. While these are subject to the risk of market rates changing subsequent to acquisition, such changes are generally offset by opposite effects on the items being hedged. The Group’s accounting policies in relation to derivative financial instruments are set out in note 2.8.

(b)

Working capital management The Group manages its working capital requirement with the view to optimise interest cost. The management remains committed to their intentions to continue to utilise committed short-term borrowings to meet the working capital requirements having regard to the operating environment and expected cash flows of the Group. Such working capital requirements are within the credit facilities established and are adequate and available to the Group to meet its obligations. The credit facilities are regularly reviewed by the management to ensure that they meet the objectives of the Group.

F 52 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 29

FINANCIAL INSTRUMENTS (Cont’d) (c)

Credit Risk Credit risk refers to the risk that counterparties may default on their contractual obligations resulting in financial loss to the Group. The Group has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from such defaults. Credit risk on cash and cash balances and derivative financial instruments is limited as these balances are placed with or transacted with reputable institutions of high credit ratings. The Group manages these risks by monitoring credit-worthiness and limiting the aggregate risk to any individual counterparty. The Group does not expect material credit losses on its financial instruments. At the balance sheet date, the Group has no significant concentration of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the balance sheets. The credit risk for trade receivables after allowance for doubtful receivables is as follows: Group

By Geographical areas Singapore Malaysia Hong Kong Australia Taiwan China Others

(d)

Company

2008

2007

2008

2007

$’000

$’000

$’000

$’000

2,266 329 10,124 182 259 1,646 308

3,685 388 10,693 336 181 703 233

-

135 -

15,114

16,219

-

135

Foreign Currency Risk The Group’s subsidiaries operate mainly in Singapore, China and Hong Kong. Entities in the Group regularly transact in currencies other than their respective functional currencies (“foreign currencies”) such as the Singapore Dollar (“SGD”), United States Dollar (“USD”), Australian Dollar (“AUD”), New Taiwan Dollar (“NTD”) and Hong Kong Dollar (“HKD”). In addition, the Group is exposed to currency translation risk on the net assets in foreign operations mainly in Hong Kong and China which has impact on the Group’s equity. The Group does not enter into currency options and does not use forward exchange contracts for speculative trading purposes.

Xpress Holdings Ltd Annual Report 2008 | F 53

Notes to the Financial Statements 29

FINANCIAL INSTRUMENTS (Cont’d) (d)

Foreign Currency Risk (Cont’d) Currency risk exposure At 31 July 2008, the carrying amounts of monetary assets and monetary liabilities including inter-company balances denominated in currencies other than the respective Group’s entities’ functional currencies are as follows:

SGD equivalent

SGD

USD

AUD

NTD

HKD

Other currencies

Total

$’000

$’000

$’000

$’000

$’000

$’000

$’000

-

217

180

259

13

167

836

(190)

-

-

Group At 31 July 2008 Financial assets Trade and other receivables Financial liabilities Trade and other payables

(2,794)

(81)

Net currency exposure

(2,794)

136

(10)

259

-

100

336

Financial liabilities Trade and other payables

(1,938)

(32)

Net currency exposure

(1,938)

68

At 31 July 2007 Financial assets Trade and other receivables

F 54 | Xpress Holdings Ltd Annual Report 2008

(93)

(3,158)

13

74

(2,322)

181

214

375

1,206

(139)

-

-

(54)

(2,163)

197

181

214

321

(957)

Notes to the Financial Statements 29

FINANCIAL INSTRUMENTS (Cont’d) (d)

Foreign Currency Risk (Cont’d) Currency sensitivity analysis The following table details the sensitivity to a 5% increase / decrease in the exchange rate of the relevant foreign currencies against the functional currency of each group entity. The magnitude represents management’s assessment of the plausible movement in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and assumes their translation at the period end. The sensitivity analysis therefore includes external loans as well as inter-company loans to foreign operations where they gave rise to an impact on the Group’s profit or loss and/or equity. If the relevant foreign currency strengthens or weakens by 5% against the functional currency of each group entity, the net profit or loss and other equity may increase / (decrease) by:

SGD equivalent

SGD

USD

AUD

NTD

HKD

Other currencies

$’000

$’000

$’000

$’000

$’000

$’000

Group 2008 Strengthens Profit and loss Weakens Profit and loss

(140)

7

1

13

1

4

140

(7)

(1)

(13)

(1)

(4)

2007 Strengthens Profit and loss Weakens Profit and loss

(97)

3

10

9

11

16

97

(3)

(10)

(9)

(11)

(16)

Xpress Holdings Ltd Annual Report 2008 | F 55

Notes to the Financial Statements 29

FINANCIAL INSTRUMENTS (Cont’d) (d)

Foreign Currency Risk (Cont’d) Currency sensitivity analysis (Cont’d) In addition, if the relevant foreign currency strengthens or weakens by 5% respectively against the presentation currency (SGD) for the consolidated financial statements with all other variables being held constant, the (decrease) / increase arising from the net financial assets / liabilities position will be as follows: Chinese Renminbi

SGD equivalent

Hong Kong Dollar

Other currencies

2008

2007

2008

2007

2008

2007

$’000

$’000

$’000

$’000

$’000

$’000

Group Strengthens Other equity Weakens Other equity

(e)

97

202

823

971

112

66

(97)

(202)

(823)

(971)

(112)

(66)

Cash Flow and Fair Value Interest Rate Risks Cash flow interest rate risk is the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the fair value of a financial instrument will fluctuate due to changes in market interest rates. Currently, the Group’s income and operating cash flows except for short term loans are substantially independent of changes in market interest rates. The Group is not exposed to significant cash flow risk except that it has bank borrowings of $3.8 million (2007: 4.0 million) for which full repayment is expected by 2009 and 1.0 per cent convertible bonds of $12.5 million (2007: Nil) which matures in 2011 at its original value. The Group is expected to repay the borrowings using its internally generated cash flow. The Group actively reviews its debt portfolio, taking into account the investment holding period and nature of its assets. This strategy allows it to obtain the most favourable interest rates available without increasing its foreign currency exposure and achieve certain level of protection against rate hikes. The Group does not use derivative financial instruments to hedge fluctuations in interest rates for its borrowings. Interest rate sensitivity analysis The sensitivity analyses below are based on the exposure to interest rates for non-derivative instruments at the balance sheet date and assume that the change took place at the beginning of the financial year and is held constant throughout the reporting period. The magnitude represents management’s assessment of the likely movement in interest rates under normal economic conditions. If interest rates had been 50 basis points higher or lower (2007: 50 basis points) and all other variables were held constant, the Group’s profit for the year ended 31 July 2008 would be decreased / increased by $10,000 (2007: decrease/ increase by $22,000). This is mainly attributable to the Group’s exposure to interest rates on its variable rate borrowings. The Group’s sensitivity to interest rates movement has decreased during the current financial year mainly due to the decrease in variable rate debt instruments.

F 56 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 29

FINANCIAL INSTRUMENTS (Cont’d) (f)

Liquidity Risk The Group actively manages its debt maturity profile, operating cash flows and the availability of funding so as to ensure that all refinancing, repayment and funding needs are met. As part of the overall prudent liquidity management, the Group maintains sufficient level of cash to meet its working capital requirement. In addition, the Group strives to maintain available banking facilities of a reasonable level to its overall debt position. The table below analyses the maturity profile of the Group’s and Company’s financial liabilities based on contractual undiscounted cash flows. Carrying amount $’000

Contractual cash flows $’000

Less than 1 year $’000

Between 2 and 5 years $’000

Over 5 years $’000

10,975 14,697 2,753

10,975 17,079 3,150

10,975 4,204 983

12,875 1,477

690

28,425

31,204

16,162

14,352

690

6,764 7,279 655

6,764 7,646 740

6,764 5,912 402

1,734 314

24

14,698

15,150

13,078

2,048

24

Group At 31 July 2008 Trade and other payables Interest-bearing borrowings Finance lease liabilities

At 31 July 2007 Trade and other payables Interest-bearing borrowings* Finance lease liabilities

* Interest-bearing long-term bank loans were fully redeemed by a subsidiary in 2008 upon sale of its leasehold building. Company At 31 July 2008 Trade and other payables Interest-bearing borrowings

At 31 July 2007 Trade and other payables Interest-bearing borrowings

887 10,928

887 13,000

887 125

12,875

-

11,815

13,887

1,012

12,875

-

549 -

549 -

549 -

-

-

549

549

549

-

-

Xpress Holdings Ltd Annual Report 2008 | F 57

Notes to the Financial Statements 29

FINANCIAL INSTRUMENTS (Cont’d) (g)

Estimating the Fair Values The fair value of financial assets at fair value through profit or loss and available-for-sale financial assets is determined by reference to their quoted bid prices at the balance sheet date. Interest-bearing loans and borrowings Fair value is calculated based on discounted expected future principal and interest cash flows. Finance Lease Liabilities The fair value of finance lease liabilities is estimated as the present value of future cash flows, discounted at market interest rates for homogeneous lease agreements. The estimated fair values reflect change in interest rates. Intra-Group Financial Guarantees The value of financial guarantees provided by the Company to its subsidiaries is determined by reference to the difference in the interest rates, by comparing the actual rates charged by the bank with these guarantees made available, with the estimated rates that the banks would have charged had these guarantees not been available. Other Financial Assets and Liabilities The notional amounts of financial assets and liabilities with a maturity of less than one year (including trade and other receivables, cash and bank balances, and trade and other payables) are assumed to approximate their fair values because of their short period to maturity. All other financial assets and liabilities are discounted to determine their fair values.

(h)

Capital Risk The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maintain an optimal capital structure so as to maximise shareholder value. The Group strives to maintain a prudent capital structure. The capital structure of the Group comprise debt, which includes the borrowings disclosed in note 15 and equity attributable to equity holders of the Company, comprising issued share capital, reserves and accumulated profits as disclosed in the Statement of Changes in Equity. The Group monitors capital based on a debt-to-capital ratio. This ratio is calculated as net debt divided by capital. Net debt is calculated as total debt (as shown in the balance sheet) less cash and bank balances. Capital comprises all components of equity as disclosed in the Statement of Changes in Equity. The Group’s overall strategy remains unchanged from 2007.

F 58 | Xpress Holdings Ltd Annual Report 2008

Notes to the Financial Statements 29

FINANCIAL INSTRUMENTS (Cont’d) (h)

Capital Risk (Cont’d) Group

Total debt Less: Cash and bank balances Net debt Capital Debt-to-capital ratio (times)

30

2008

2007

$’000

$’000

17,450 (12,813)

7,934 (3,323)

4,637

4,611

111,349

102,632

0.04

0.05

SIGNIFICANT RELATED PARTY TRANSACTIONS Identity of related parties For the purpose of these financial statements, parties are considered to be related to the Group if the Group has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Group and the party are subject to common control or common significant influence. Related parties may be individuals or other entities. In addition to the related party information disclosed elsewhere in the financial statements, there were significant related party transactions which were carried out in the normal course of business on terms agreed between the parties during the financial year as follows: Company

Subsidiaries Print Consultancy Management fee income Interest income on non-current receivables

2008

2007

$’000

$’000

7,302 226

114 4,376 -

Xpress Holdings Ltd Annual Report 2008 | F 59

Notes to the Financial Statements 31

RECLASSICATION AND COMPARATIVE FIGURES Certain reclassification has been made to the prior year’s financial statements to better reflect the nature of the transactions and to enhance comparability with the current year’s financial statements. The following 2007 figures have been restated to conform to the current year’s presentation: Group

Remuneration of directors and key management personnel during the year: Short-term benefits

32

Restated 2007

Previously reported 2007

$’000

$’000

2,588

1,111

Other income

634

1,296

Non-operating income

662

-

SUBSEQUENT EVENTS No items, transactions or events of material and unusual nature has arisen in the interval between the end of the financial year and the date of this report which is likely to affect substantially the results of operations of the Group for the succeeding financial year.

F 60 | Xpress Holdings Ltd Annual Report 2008

Statistics of Shareholders As at 16 October 2008 Number of equity securities Class of equity securities Voting rights

: : :

1,384,519,374 Ordinary shares One vote per share

Distribution of Shareholdings

Size of shareholdings 1 1,000 10,001 1,000,001

-

No. of Shareholders

%

43 11,358 5,216 52

0.26 68.14 31.29 0.31

14,350 40,811,961 349,530,010 994,163,053

0.00 2.95 25.24 71.81

16,669

100.00

1,384,519,374

100.00

999 10,000 1,000,000 AND ABOVE

TOTAL :

No. of Shares

%

Twenty Largest Shareholders NO. NAME

NO. OF SHARES

%

1

MORGAN STANLEY ASIA (SINGAPORE) SECURITIES PTE LTD

425,081,313

30.70

2

MERRILL LYNCH (SINGAPORE) PTE LTD

196,451,714

14.19

3

CITIBANK NOMINEES SINGAPORE PTE LTD

35,611,974

2.57

4

MAYBAN NOMINEES (S) PTE LTD

32,480,000

2.35

5

DBS VICKERS SECURITIES (S) PTE LTD

31,167,830

2.25

6

UOB NOMINEES (2006) PTE LTD

29,330,000

2.12

7

OCBC SECURITIES PRIVATE LTD

28,944,000

2.09

8

UNIGOLD ASIA LIMITED

28,845,750

2.08

9

UOB KAY HIAN PTE LTD

19,318,000

1.40

10

CHENG FU ZAY

13,566,000

0.98

11

DBS NOMINEES PTE LTD

12,485,450

0.90

12

HONG LEONG FINANCE NOMINEES PTE LTD

11,915,000

0.86

13

KIM ENG SECURITIES PTE. LTD.

11,879,300

0.86

14

UNITED OVERSEAS BANK NOMINEES PTE LTD

10,243,500

0.74

15

HSBC (SINGAPORE) NOMINEES PTE LTD

7,819,000

0.56

16

LEOW TZE FEI (LIAO ZHIHUI)

7,291,000

0.53

17

FOO KET

6,299,000

0.45

18

THIAN YIM PHENG

6,226,000

0.45

19

OCBC NOMINEES SINGAPORE PTE LTD

5,556,000

0.40

20

SAM CHONG KEEN

5,000,000

0.36

925,510,831

66.84

TOTAL

Xpress Holdings Ltd Annual Report 2008 | F 61

Statistics of Shareholders As at 16 October 2008

Deemed Interest

Direct Interest

%

137,943,313

9.96

-

-

-

-

137,943,313

9.96

K K Fong Holdings Pte Ltd (Note 2)

77,539,000

5.60

-

-

Fong Kah Kuen @ Foong Kah Kuen (Note 3)

30,081,000

2.17

77,539,000

5.60

-

-

107,620,000

7.77

89,285,714

6.45

-

-

-

-

149,787,714

10.82

Triumph Development Holdings Limited Dr Lee Tsu-Der (Note 1)

Foo Ai Lan (Note 4) Bioactive Enterprises Limited Tseng An Hsiung Andy (Note 5)

%

Notes: (1)

Dr Lee Tsu-Der is deemed to be interested in the 137,943,313 shares held by Triumph Development Holdings Limited by virtue of Section 7 of the Companies Act, Cap. 50. (the “Act”)

(2)

K K Fong Holdings Pte Ltd has a total beneficial interest in the 77,539,000 shares out of which 77,459,000 shares are held in the names of nominees.

(3)

Fong Kah Kuen @ Foong Kah Kuen is deemed to be interested in the 77,539,000 shares held by K K Fong Holdings Pte Ltd by virtue of Section 7 of the Act.

(4)

Foo Ai Lan is deemed to be interested in the 107,620,000 shares comprising 77,539,000 shares held by K K Fong Holdings Pte Ltd by virtue of Section 7 of the Act and 30,081,000 shares held by her spouse, Fong Kah Kuen @ Foong Kah Kuen.

(5)

Tseng Ah Hsiung Andy is deemed to be interested in the 89,285,714 shares held by Bioactive Enterprises Limited, the 58,710,000 shares held by Wellspring Investment Ltd by virtue of Section 7 of the Act and the 1,792,000 shares held by his spouse, Mrs Tseng Shu Eng Eng.

PERCENTAGE OF SHAREHOLDING IN PUBLIC’S HANDS Based on the information provided to the best knowledge of the directors, substantial shareholder and controlling shareholder of the Company and its subsidiaries, approximately 68.3% of the issued share capital of the Company is held by the public. Accordingly, the Company has complied with Rule 723 of the Listing Manual of the SGX-ST.

F 62 | Xpress Holdings Ltd Annual Report 2008

Notice of Annual General Meeting NOTICE IS HEREBY GIVEN that the Annual General Meeting of Xpress Holdings Ltd (“the Company”) will be held at No. 1 Kallang Way 2A, Communications Techno Centre, Singapore 347495 on Monday, 24 November 2008 at 10.00 a.m. for the following purposes: AS ORDINARY BUSINESS 1.

To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the financial year ended 31 July 2008 together with the Auditors’ Report thereon. (Resolution 1)

2.

To declare a first and final tax exempt one-tier dividend of 0.13 cents per share for the year ended 31 July 2008 (2007: 0.12 cents per share). (Resolution 2)

3.

To re-elect the following Directors of the Company retiring pursuant to Articles 76 and 94(2) of the Articles of Association of the Company: Mr Darlington Tseng Te-Lin Mr Khoo Choon Meng Mr Lai Hock Meng Dr Wang Kai Yuen Mr Jerry Lee Yin Chia

[Retiring [Retiring [Retiring [Retiring [Retiring

under under under under under

Article Article Article Article Article

76] 76] 76] 94(2)] 94(2)]

(Resolution (Resolution (Resolution (Resolution (Resolution

3) 4) 5) 6) 7)

4.

To approve the payment of Directors’ fees of S$188,414 for the financial year ended 31 July 2008 (2007: S$157,000). (Resolution 8)

5.

To re-appoint Messrs Foo Kon Tan Grant Thornton as the Auditors of the Company and to authorise the Directors of the Company to fix their remuneration. (Resolution 9)

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, 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, and/or

(iii)

issue additional Instruments arising from adjustments made to the number of Instruments previously issued in the event of rights, bonus or capitalisation issues,

Xpress Holdings Ltd Annual Report 2008 | F 63

Notice of Annual General Meeting 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 in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of shares and Instruments to be issued other than on a pro rata basis to existing shareholders of the Company shall not exceed twenty per centum (20%) of the total number of issued shares in the capital of the Company (as calculated in accordance with subparagraph (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 number of issued shares in the capital of the Company at the time of the passing of this Resolution, after adjusting for: (a)

new shares arising from the conversion or exercise of the Instruments or any convertible securities;

(b)

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

(c)

any subsequent consolidation or subdivision of shares;

(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 10)

F 64 | Xpress Holdings Ltd Annual Report 2008

Notice of Annual General Meeting 8.

Authority to allot and issue shares under the Xpress Holdings Executives’ Share Option Scheme 2001 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 Xpress Holdings Executives’ Share Option Scheme 2001 (“the SOS”) 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 SOS, 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 SOS shall not exceed fifteen per centum (15%) of the total number of issued 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 11)

By Order of the Board

Ng Lai Ying Secretary Singapore, 7 November 2008

Xpress Holdings Ltd Annual Report 2008 | F 65

Notice of Annual General Meeting Explanatory Notes: (i)

The Ordinary Resolution 10 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 in the capital of the Company, of which up to 20% may be issued other than on a pro-rata basis to existing shareholders of the Company. For determining the aggregate number of shares that may be issued, the percentage of issued shares in the capital of the Company will be calculated based on the total number of issued shares in the capital of the Company at the time this Ordinary Resolution is passed after adjusting for new shares arising from the conversion or exercise of the Instruments or any convertible securities, the exercise of share options or the vesting of share awards outstanding or subsisting at the time when this Ordinary Resolution is passed and any subsequent consolidation or subdivision of shares.

(ii)

The Ordinary Resolution 11 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, or the date by which the next Annual General Meeting is required by law to be held or when varied or revoke by the Company in a general meeting, whichever is the earlier, to allot and issue shares in the Company of up to a number not exceeding in total fifteen per centum (15%) of the total number of issued shares in the capital of the Company from time to time pursuant to the exercise of the options under the Scheme.

Notes: 1.

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

2.

The instrument appointing a proxy must be deposited at the Registered Office of the Company at No. 1 Kallang Way 2A, Communications Techno Centre, Singapore 347495 not less than forty-eight (48) hours before the time appointed for holding the Meeting.

F 66 | Xpress Holdings Ltd Annual Report 2008

XPRESS HOLDINGS LTD

IMPORTANT:

(Company Registration No. 199902058Z) (Incorporated in Singapore with limited liability)

PROXY FORM

1.

For investors who have used their CPF monies to buy Xpress Holdings 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.

(Please see notes overleaf before completing this Form)

I/We, of being a member/members of Xpress Holdings 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 at No. 1 Kallang Way 2A, Communications Techno Centre, Singapore 347495 on Monday, 24 November 2008 at 10.00 a.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll. (Please indicate your vote “For” or “Against” with a tick [√] within the box provided.) No.

Resolutions relating to:

For

1

Directors’ Report and Audited Accounts for the financial year ended 31 July 2008

2

Payment of proposed first and final tax exempt one-tier dividend

3

Re-election of Mr Darlington Tseng Te-Lin as a Director

4

Re-election of Mr Khoo Choon Meng as a Director

5

Re-election of Mr Lai Hock Meng as a Director

6

Re-election of Dr Wang Kai Yuen as a Director

7

Re-election of Mr Jerry Lin Yin Chia as a Director

8

Approval of Directors’ fees amounting to S$188,414

9

Re-appointment of Messrs Foo Kon Tan Grant Thornton as Auditors

10

Authority to allot and issue new shares

11

Authority to allot and issue shares under the Xpress Holdings Executives’ Share

Against

Option Scheme 2001 Dated this

day of

2008

Total number of Shares in: Signature of Shareholder(s) or, Common Seal of Corporate Shareholder

No. of Shares

(a) CDP Register (b) Register of Members

*Delete where inapplicable Xpress Holdings Ltd Annual Report 2008 | F 67

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 not more than two proxies to attend and vote in his/her stead. A proxy need not be a member of the Company.

3.

Where a member of the Company appoints more than one proxy, that member shall specify the proportion of his/ her shareholding to be represented by each proxy and if the proportion is not specified, the first named proxy shall be deemed to represent 100 per cent. of the shareholding of that member and the second named proxy shall be deemed to be an alternate to the first named proxy.

4.

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

5.

The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at No. 1 Kallang Way 2A, Communications Techno Centre, Singapore 347495 not less than 48 hours before the time appointed for the Meeting.

6.

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

7.

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

General: The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible, or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the appointor, is not shown to have Shares entered against his name in the Depository Register 48 hours before the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited to the Company.

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