(Extracted from Annual Report 2016)

On behalf of the Board of Directors, I am pleased to present the Annual Report and Financial Statements of the Group and the Company for the financial period ended 31 December 2016. The financial period under review, FY2016, covers the 18-month period from 1 July 2015 to 31 December 2016 as a result of the change of financial year end from 30 June to 31 December.

PERFORMANCE REVIEW
The external operating environment for FY2016 continued to be challenging, against a background of modest growth for the Singapore's economy of 2.0% for the whole of 2016. Under this difficult business environment, the Group registered a profit after tax of $3.9 million for FY2016, a dip of $1.8 million or 31.7% compared to the preceding corresponding period. The decline was chiefly due to higher cost of funds and charge of allowances for loan losses.

The Group's profit from operations before allowances for FY2016 was $10.1 million, 1.8% higher vis-à-vis the same period last year. This was a result of strict discipline in the management of operating costs in the light of lower income. Net interest income contracted by $2.4 million or 7.2% as the rise in interest costs more than offset the growth in interest income. The drop in net interest income was partially compensated by higher non-interest income particularly fee and commission income and gain on sale of investments.

Net allowances for loan losses amounted to $4.7 million for FY2016. This is a reflection of the prevailing challenging economic conditions, especially in some sectors, like the oil and gas sector. For the same period last year, there was a net charge for loan allowances of $1.9 million. The Group continues to set aside adequate specific and collective allowances for the loan portfolio.

The Group has also made impairment loss on investments of $0.7 million due to prolonged decline in the market value of quoted equity investments. The investments have been disposed of during the first quarter of 2016.

Notwithstanding the weaker profitability, the Group's shareholders' funds remains strong at $252 million as at 31 December 2016, and is more than adequate to buffer further volatility in the current economic slowdown. Our capital adequacy ratio continues to be well above the regulatory minimum requirement.

Total loan net of allowances decreased by 10.4% to $838 million compared to $935 million as at 30 June 2015 in the midst of a challenging economic environment. To match the lower loan balance, total customers' deposits was managed downwards by 12.4% to $857 million as at 31 December 2016.

DIVIDENDS
Subject to approval of shareholders at the forthcoming Annual General Meeting, the Board is recommending a first and final one-tier tax exempt dividend of 2 cents per share amounting to $3.2 million for FY2016.

OPERATIONS REVIEW
The Group is fully committed to deliver excellent service to our customers and is also constantly exploring new avenues to boost productivity. During FY2016, frontline staff was trained on how to improve their skills to enhance customers' experience.

The Group has been proactively managing our operating expenses down and where possible, have a leaner organizational structure and productive work force. We have also continued to boost productivity and efficiency via technology and streamlining of process flows. An inhouse development project is underway to enable front-end interface with our loan system which would reduce back-end data re-entry work.

During FY2016, we continued for the second year to be the title sponsor of the Singapore National Age Group Swimming Championships ("SNAG") which was held in March 2016, working alongside Enterprise Sports Group ("ESG") and Singapore Swimming Association ("SSA") to engage our youth community. SNAG presents swimmers with the chance to qualify for FINA sanctioned events and to be recognized and picked to be part of Team Singapore for international swimming competitions such as SEA Games, Asian Games and the Olympics. The event serves our commitment to be a good corporate citizen and also present opportunities for us to enhance awareness of our brand and products.

OUTLOOK
Singapore's economy is expected to remain subdued in 2017 with local economic restructuring challenges and slowdown in the global trade and the uncertainties of any policy changes from the newly elected US Administration. Nevertheless, the Group will continue to be prudent in seeking new business opportunities and be proactive in managing our credit exposure and operating expenses to remain competitive.

On a positive note, Monetary Authority of Singapore ("MAS") has announced on 14 February 2017 regulatory changes to strengthen the resilience of finance companies and enhance their ability to provide financing to small and medium sized enterprises (SMEs). MAS will be phasing in the regulatory changes starting from 2017. The Group welcomes the announcement and will explore any expanded business opportunities that accompanies the changes.

ACKNOWLEDGEMENTS
On behalf of the Board, I welcome Mr Adam Tan Chin Han who joined the Board on 3 January 2017 as an independent director. I am confident the Group will benefit from his extensive and diverse experience and counsel.

I would like to extend my appreciation to our clients and business associates for their support and to our shareholders for their patience and loyalty. I thank my fellow Board members for their continual support, counsel and guidance. I also acknowledge and commend our management and staff for their diligence and hard work in contributing to the development of the Group.