Moya Asia – your partner for clean water

Dayen Environmental Limited

annual report 2005

Company Reg. No. 198602051G

growth and inspiration

contentsmission . 01chairman’s message . 02managing director’s statement . 06financial highlights . 10

group structure . 11board of directors . 12senior management . 14corporate information . 15

corporate governance . 16financial statements . 24

to provide our Clients with cost-effective and value-added solutions.

to provide rewarding career development for staff through structured on-the-job and professional training in a supportive working environment.

to maximise shareholder value through strong and consistent performance.

pg 1

mission statement

pg 2 Dayen Environmental Limited

annual report 2005

chairman’s message

On behalf of the Board of Directors, I am pleased to present the audited accounts of Dayen Environmental Limited for the financial year ended 30 September 2005.

2005 proved to be a breakthrough year for Dayen Environmental. In July 2005, Dayen Environmental secured its first ever Membrane

Bio-Reactor (“MBR”) project. MBR technology is revolutionary and reduces the cost of producing effluent discharge to the sea or in

producing NEWater. This contract shall add credibility to the Group’s reputation in its bid to secure MBR contracts from the local and

overseas markets.

The Group also made a significant breakthrough in the industrial market. The Group had secured contracts amounting to approximately

$1.4 million from customers mainly in the electronic sectors. Projects in the industrial market usually have higher margin and will certainly

improve the Group’s overall profit margin.

The third breakthrough that I want to highlight is that the Board is recommending the Group’s first ever dividend since its listing in the

Singapore Exchange in April 2002 due to a set of steady financial performance in the past years.


annual report 2005

pg 2

pg 3

Financial Highlights

We achieved a 15% increased in the Group turnover to $75.3

million for the year ended 30 September 2005, up from the

$65.7 million recorded for FY 2004. Profit attributable to

shareholders also increased to $2.2 million from $2.1 million

posted last year. Based on our results, the Group’s earnings

per share (EPS) on a fully diluted basis rose 7% to 3.39 cents

compared with 3.16 cents previously while net assets backing

per ordinary share improved to 21.76 cents this year from

18.27 cents in FY 2004.

chairman’s message cont’d

Building Our Capabilities

The successful completion of various multi-million projects

confirmed Dayen Environmental’s ability and capabilities in

handling large scale and complex environmental engineering

projects. In addition, the MBR and industrial projects utilise

membrane technical and thus enhances our membrane

technology capabilities in our water treatment solutions. We

will build upon this strength and continue to acquire expertise

in the application of advanced membrane technology in the

treatment of municipal and industrial water. In addition, our

Build, Own, Operate and Transfer (BOOT) projects in China have

enhanced our experience and capabilities, thus strengthening

the portfolio and business networking of the Group. Going

forward, we will continue to seek new initiatives and strategic

partnerships to enhance our engineering and process

capabilities and develop efficient and cost-effective water

treatment solutions.


annual report 2005


Targeted Markets

We expect the municipal environmental engineering market

in Singapore to remain competitive in the coming year.

The overseas environmental engineering markets are relatively

more vibrant, especially in the Middle East and developing

countries. Nonetheless, the Singapore market will continue to

be an important business territory to Dayen Environmental in the

near future. However, we are committed to build and increase our

market share in the overseas markets, especially China, Vietnam

and Middle-East, in order to reduce our reliance on Singapore.

Challenges Ahead

The year ahead will continue to be full of challenges as

Dayen Environmental seeks to reduce its reliance on Singapore

and its traditional business by developing the overseas markets

and new revenue streams. As in the previous year, Dayen

Environmental will be treading on unfamiliar territory and

is bound to encounter difficult grounds. However, with our

strengths and experience in the environmental engineering

businesses, we are confident of overcoming these challenges.

Growth Strategies

Last year, Dayen Environmental had identified four taps of

revenue stream, namely Engineer, Procure and Construct (EPC),

Build, Own, Operate and Transfer (BOOT), trading of environment

equipment and system packages for industrial users. We will

continue to centre our growth strategies on these four taps.

Dayen Environmental will actively seek out collaborations

with strategic partners with whom we can either provide

integrated solutions or secure marketing network with a view

to enhancing our waste and water treatment capabilities and

improving profitability.

We believed that our collaboration with these partners in the

four growth areas is important and will increase our success rate

in the vast overseas environmental market.

Capitalising on its breakthrough in the industrial markets, Dayen

Environmental will enhance its process design capabilities to

better compete in the industrial market.

pg 5

Mr Lee Thian Guan Johnexecutive chairman

A Note of Appreciation

On behalf of the Board of Directors and management team,

I would like to thank our customers, business associates and

shareholders for their support during the last year. I also would

like to express our sincerest gratitude to our employees for their

continued commitment and dedication to the Group. We look

forward to your continual support as we strive to improve the

quality of our earning and achieve higher growth in the overseas

market.

The successful completion of various multi-million projects confirmed Dayen Environmental’s ability and capabilities in handling large scale and complex environmental engineering projects.



annual report 2005

managing director’s statement

Dayen Environmental had an exciting year in 2005. We secured several breakthrough projects, such as the Membrane Bio-Reactor (“MBR”) for Singapore’s Public Utilities Board and wastewater treatment plant for customers in the electronic industry.

We continue to achieve a steady financial performance. Group’s turnover increased to $75.3 million from $65.7 million and profit

attributable to shareholders increased to $2.2 million from $2.1 million mainly due to the contribution from the wastewater treatment

segment. Group’s shareholders’ equity increased to $14.3 million from $12.0 million mainly due to profit generated from operation.

The Group had made substantial project claims and collection from its customer during the financial year resulting in significant

decrease of contract work-in-progress to $14.8 million from $37.3 million. Cash collected from these project billings were used to

settle trade and other payables and bank borrowings.


annual report 2005

pg 6

pg 7

Segmentation Results

The Waste Treatment segment continues to be the major

contributor to the Group’s turnover and net profits. The Waste

Treatment segment contributed 93% to the Group’s turnover.

The Waste Treatment segment registered a 14% increase in

turnover to $70.3 million from $61.8 million. While our Water

Treatment segment achieved $3.7 million in sales, up from

2004’s 3.2 million. Our revenue for Others segment jumped

98% to $1.4 million from $0.7 million.

Municipal EPC Projects

Singapore

Despite the challenging environmental engineering municipal

markets in Singapore, Dayen Environmental managed to secure

a project to design and construct a $7.6 million Membrane Bio-

Reactor (MBR) plant for Singapore’s Public Utilities Board. This

MBR project is an important milestone to Dayen Environmental

as it is a revolutionary wastewater treatment technology where it

reduces several stages in the treatment process and thus reducing

the capital and operation cost.

Overseas

Dayen Environmental continues to spend more resources in its

marketing and tendering efforts in the overseas market in order

to reduce our reliance on Singapore. We will focus on overseas

projects that are funded by multilateral development financial

institution such as, the Asian Development Bank and World

Bank. In this respect, we have been pre-qualified to participate in

several projects in Vietnam, Papua New Guinea and Uzbekistan.

These projects are still in various stages of the tendering process.

managing director’s statement cont’d


annual report 2005

BOOT (BUILD Own Operate Transfer)

The Group is currently executing two BOOT’s projects in China.

The civil work for the wastewater treatment project in Diao Bing

Shan City has been substantially completed. The whole plant is

expected to be completed in the third quarter of calendar year

2006, a slight delay from our original expectation.

The second BOOT project is in Jufuyuan Nationality Industrial

Area (JNIA) in Tongzhou District, Beijing and involves the

operation of a water plant and a construction of a wastewater

treatment plant. The operation of the water plant has met our

expectation as it show a slight pick-up in the water demand in

JNIA. We had completed the design works of the wastewater

treatment plant and would commence the construction of the

plant once the volume of the wastewater discharge has reached

an economical level. We do not expect the construction of the

wastewater plant to commence within the next 12 months.


Industrial Project

Dayen Environmental have made significant inroad to the

industrial markets. We had secured a total of about

$1.4 million contracts from customers in electronic and

pharmaceutical industries These contracts demonstrated our

capabilities in designing and implementing water and wastewater

treatment systems to meet industrial customers’ demand for

high quality water.

Project in the industrial market usually has a higher margin than

the municipal market although the contract value is smaller.

We will actively pursue new projects from industries such as

automotive, pharmaceutical, food and beverage, electroplating

& metal finishing, Oil and Gas, Power, Pulp and Paper, Textiles,

Semiconductor and Electronics.

Membrane Bio-Reactor project is an important milestone to Dayen Environmental as it is a revolutionary waste water treatment technology where it reduces several stages in the treatment process”

“

pg 9

Last year, we continued rolling-out various modules from the

in-house software systems to streamline work processes for

our Staff. Employees can now make reimbursement claims and

updates attendance by using the on-line system at the comfort of

their desks. Employees are also able to access information, such

as the respective projects’ actual and budgetary cost, on-line.

This allows project management to have timely information to

ensure that projects are executed within budget.

Looking Ahead

Dayen Environmental is renowned for its strength in project

executions. We have been serving our customers well in

Singapore. Our track record of completing projects on time,

within budgeted cost and to the satisfaction of our customers

is impeccable. We are confident that we can leverage on this

strength to increase our market shares in the overseas market.


Products Manufacturing and Trading

The Products Manufacturing and Trading division has made

progresses, albeit slowly, and managed to secure about $636,000

in sales. The gestation period for customer’s acceptance of new

products introduced by new vendors is usually very long in the

environmental equipments market. We commenced this division

only in mid 2004 and will continue to commit resources and

expand our networks to secure more products sales. We are also

looking into developing new products and acquiring new agency

products to enlarge our current portfolio of self-manufactured

and agency products.

Internal Management Initiatives

Majority of the Groups’ operations is project based and extends

over a period of time. As such, the ability to manage project

risk, cost and productive is very paramount to the success of the

Group. The Group had implemented various initiatives in this

respect and will continue improving its systems and processes.

Mr Kor Hock Laimanaging director


annual report 2005

financial highlights


annual report 2005

Turnover (S$’000)

33,561

23,041

43,878

65,658

75,340

’01’02’03’04’05

Profit after Taxation (S$’000)

’01’02’03’04’05

Earnings per Share (cents)

3.0

0.6

2.9

3.2

3.4

’01’02’03’04’05

Net Assets per Share (cents)

17.12

12.26

15.19

18.27

21.76

’01’02’03’04’05

1,582

350

1,926

2,071

2,226

pg 11

50%

group structure

Dayen Investment Holdings Pte Ltd

100%

Shenfei Dayen Environmental Ltd

JuFuYuan Environmental (Beijing) Ltd

100%



annual report 2005

board of directors

Mr Lee Thian Guan John Executive Chairman

Lee Thian Guan John is a co-founder

and Executive Chairman of Dayen

Environmental Limited. He began his

career as an aircraft technician in the

Republic of Singapore Air Force and

subsequently left to set up Dayen

in September 1986 together with

co-founder and current Managing

Director, Kor Hock Lai. Since then, he

has accumulated more than 20 years of

experience in the engineering industry,

more than 10 of which have been in

environmental engineering. Mr Lee

overlooks the Group’s investments in

China. He holds a Diploma in Mechanical

Engineering from the Singapore

Polytechnic.

Mr Kor Hock Lai Managing Director

Kor Hock Lai is a co-founder and

Managing Director of the Group.

Beginning his career as a management

trainee in Sembawang Shipyard, he later

joined Boustead Engineering as a factory

engineer and subsequently, helped set up

Dayen together with Executive Chairman

Lee Thian Guan John. With more than

20 years of engineering experience,

he has acquired more than 10 years

specifically in environmental engineering.

As Managing Director, Mr Kor’s overall

management capacity includes the

supervision of Dayen’s waste and water

treatment business, project management

functions and administrative functions.

He holds a Bachelor of Science Degree in

Mechanical Engineering from Portsmouth

Polytechnic.

Dr Ho Kah Leong Independent Director

Dr Ho Kah Leong was appointed as an

Independent Director of the Company on

1 April 2002 and is the Chairman of our

Audit Committee. Dr Ho is currently the

senior consultant to Pioneers & Leaders

(Publisher) Pte Ltd and also a Director

of G&W Group (Holdings) Limited,

Superbowl Holdings Limited, Vicom Ltd,

Green World Holdings Limited, Ang Mo

Kio Hospital Ltd, Sculpture Square Ltd,

Toa Payoh Senior Citizens’ Health Care

Centre Ltd, Geylang Senior Citizens’

Health Care Centre Ltd and Mee Toh

School Ltd. Dr Ho previously served

in various capacities in the Singapore

Government, with his last appointment

as the Senior Parliamentary Secretary in

the Ministry of the Environment between

1994 and 1997. He holds a Bachelor of

Science degree from Nanyang University

and was conferred an Honorary Doctorate

by Wisconsin International University,

USA in 2001.


annual report 2005

pg 12

pg 13

Mr Kwa Kim Chiong Independent Director

Kwa Kim Chiong was appointed as an

Independent Director of the Company

on 1 April 2002. Currently also the Chief

Executive Officer of JustLogin Pte Ltd

which he founded in February 2000, his

most recent prior appointments were that

of Deputy General Manager and Director

of Operations at Singapore Technologies

Electronics Pte Ltd. Before that, Mr Kwa

spent 11 years with the Defence Science

Organization, holding the position of

Head of IT until he left in 1995. Most

recently, he emerged as a grand finalist

in the “Netrepreneur of the Year Award”

in 2001, an award organised by the

Association of Small and Medium

Enterprises to recognise entrepreneurial

achievements. Mr Kwa holds a Master

of Business Administration degree and a

Bachelor in Electrical Engineering degree

(honours) from the National University

of Singapore.

pg 13

Mr Lee Nyen Fatt Independent Director

Lee Nyen Fatt was appointed as an

Non-Executive Director of the Company

on 1 April 2002 and appointed as an

Independent Director on 12 November

2003. He is also one of the members

of our Audit Committee. He is a fellow

member of The Association of Chartered

Certified Accountants, United Kingdom

and a practising member of the Institue

of Certified Public Accountants of

Singapore. He has more than 20 years

experience in accounting, auditing,

taxation and corporate secretarial work.

Mr Lee is also currently a managing

partner in a certified public accountants

firm in Singapore.

board of directors cont’d


annual report 2005

Mr Koh Meng Chuan Project Director

Koh Meng Chuan is Dayen’s Project

Director and oversees the implementation

of projects in both waste and water

treatment in Singapore. Mr Koh began

his career as a defence engineer in the

Ministry of Defence, eventually working

his way to Head of Branch before leaving

to join the Company in 1996. Koh

Meng Chuan holds a Master of Science

(Mechanical Engineering) degree from the

National University of Singapore.

senior management


pg 14 annual report 2005

Mr Darren Tan Poon Guan Financial Controller

Darren Tan Poon Guan is the Financial

Controller and is responsible for the

finance and accounting systems of the

Company. He also manages the Group’s

human resource and administration

functions. Prior to joining the Company in

October 2000, he held auditing positions

in Singapore Technologies Pte Ltd and

Advanced Micro Devices (Singapore) Ltd,

and was an external auditor in KPMG.

Mr Tan is a member of The Association

of Chartered Certified Accountants and

a non-practising member of the Institute

of Certified Public Accountants of

Singapore.

pg 15pg 15

Audit Committee

Ho Kah Leong Chairman

Kwa Kim Chiong

Lee Nyen Fatt

Nominating Committee

Kwa Kim Chiong Chairman

Ho Kah Leong

Lee Nyen Fatt

Remuneration Committee

Lee Nyen Fatt Chairman

Kwa Kim Chiong

Ho Kah Leong

Company Secretary

Darren Tan Poon Guan

corporate information

Board of Directors

Lee Thian Guan John Executive Chairman

Kor Hok Lai Managing Director

Ho Kah Leong Independent Director

Kwa Kim Chiong Independent Director

Lee Nyen Fatt Independent Director

Registered Office

6 Woodlands Industrial Park E1

Singapore 757729

Tel: 65 6365 0652

Fax: 65 6365 1025

Registrar

M&C Services Private Limited

138 Robinson Road

#17-00 The Corporate Office

Singapore 068906

Auditors

KPMG

Certified Public Accountants

16 Raffles Quay #22-00

Hong Leong Building

Singapore 048521

Partner-in-Charge:

Phuoc Tran

(appointed during the financial

year ended 30 September 2001)


annual report 2005

The Company believes in maintaining high standards of corporate governance and is committed to ensuring that effective self-regulatory corporate practices exist to protect the interests of its shareholders. The Company recognises the importance of practicing good corporate governance and fully supports the recommendations of the Singapore Code of Corporate Governance (“Code”).

The Company is pleased to disclose below a description of its corporate governance processes and activities with specific reference to the Code.

1. BOARD OF DIRECTORS

Principle 1: Board’s Conduct of its AffairsThe Board conducts meetings at least twice yearly in addition to ad-hoc meetings. The attendance of the directors at meetings of the Board during the financial year is as follows:

Board Committees

Board/Committees Board Audit Remuneration Nominating

No. of meetings held 3 2 1 1

Directors No. of meetings attended

Lee Thian Guan John 3 2 1 1

Kor Hock Lai 3 2 1 1

Ho Kah Leong 3 2 1 1

Kwa Kim Chiong 3 2 1 1

Lee Nyen Fatt 3 2 1 1

The principal functions of the Board, apart from its statutory responsibilities, are:

i. Reviewing financial performance of the Group;

ii. Approving major investment and funding decisions;

iii. Overseeing the processes for evaluating the adequacy of internal controls, risk management, financial reporting and compliance;

iv. Evaluating the performance and determine the compensation of key management personnel; and

v. Assuming responsibility for corporate governance.

Certain matters specifically reserved for decision by the Board are those relating to approval of announcements of financial results, approval of annual reports and financial statements, convening of shareholders’ meetings, dividend payment, material acquisitions and disposal of assets and corporate restructuring matters.

New directors are briefed on the Group’s business and Corporate Governance policies. Familiarisation visits, including overseas plants, are organised, if necessary, to facilitate a better understanding of the Group’s operations.

The Board has no dissenting view on the Chairman’s statement for the year in review

corporate governance

pg 17

1. BOARD OF DIRECTORS cont’d

Principle 2: Board Composition and BalanceThe Board’s 5 Directors comprise 2 executive Directors and 3 independent Directors. This composition complies with the Code’s requirement that at least one-third of the Board should be made up of independent Directors. The Board has reviewed and is satisfied as to the independence of the respective independent Directors. The Board is of the opinion that its current size and composition reflects the broad range of experience, skills and knowledge necessary for the effective stewardship of the Group.

The nature of the Directors’ appointments on the Board, and details of their memberships in the Board Committees are set out below:

Board Committees

Director Board Membership Audit Remuneration Nominating

Lee Thian Guan John Executive Chairman

Kor Hock Lai Managing Director

Ho Kah Leong Independent Director Chairman Member Member

Kwa Kim Chiong Independent Director Member Member Chairman

Lee Nyen Fatt Independent Director Member Chairman Member

Principle 3: Chairman and Chief Executive OfficerLee Thian Guan John is the Executive Chairman. Kor Hock Lai is the Managing Director.

The Executive Chairman and Managing Director carry complementary responsibilities. There is a clear division of responsibilities between the Executive Chairman and Managing Director to ensure that there is a balance of power and authority. Their responsibilities are disclosed under the “Board of Directors” section.

2. NOMINATING COMMITTEE (“NC”)

Principle 4: Board Membership

Principle 5: Board PerformanceThe NC was established on 21 June 2002. The NC comprises of 3 Directors, of whom all are independent non-executive Directors.

Chairman: Kwa Kim Chiong (independent non-executive Director)

Member: Ho Kah Leong (independent non-executive Director)

Lee Nyen Fatt (independent non-executive Director)

The main role of the Committee is to make the process of Board appointments and re-appointments transparent, and to assess the effectiveness of the Board as a whole and the contribution of individual Directors to the effectiveness of the Board.

corporate governance cont’d


annual report 2005

2. NOMINATING COMMITTEE (“NC”)The terms of reference of the Committee are as follows:

i. Recommend appointment and reappointment of Directors;

ii. Review annually the independence of each Director, and ensure that the Board comprises at least one-third independent Director;

iii. Decide, where a Director has multiple board representation, whether the director is able to and has been adequately carrying out his duties as director of the Company;

iv. Decide how the Board’s performance may be evaluated and propose objective performance criteria to assess effectiveness of the Boards; and

v. Perform assessment of the effectiveness of the Board as a whole and the contribution of individual Directors.

Under the Company’s Article of Association, each Director (except the Managing Director) is required to retire at least once in every three years by rotation and all newly appointed Directors will have to retire at the next Annual General Meeting following their appointment. The retiring Directors are eligible to offer themselves for re-election. The NC has recommended the re-appointment of 2 retiring Directors, namely Messrs Ho Kah Leong and Lee Nyen Fatt at this forthcoming Annual General Meeting. The Board has accepted the NC’s recommendation.

The dates of initial appointment and re-election of the Directors are set out below:

Director Position Date of Initial Appointment Date of Last Re-election

Lee Thian Guan John Executive Chairman 23 September 1986 30 December 2004

Kor Hock Lai Managing Director 23 September 1986 23 September 1986

Ho Kah Leong Independent Director 1 April 2002 30 December 2003

Kwa Kim Chiong Independent Director 1 April 2002 30 December 2004

Lee Nyen Fatt Independent Director 1 April 2002 30 December 2003

Information on Directors

Information required in respect of the academic and professional qualification, directorship or chairmanship in other listed companies is set out in the “Board of Directors” section.

Information on shareholdings in the Company held by each director are set out in the “Directors’ Report” section of the Annual Report.

The NC will conduct an assessment on the effectiveness of the Board as a whole and the contribution by each individual director to the effectiveness of the Board on an annual basis.


pg 19


2. NOMINATING COMMITTEE (“NC”)

Principle 6: Access to InformationThe members of the Board in their individual capacity have access to complete information on a timely basis in the form and quality necessary for the discharge of their duties and responsibilities. Prior to each Board meeting, the members of the Board are each provided with the relevant documents and information to enable them to obtain a comprehensive understanding of the issues to be deliberated upon to enable them to arrive at an informed decision.

The Directors have direct access to management and the advice and services of the Company Secretary, who attends all Board meetings and is responsible for ensuring that Board meeting procedures are followed and that applicable rules, acts and regulations are complied with.

Should Directors, whether as a group or individually, need independent professional advice, the Company Secretary will, upon direction by the Board, appoint a professional advisor approved by the Company to render the advice.

3. REMUNERATION COMMITTEE (“RC”)

Principle 7: Procedures for Developing Remuneration Policies

Principle 8: Level and Mix of Remuneration

Principle 9: Disclosure on RemunerationThe RC was established on 1 April 2002. The RC comprises of 3 Directors, of whom all are independent non-executive Directors.

Chairman: Lee Nyen Fatt (independent non-executive Director)

Member: Ho Kah Leong (independent non-executive Director)

Kwa Kim Chiong (independent non-executive Director)

The terms of reference of the Committee are as follows:

i. Recommend to the Board a framework of remuneration for the Executive Directors and other key members of executive management;

ii. Determine specific remuneration packages for each Executive Director;

iii. Determine targets for any performance related pay schemes operated by the Company; and

iv. Administer the Dayen Employee Share Option Scheme in accordance with the rules of the Scheme.

The RC members are familiar with executive compensation matters as they manage their own business and/or holding other directorships in the boards of other listed companies. In discharging its duties, the RC may retain such professional consultancy firm, as it deems necessary.

The RC will ensure that the Directors are adequately but not excessively remunerated. The RC will also consider amongst other things, their responsibilities and contribution to the Company’s performance and ensure that rewards are linked to corporate and individual performance. No individual Director should be involved in deciding his own remuneration. Non-executive Directors are paid Director’s fees annually on a standard basis.


annual report 2005

3. REMUNERATION COMMITTEE (“RC”)Breakdown of remuneration of each Director by % (financial year ended 30 September 2005)

Remuneration Band Variable or Performance Total

& Name of Director Salary and CPF Directors’ Fees Related Income / Bonus

Below $250,000

Lee Thian Guan John 87% - 13% 100%

Kor Hock Lai 87% - 13% 100%

Ho Kah Leong - 100% - 100%

Kwa Kim Chiong - 100% - 100%

Lee Nyen Fatt - 100% - 100%

For the financial year ended 30 September 2005, the top 5 key executives (who are not Directors) of the Company are Messrs Koh Meng Chuan, Teo Hock Heng, Darren Tan Poon Guan, Lim Eng Teck and Ang Kwee Huat. The remuneration of each of these 5 key executives did not exceed $250,000.

No employees of the Company and its subsidiary were an immediate family member of any Director and whose remuneration has exceeded $150,000 during the financial year ended 30 September 2005. “Immediate family member” means the spouse, child, adopted child, stepchild, brother, sister and parent.

4. AUDIT COMMITTEE (“AC”)

Principle 11: Audit CommitteeThe AC was established on 1 April 2002. The RC comprises of 3 Directors, all are independent non-executive Directors.

Chairman: Ho Kah Leong (independent non-executive Director)

Member: Kwa Kim Chiong (independent non-executive Director)

Lee Nyen Fatt (independent non-executive Director)

The profile of the members of the AC are set out in the “Board of Directors” section. The Board is of the view that the AC has the requisite financial management expertise and experience to discharge its responsibilities properly.

The terms of reference of the Committee are as follows:

i Review the audit plans, the system of internal accounting controls and the audit report in conjunction with the external auditors;

ii Review the assistance given by the Company’s officers to the external and internal auditors;

iii Review the independence and objectivity of the external auditors annually;

iv Nominate external auditors for re-appointment;


pg 21

4. AUDIT COMMITTEE (“AC”) cont’d

v Review the financial statements of the Company, including the half year and full year results and the respective announcements before the submission to the Board of Directors;

vi Give due consideration to the requirements of the Stock Exchange Listing Rules; and

vii Review interested person transaction.

The AC has direct access to and full co-operation of the Company’s management. It has full discretion to invite any Director or executive officer to attend its meetings and has been given reasonable resources to enable it to discharge its functions.

The AC meets at least twice in a year to review the announcements of the half-year and full-year results before being approved by the Board for release to the SGX-ST. The AC also meet with the external auditors and reviews the scope and results of the external audit. The AC may meet the external auditors at any time, without the presence of the Company’s management.

The AC has reviewed the volume of non-audit services to the Group by the external auditors, and being satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors, is pleased to confirm their re-nomination.

Principle 12: Internal Controls

Principle 13: Internal Audits (“IA”)

The Board acknowledges that it is responsible for maintaining a sound system of internal controls to safeguard shareholders’ interests and maintain accountability of its assets. While no cost-effective internal control system can provide absolute assurance against loss or misstatement, the Group’s internal controls and systems have been designed to provide reasonable assurance that assets are safeguarded, operational controls are in place, business risks are suitably protected, proper accounting records are maintained and financial information used within the business and for publication, are reasonable and accurate.

The AC continuously reviews the cost-effectiveness and adequacy of the Group’s internal system with the internal and external auditors. The Company engages the services of external consultant to perform the internal audit functions. The internal auditor reports directly to the Chairman of the AC on internal audit matters. During the current financial year, there is no internal audit performed by external consultant, however, the external auditors had reviewed the internal control system. Nevertheless, the Company will engage external consultant to perform IA functions in the coming financial year.

5. EXECUTIVE COMMITTEE (“EXCO”)The EXCO comprises of Messrs Kor Hock Lai, Lee Thian Guan John, Koh Meng Chuan and Darren Tan Poon Guan and is responsible for the supervision of the management of the Group’s business. Budgets and management reports relating to the financial performance, position and prospects of the Group are submitted to the EXCO regularly for review.



annual report 2005

6. COMMUNICATION WITH SHAREHOLDERS

Principle 10: Accountability

Principle 14: Communication with Shareholders

Principle 15: Greater Shareholder Participation

The Board believes in timely communication of information to shareholders and the public. It is the Company’s policy that all shareholders and the public should be equally and timely informed of all major developments that impact the Company. Communication is made through:

i Annual reports that are issued to all shareholders;

ii Announcement of half-year and full-year results on the Singapore Exchange Securities Trading Limited’s SGXNET;

iii Disclosures on the SGXNET;

iv Press releases on major developments of the Company; and

iv Company’s website at www.dayen.com.sg from which shareholders can access information on the Company.

The Annual General Meeting is the principal forum for dialogue with shareholders. There is an open question and answer session at which shareholders may raise questions or share their views regarding the proposed resolutions and the Company’s businesses and affairs. The Chairman of the Board, the Board members and the external auditors are in attendance at the Annual General Meeting.

7. INTERESTED PERSON TRANSACTIONSThe Company has established internal control policies to ensure that transactions with interested persons are properly reviewed and approved, and are conducted at arm’s length basis.

8. SECURITIES TRANSACTIONSThe Company has issued a policy on dealings in the securities of the Company to its Directors and key employees (including employees with access to price-sensitive information to the Company’s shares), setting out the implications of insider trading and guidance on such dealings. It has adopted the Best Practices Guide on Dealings in Securities issued by the Singapore Exchange Securities Trading Limited.

9. RISK MANAGEMENT AND PROCESSESInformation relating to risk management policies and processes are set out on page 52 of the Annual Report.



annual report 2005

financial contentsdirectors’ report . 24

statement by directors . 27

report of the auditors . 28

balance sheets . 29

profit and loss accounts . 30

statements of changes in equity . 31

consolidated statement of cash flows . 32

notes to the financial statement . 33

shareholding statistics . 54

notice of annual general meeting . 55

proxy form . 59


annual report 2005

We are pleased to submit this annual report to the members of the Company together with the audited financial statements for the financial year ended 30 September 2005.

Directors

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

Lee Thian Guan John Kor Hock Lai Ho Kah Leong Kwa Kim Chiong Lee Nyen Fatt

Directors’ Interests

According to the register kept by the Company for the purposes of Section 164 of the Companies Act, Chapter 50 (the “Act”), particulars of interests of directors who held office at the end of the financial year (including those held by their spouses and infant children) in shares in the Company (other than wholly-owned subsidiaries) are as follows:

Holdings Holdings at beginning at end Name of director and corporation in which interests are held of the year of the year

The Company Ordinary shares of $0.08 each

Lee Thian Guan John 25,462,500 25,462,500 Kor Hock Lai 25,462,500 25,462,500 Lee Nyen Fatt 40,000 40,000 Ho Kah Leong 40,000 40,000

Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, debentures, warrants or share options of the Company or of related corporations, either at the beginning or at the end of the financial year.

There were no changes in any of the abovementioned interests in the Company between the end of the financial year and 21 October 2005.

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

Since the end of the last financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

directors’ reportyear ended 30 september 2005

pg 25

Share Options

During the financial year, there were:

(i) no options granted by the Company to any person to take up unissued shares in the Company; and

(ii) no shares issued by virtue of any exercise of option to take up unissued shares of the Company.

As at the end of the financial year, there were no unissued shares of the Company under option.

Audit Committee

The members of the Audit Committee during the year and at the date of this report are:

• Ho Kah Leong (Chairman), independent director

• Kwa Kim Chiong Independent director

• Lee Nyen Fatt Independent director

The Audit Committee performs the functions specified in Section 201B of the Companies Act, the Listing Manual and the Best Practices Guide of the Singapore Exchange, and the Code of Corporate Governance.

The Audit Committee has held two meetings since the last directors’ report. In performing its functions, the Audit Committee met with the Company’s external and internal auditors to discuss the scope of their work, the results of their examination and evaluation of the Company’s internal accounting control system.

The Audit Committee also reviewed the following:

• assistance provided by the Company’s officers to the internal and external auditors;

• financial statements of the Group and the Company prior to their submission to the directors of the Company for adoption; and

• interested person transactions (as defined in Chapter 9 of the Listing Manual of the Singapore Exchange).

The Audit Committee has full access to management and is given the resources required for it to discharge its functions. It has full authority and the discretion to invite any director or executive officer to attend its meetings. The Audit Committee also recommends the appointment of the external auditors and reviews the level of audit and non-audit fees.

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, KPMG, be nominated for re-appointment as auditors at the forthcoming Annual General Meeting of the Company.

directors’ report (cont’d)


annual report 2005

Auditors

The auditors, KPMG, have indicated their willingness to accept re-appointment.

On behalf of the Board of Directors

Lee Thian Guan JohnDirector

Kor Hock LaiDirector

Singapore16 November 2005

directors’ report (cont’d)

pg 27

statement by directorsyear ended 30 september 2005

In our opinion:

(a) the financial statements set out on pages 29 to 53 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 30 September 2005 and of the results, changes in equity and cash flows of the Group and of the results and changes in equity of the Company for the year ended on that date; and

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

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

On behalf of the Board of Directors

Lee Thian Guan JohnDirector

Kor Hock LaiDirector



annual report 2005

report of the auditors to the Members of Dayen Environmental Limited

We have audited the accompanying financial statements of Dayen Environmental Limited for the year ended 30 September 2005 as set out on pages 29 to 53. These financial statements are the responsibility of the Company’s directors. 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 plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion:

(a) the consolidated financial statements of the Group and the balance sheet, profit and loss account and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards to give a true and fair view of the state of affairs of the Group and of the Company as at 30 September 2005 and of the results, changes in equity and cash flows of the Group and of the results and changes in equity of the Company for the 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 Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

KPMGCertified Public Accountants


pg 29

balance sheets as at 30 September 2005

Group Company

Note 2005 2004 2005 2004

$ $ $ $

Non-current assets

Property, plant and equipment 3 2,561,680 2,666,088 2,526,111 2,623,826

Intangible asset 4 433,429 440,258 - -

Subsidiaries 5 - - 300,000 300,000

Associate 6 2,007,482 2,013,183 2,067,240 2,067,240

Other investment 7 50,000 50,000 - -

5,052,591 5,169,529 4,893,351 4,991,066

Current assets

Contract work-in-progress 8 14,828,948 37,326,522 14,828,948 37,261,687

Inventories 817 3,136 - -

Trade and other receivables 9 9,916,307 18,924,243 10,599,146 19,612,006

Cash at bank and on hand 10 1,136,963 644,406 968,289 380,678

25,883,035 56,898,307 26,396,383 57,254,371

Current liabilities

Bank overdrafts (secured) 10 1,925,038 5,459,553 1,925,038 5,459,553

Excess of progress billings over contract work-in-progress 8 535,050 35,713 535,050 35,713

Trade and other payables 11 12,937,153 42,469,652 12,932,061 42,465,457

Dividend payable - 1,000,000 - 1,000,000

Current tax payable 1,241,725 1,084,572 1,241,725 1,084,572

16,638,966 50,049,490 16,633,874 50,045,295

Net current assets 9,244,069 6,848,817 9,762,509 7,209,076

Non-current liabilities

Deferred tax liabilities 12 19,621 33,685 19,621 33,685

Net assets 14,277,039 11,984,661 14,636,239 12,166,457

Share capital 13 5,248,000 5,248,000 5,248,000 5,248,000

Reserves 14 9,029,039 6,736,661 9,388,239 6,918,457

Shareholders’ equity 14,277,039 11,984,661 14,636,239 12,166,457

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


annual report 2005


profit and loss accounts Year Ended 30 September 2005

Group Company

Note 2005 2004 2005 2004

$ $ $ $

Revenue 15 75,340,497 65,658,475 75,303,753 65,638,827

Cost of sales (70,040,729) (60,723,934) (69,988,086) (60,697,770)

Gross profit 5,299,768 4,934,541 5,315,667 4,941,057

Other operating income 79,127 15,570 77,523 15,171

Administrative expenses (2,152,831) (2,037,456) (2,092,902) (1,971,151)

Other operating expenses (337,042) (258,004) (237,936) (226,841)

Profit from operations 2,889,022 2,654,651 3,062,352 2,758,236

Finance costs (48,915) (47,261) (36,221) (47,253)

Share of (loss)/profit of an associate (57,507) 28,844 - -

Profit from ordinary activities before taxation 17 2,782,600 2,636,234 3,026,131 2,710,983

Income tax expenses 19 (556,349) (565,660) (556,349) (565,660)

Net profit for the year 2,226,251 2,070,574 2,469,782 2,145,323

Earnings per share (cents) 20

Basic 3.39 3.16

Diluted 3.39 3.16

pg 31


statements of changes in equityyear ended 30 september 2005

Currency Share Share translation Accumulated capital premium reserve profits Total

$ $ $ $ $

Group

At 1 October 2003 5,248,000 657,274 (6,073) 4,065,277 9,964,478

Net profit for the year - - - 2,070,574 2,070,574

Translation differences relating to financial statements of foreign entities - - (50,391) - (50,391)

At 30 September 2004 5,248,000 657,274 (56,464) 6,135,851 11,984,661

Net profit for the year - - - 2,226,251 2,226,251

Translation differences relating to financial statements of foreign entities - - 66,127 - 66,127

At 30 September 2005 5,248,000 657,274 9,663 8,362,102 14,277,039

Company

At 1 October 2003 5,248,000 657,274 - 4,115,860 10,021,134

Net profit for the year - - - 2,145,323 2,145,323At 30 September 2004 5,248,000 657,274 - 6,261,183 12,166,457

Net profit for the year - - - 2,469,782 2,469,782At 30 September 2005 5,248,000 657,274 - 8,730,965 14,636,239


annual report 2005

Note 2005 2004 $ $

Operating activitiesProfit from ordinary activities before taxation 2,782,600 2,636,234Adjustments for:Depreciation of property, plant and equipment 180,640 202,456Amortisation of intangible assets 17,881 6,705Gain on disposal of property, plant and equipment (312) - Property, plant and equipment written off - 8,638Interest expenses 48,915 47,261Interest income (3,668) (1,384)Share of loss/(profit) of an associate 57,507 (28,844)Allowance made/(reversed) for foreseeable losses 121,571 (130,000)Operating profit before working capital changes 3,205,134 2,741,066

Changes in working capital:Contract work-in-progress 22,875,340 (24,182,557)Inventories 2,319 (3,136)Trade and other receivables 9,007,936 (12,151,552)Trade and other payables (29,532,499) 33,264,820 Cash generated from operations 5,558,230 (331,359)Income taxes paid (413,260) (670,812)Cash flows from/(used in) operating activities 5,144,970 (1,002,171)

Investing activitiesInterest received 3,668 1,384Purchase of property, plant and equipment (75,751) (114,576)Purchase of intangible assets - (446,963)Proceeds from disposal of property, plant and equipment 619 - Other investment - (50,000)Cash flows used in investing activities (71,464) (610,155)

Financing activitiesInterest paid (48,915) (47,261)Dividends paid (1,000,000) (1,000,000)Repayment of short-term loan - (325,994)Fixed deposit pledged to bank (10,006) - Cash flows used in financing activities (1,058,921) (1,373,255)

Net increase/(decrease) in cash and cash equivalents 4,014,585 (2,985,581)Cash and cash equivalents at beginning of year (4,815,147) (1,808,402)Effect of exchange rate changes on balances held in foreign currency 2,481 (21,164)Cash and cash equivalents at end of year 10 (798,081) (4,815,147)

consolidated statement of cash flowsYear Ended 30 September 2005


pg 33

These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the directors on 16 November 2005.

1 Domicile and Activities

Dayen Environmental Limited (the Company) is incorporated in the Republic of Singapore and has its registered office at 6 Woodlands Industrial Park E1, Singapore 757729.

The principal activities of the Group and the Company are those relating to the provision of mechanical and electrical engineering services.

The consolidated financial statements relate to the Company and its subsidiaries (referred to as the Group) and the Group’s interests in an associate.

2 Summary of Significant Accounting Policies

2.1 Basis of preparation

The financial statements are prepared in accordance with Singapore Financial Reporting Standards (FRS) including related Interpretations promulgated by the Council on Corporate Disclosure and Governance.

In 2005, the Group adopted the following new/revised FRSs which are relevant to the operations:

FRS36 (revised) Impairment of Assets

FRS38 (revised) Intangible Assets

FRS103 Business Combinations

The adoption of the new/revised FRSs did not give rise to any adjustments to the opening balances of accumulated profits of the prior and current years or changes to comparatives.

The historical cost basis is used. Amounts are expressed in Singapore dollars, unless stated otherwise.

2.2 Consolidation

Subsidiaries are companies controlled by the Company. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of a company so as to obtain benefits from its activities.

Investments in subsidiaries are stated in the Company’s balance sheet at cost less impairment losses. 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 are those companies in which the Group has significant influence, but not control, over the financial and operating policies.

Notes to the Financial StatementsYear Ended 30 September 2005


annual report 2005

notes to the financial statements (cont’d)

2 Summary of Significant Accounting Policies (cont’d)

2.2 Consolidation

Investments in associates are stated in the Company’s balance sheet at cost less impairment losses. In the Group’s financial statements, they are accounted for by using the equity method of accounting.

Business combinations are accounted for under 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.

2.3 Foreign currencies

Foreign currency transactions

Monetary assets and liabilities in foreign currencies, except for foreign currency assets and liabilities hedged by forward exchange contracts, are translated into Singapore dollars at rates of exchange approximate to those ruling at the balance sheet date. Foreign currency assets and liabilities hedged by forward exchange contracts are translated into Singapore dollars at the contracted forward exchange rates. Transactions in foreign currencies are translated at rates ruling on transaction dates. Translation differences are included in the profit and loss accounts.

Foreign entities

The assets and liabilities of foreign entities are translated to Singapore dollars at the rates of exchange ruling at the balance sheet date. The results of foreign entities are translated at the average exchange rates for the year. Goodwill and fair value adjustment arising on the acquisition of foreign entities are stated at exchange rates ruling on transaction dates. Exchange differences arising on translation are recognised directly in equity. On disposal, the accumulated translation differences are recognised in the consolidated profit and loss account as part of the gain or loss on sale.

2.4 Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

Gains or losses arising from the retirements or disposals of property, plant and equipment are determined as the difference between the net disposal proceeds and the carrying amount of the assets and are recognised in the profit and loss accounts on the date of retirement or disposal.

Depreciation is provided on a straight-line basis so as to write off items of property, plant and equipment over their estimated useful lives as follows:

Leasehold property - Over the period of the lease of 57 years Plant and machinery - 5 years Furniture, fittings and office equipment - 3 to 5 years Motor vehicles - 2 to 3 years

pg 35


2.5 Intangible asset

Goodwill in a business combination represents the excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired. Goodwill is stated at cost less impairment losses. Goodwill arising on acquisitions of associates is included in investments in associates.

Goodwill is tested for impairment on an annual basis in accordance with note 2.10 below.

Goodwill and negative goodwill that were previously taken to reserves are not taken to the profit and loss account when (a) the business is disposed or discontinued or (b) the goodwill is impaired.

Other Intangible Assets

Intangible assets that have an indefinite life or that are not yet available for use are stated at cost less impairment loss. Such intangible assets are tested for impairment annually in accordance with note 2.10 below.

Amortisation of intangible assets with finite life is charged to the profit and loss account on a straight-line basis over their estimated useful lives.

2.6 Other investments

Other investments are stated at cost less impairment losses.

2.7 Derivatives and hedging

Derivative financial instruments are used to manage the Group’s exposure to foreign exchange and interest rate risk arising from operational, financing and investment activities. Derivative financial instruments are not used for trading purposes.

Derivative financial instruments used for hedging purposes are accounted for on an equivalent basis to the underlying assets, liabilities or net positions. Any profit or loss arising is recognised on the same basis as that arising from the related assets, liabilities or positions.

2.8 Inventories

Inventories held for sale

Inventories are stated at the lower of cost and net realisable value. Cost is calculated using the weighted average cost formula and comprises all costs of purchase, cost of conversion and other costs incurred in bringing the inventories to their present location and condition.

Construction contracts

The accounting policy for contract revenue is set out in note 2.14 below. When the outcome of a construction contract can be estimated reliably, contract costs are recognised as expenses by reference to the stage of completion of the contract activity at the balance sheet date. When it is probable that total contract costs will exceed total contract revenue, the expected loss is recognised as an expense immediately.



annual report 2005



2.9 Cash and cash equivalents

Cash and cash equivalents comprise cash balances and bank deposits. For the purpose of the statement of cash flows, cash and cash equivalents are presented net of bank overdrafts which are repayable on demand and which form an integral part of the Group’s cash management.

2.10 Impairment

Goodwill, intangible assets with indefinite useful lives and intangible assets not yet available for use are tested for impairment annually and as and when indicators of impairment are identified. The Group’s other assets are reviewed at each balance sheet date and tested for impairment only when there are indicators of impairment. An impairment loss is recognised whenever the carrying amount of an asset exceeds its recoverable amount. The impairment loss is charged to profit and loss account unless it reverses a previous revaluation, credited to equity, in which case it is charged to equity.

An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. However, impairment losses relating to goodwill are not reversed.

2.11 Liabilities and interest-bearing liabilities

Trade and other payables are stated at cost. Interest-bearing liabilities are recognised initially at cost less attributable transaction costs.

2.12 Employee benefits

Defined contribution plans

Contributions to defined contribution plans are recognised as an expense in the profit and loss account as incurred.

Accrual for short-term accumulating compensated absences

Accrual for short-term accumulating compensated absences is made when services are rendered by the employees that increase their entitlement to future compensated absences.

2.13 Deferred tax

Deferred tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements. Temporary differences are not recognised for goodwill not deductible for tax purposes and the initial recognition of assets or liabilities that affect neither accounting nor taxable profit. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

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

Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not be reversed in the foreseeable future.

pg 37



2.14 Revenue recognition

Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer. Revenue excludes goods and services taxes or other sales 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 of the possible return of goods.

When the outcome of a construction contract can be estimated reliably, contract revenue and expenses are recognised in the profit and loss account by reference to the stage of completion of the contract activity at the balance sheet date. The stage of completion is assessed by reference to surveys of work performed.

When the outcome of a construction contract cannot be estimated reliably, revenue is recognised only to the extent of contract costs incurred that are probable to be recoverable and contract costs are recognised as an expense in the period in which they are incurred.

2.15 Operating leases

Where the Group has the use of assets under operating leases, payments made under the leases are recognised in the profit and loss account on a straight-line basis over the term of the lease.

2.16 Finance costs

Interest expense and similar charges are expensed in the profit and loss account in the period in which they are incurred, 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. The interest component of finance lease payments is recognised in the profit and loss account using the effective interest rate method.


annual report 2005


Furniture, fittings Leasehold Plant and and office Motor property machinery equipment vehicles Total

Group $ $ $ $ $

Cost

At 1 October 2004 2,763,670 111,713 646,517 641,953 4,163,853

Additions - - 70,686 5,065 75,751

Disposals - - (26,703) - (26,703)

Translation differences - - 82 1,176 1,258

At 30 September 2005 2,763,670 111,713 690,582 648,194 4,214,159

Accumulated depreciation

At 1 October 2004 339,395 104,210 468,604 585,556 1,497,765

Depreciation charge for the year 48,304 7,503 102,520 22,313 180,640

Disposals - - (26,396) - (26,396)

Translation differences - - 28 442 470

At 30 September 2005 387,699 111,713 544,756 608,311 1,652,479

Carrying amount

30 September 2005 2,375,971 - 145,826 39,883 2,561,680

30 September 2004 2,424,275 7,503 177,913 56,397 2,666,088

3 Property, Plant and Equipment

pg 39


3 Property, Plant and Equipment (cont’d)

Furniture, fittings Leasehold Plant and and office Motor property machinery equipment vehicles Total

$ $ $ $ $

Company

Cost

At 1 October 2004 2,763,670 111,713 643,375 598,038 4,116,796

Additions - - 69,773 5,065 74,838

Disposals - - (26,703) - (26,703)

At 30 September 2005 2,763,670 111,713 686,445 603,103 4,164,931

Accumulated depreciation

At 1 October 2004 339,395 104,210 468,421 580,944 1,492,970

Depreciation charge for the year 48,304 7,503 101,923 14,516 172,246

Disposals - - (26,396) - (26,396)

At 30 September 2005 387,699 111,713 543,948 595,460 1,638,820

Carrying amount

30 September 2005 2,375,971 - 142,497 7,643 2,526,111

30 September 2004 2,424,275 7,503 174,954 17,094 2,623,826

Leasehold property with carrying amount of $2,375,971 (2004: $2,424,275) was mortgaged to a bank to secure banking facilities for the Company as detailed in note 10.


annual report 2005


Water control rights

Group $

Cost

At 1 October 2004 446,963

Translation differences 11,963

At 30 September 2005 458,926

Accumulated amortisation

At 1 October 2004 6,705

Amortisation charge for the year 17,881

Translation differences 911

At 30 September 2005 25,497

Carrying amount

At 30 September 2005 433,429

At 30 September 2004 440,258

4 Intangible Assets

Company

2005 2004

$ $

Unquoted shares, at cost 300,000 300,000

Details of the subsidiaries are as follows:

Country of Effective equity held Name of subsidiary incorporation by the Group

2005 2004 % %

1 Dayen Investment Holdings Pte Ltd and its subsidiary: 100 1002 Jufuyuan Environmental (Beijing) Ltd 100 100

1 Audited by KPMG Singapore2 Not required to be audited by law of country of incorporation

5 Subsidiaries

Singapore The People’s Republic of China

pg 41


6 Associate

Group Company

2005 2004 2005 2004

$ $ $ $

Unquoted shares, at cost 2,067,240 2,067,240 2,067,240 2,067,240

Share of post-acquisition reserves:

- Revenue reserve (76,246) (18,739) - -

- Currency translation reserve 16,488 (35,318) - -

Carrying value 2,007,482 2,013,183 2,067,240 2,067,240

Details of the associate are as follows:

Country of Effective equity held Name of associate incorporation by the Group

2005 2004 % %

Shenfei Dayen Environmental Ltd The People’s Republic of China 50 50(Not required to be audited by law of country of incorporation)

Group Company

2005 2004 2005 2004

$ $ $ $

Unquoted equity, at cost 50,000 50,000 - -

7 Other Investments


annual report 2005


8 Contract Work-in-Progress

Group Company

2005 2004 2005 2004

$ $ $ $

Construction costs 139,218,418 127,459,078 139,151,847 127,394,243

Attributable profits 12,257,502 9,524,782 12,257,502 9,524,782

151,475,920 136,983,860 151,409,349 136,919,025

Allowance for foreseeable losses (121,571) - (55,000) -

151,354,349 136,983,860 151,354,349 136,919,025

Progress billings (137,060,451) (99,693,051) (137,060,451) (99,693,051)

14,293,898 37,290,809 14,293,898 37,225,974

Comprising:

Contract work-in-progress 14,828,948 37,326,522 14,828,948 37,261,687

Excess of progress billings over contract work-in-progress (535,050) (35,713) (535,050) (35,713)

14,293,898 37,290,809 14,293,898 37,225,974

Included in construction costs incurred for the year are staff costs amounting to $3,431,813 (2004: $3,297,648).

Group Company

2005 2004 2005 2004

$ $ $ $

Trade receivables 9,799,008 18,806,290 9,798,723 18,806,012

Deposits 100,304 105,793 97,534 100,378

Prepayment 7,783 - 6,400 -

Staff advances 8,850 10,150 8,850 10,150

Amounts due from subsidiaries (non-trade) - - 687,277 693,456

Other receivables 362 2,010 362 2,010

9,916,307 18,924,243 10,599,146 19,612,006

Amounts due from subsidiaries are unsecured, interest free and payable on demand.

9 Trade and Other Receivables

pg 43


10 Cash and Cash Equivalents

Group Company

2005 2004 2005 2004

$ $ $ $

Cash and bank balances 1,126,957 644,406 958,283 380,678

Fixed deposit 10,006 - 10,006 -

1,136,963 644,406 968,289 380,678

Bank overdrafts (secured) (1,925,038) (5,459,553) (1,925,038) (5,459,553)

(788,075) (4,815,147) (956,749) (5,078,875)

Fixed deposit pledged (10,006) - (10,006) -

(798,081) (4,815,147) (966,755) (5,078,875)

The bank overdrafts and banking facilities including trust receipts granted to the Company (note 11) are secured by an assignment of proceeds from certain projects, joint and several guarantee given by certain directors and the following assets:

Net carrying value Group and Company

2005 2004

$ $

Leasehold property 2,375,971 2,424,275

Bank balances 330,834 371,562

Trade receivables 7,838,450 17,183,900

The weighted average effective interest rates of bank overdraft of the Group and of the Company at the balance sheet date are 5.42% - 6.25% (2004: 5.25% - 6.25%) per annum. Interest rates reprice at intervals of one, three or six months.


annual report 2005


11 Trade and Other Payables

Group Company

2005 2004 2005 2004

Note $ $ $ $

Trade payables 8,863,379 12,840,992 8,863,379 12,840,992

Accrued operating expenses 804,312 716,277 799,619 712,082

Trust receipts (secured) 10 3,264,338 28,860,998 3,264,338 28,860,998

Other payables 5,124 51,385 4,725 51,385

12,937,153 42,469,652 12,932,061 42,465,457

The weighted effective interest rate of trust receipts of the Group and of the Company at the end of the financial year is 5.08% (2004: 5%) per annum. Interest rates reprice at intervals of one, three or six months.

Charged/ (credited) to At profit and At 1/10/2004 loss account 30/9/2005

$ $ $

Deferred tax liabilities

Property, plant and equipment (1,723) 32,344 30,621

Provisions 34,499 (45,499) (11,000)

Other items 909 (909) -

Total 33,685 (14,064) 19,621

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when the deferred taxes relate to the same taxation authority.

12 Deferred Tax

Movements in deferred tax liabilities of the Group and the Company during the year are as follows:

pg 45


13 Share Capital

2005 2004

No. of No. of Shares $ Shares $

Authorised:

Ordinary shares of $0.08 each 125,000,000 10,000,000 125,000,000 10,000,000

Issued and fully paid:

Ordinary shares of $0.08 each 65,600,000 5,248,000 65,600,000 5,248,000

14 Reserves

Group Company

2005 2004 2005 2004

$ $ $ $

Share premium 657,274 657,274 657,274 657,274

Currency translation reserve 9,663 (56,464) - -

Accumulated profits 8,362,102 6,135,851 8,730,965 6,261,183

9,029,039 6,736,661 9,388,239 6,918,457

The application of the share premium account is governed by Section 69 of the Companies Act, Chapter 50.

The currency translation reserve of the Group comprises foreign exchange differences arising from the translation of the financial

statements of foreign entities whose measurement currencies are different from that of the Company.

15 Revenue

Revenue represents net progress billings on contracts.


annual report 2005


16 Segment Reporting

Segment information is presented in respect of the Group’s business and geographical segments. The primary format, businesses segments, is based on the Group’s management and internal reporting structure.

Inter-segment pricing is determined on mutually agreed terms.

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 corporate assets and expenses, share of result of an associate and taxation and related assets and liabilities.

The Group comprises the following main business segments:

Waste treatment : Provision of specialised mechanical and electrical engineering works involving the implementation and integration of industrial and process control systems for the pumping installations and treatment works/plants, which relates mainly to the treatment of waste water.

Water treatment : Provision of engineering services in the design, supply and installation of specialised equipment used in the water treatment process.

Others : Generic mechanical and electrical projects.

Business Segment

Waste Water Treatment Treatment Others Consolidated

$ $ $ $

Revenue and Expenses 2005

Total revenue from external customers 70,332,382 3,654,383 1,353,732 75,340,497

Segment results 2,063,811 554,383 221,913 2,840,107

Share of loss of an associate (57,507)

Taxation (556,349)

Net profit for the year 2,226,251

2004

Total revenue from external customers 61,775,580 3,200,724 682,171 65,658,475

Segment results 2,038,920 399,109 169,361 2,607,390

Share of profit of an associate 28,844

Taxation (565,660)

Net profit for the year 2,070,574

pg 47


Business Segment (cont’d)


$ $ $ $

Assets and Liabilities 2005

Segment assets 22,828,464 1,913,750 519,247 25,261,461

Investment in an associate 2,007,482

Unallocated assets 3,666,683

Total assets 30,935,626

Segment liabilities 10,982,036 926,808 311,510 12,220,354

Current tax payable 1,241,725

Deferred tax liabilities 19,621

Unallocated liabilities 3,176,887

Total liabilities 16,658,587

2004

Segment assets 55,222,041 805,566 592,556 56,620,163

Investment in an associate 2,013,183

Unallocated assets 3,434,490

Total assets 62,067,836

Segment liabilities 40,903,277 97,498 249,907 41,250,682

Current tax payable 1,084,572

Deferred tax liabilities 33,685

Unallocated liabilities 7,714,236

Total liabilities 50,083,175

16 Segment Reporting (cont’d)


annual report 2005


Business Segment (cont’d)


$ $ $ $

Other Segmental Information

2005

Unallocated capital expenditure 75,731

Unallocated depreciation of property, plant and equipment 180,640

Amortisation of intangible assets - 17,881 - 17,881

Allowance made for foreseeable losses 55,000 66,571 - 121,571

2004

Unallocated capital expenditure 114,576

Unallocated depreciation of property, plant and equipment 202,456

Amortisation of intangible assets - 6,705 - 6,705

Allowance reversed for foreseeable losses (130,000) - - (130,000)

Geographical Segment

The Group operates predominantly in Singapore.

16 Segment Reporting (cont’d)

pg 49


17 Profit from Ordinary Activities before Taxation

The following items have been (credited)/charged in arriving at profit from ordinary activities before taxation:

Group Company

2005 2004 2005 2004

$ $ $ $

Interest income from banks (3,668) (1,384) (2,057) (45)

Rental income received from affiliated corporation (10,000) (4,000) (10,000) (4,000)

Exchange (gain)/loss (net) (45,599) 7,747 (45,639) 6,808

Allowance made/(reversed) for foreseeable losses 121,571 (130,000) 121,571 (130,000)

Interest expenses paid to banks 48,915 47,261 36,221 47,253

Non-audit fees paid to auditors of the Company 4,000 18,500 4,000 18,500

Operating lease expense 12,564 32,491 1,055 25,352

Staff costs 1,647,979 1,671,166 1,631,072 1,650,320

Contributions to defined contribution plans included in staff cost 111,420 94,935 111,420 94,935

Number of employees as at 30 September 152 156 146 147

18 Key Management’s Remuneration

Key management’s remuneration is recognised in the following line items in the profit and loss accounts:

Group and Company

2005 2004

$ $

Wages and salaries classified as administrative expenses:

- key management of the Company 839,318 842,661

- directors’ fees 70,000 70,000

909,318 912,661

The remuneration of the Company’s directors fall within the following range:

Group and Company Number of Directors

2005 2004

$ $

Remuneration band

Below $250,000 5 5


annual report 2005


19 Income Tax Expenses

Group Company

2005 2004 2005 2004

$ $ $ $

Current tax expenses

Current taxation 613,172 504,431 613,172 504,431

(Over)/Underprovided in prior years (42,759) 27,544 (42,759) 27,544

570,413 531,975 570,413 531,975

Deferred tax expenses

Movement in temporary differences (16,568) 32,776 (16,568) 32,776

Reduction in tax rate - 909 - 909

Underprovided in prior years 2,504 - 2,504 -

(14,064) 33,685 (14,064) 33,685

Total income tax expense 556,349 565,660 556,349 565,660

Reconciliation of effective tax rate

Profit before tax 2,782,600 2,636,234 3,026,131 2,710,983

Income tax using Singapore tax rate 556,520 527,247 605,226 542,197

Effect of different tax rates in other countries 6,527 (10,541) 6,527 (10,541)

Expenses not deductible for tax purposes 55,609 8,692 6,903 8,692

Tax-exempt income (10,500) (10,500) (10,500) (10,500)

(Over)/Underprovided in prior years (40,255) 27,544 (40,255) 27,544

Others (11,552) 23,218 (11,552) 8,268

556,349 565,660 556,349 565,660

20 Earnings Per Share

The calculation of basic and diluted earnings per share is based on the net profit for the year of $2,226,251 (2004: $2,070,574) divided by the weighted average number of shares in issue during the year of 65,600,000 (2004: 65,600,000).

pg 51


21 Capital Commitments

Group Company

2005 2004 2005 2004

$ $ $ $

Contracted but not provided for - 825,000 - -

22 Significant Related Party Transactions

For the purposes 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.

During the financial year, other than those transactions disclosed elsewhere in the financial statements, there were the following significant transactions carried out with affiliated corporations in the normal course of business on terms agreed between the parties:

Group and Company

2005 2004

$ $

Associate

Purchase of equipment - 41,148


annual report 2005


23 Financial Instruments

Risk management is integral to the whole business of the Group. The Group has a system of controls in place to create an acceptable balance between the cost of risks occurring and the cost of managing the risks. The management continually monitors the Group’s risk management process to ensure that an appropriate balance between risk and control is achieved.

Credit risk

Credit risk is the potential financial loss resulting from the failure of a customer or a counterparty to settle its financial and contractual obligations to the Group, as and when they fall due.

The Group established credit limits for customers and monitors their balances. Cash and fixed deposits are placed with banks and financial institutions which are regulated. Investments and transactions involving derivative financial instruments are allowed only with counterparties that are of high quality.

At the balance sheet date, 80% (2004: 84%) of the trade receivables of the Group and of the Company relates to one customer, there is no other significant concentration of credit risk. The maximum exposure to credit risk is represented by the carrying amount of each financial asset, including derivative financial instruments, in the balance sheet.

Liquidity risk

The Group monitors its liquidity risk and maintains a level of cash and cash equivalents deemed adequate by management to finance the Group’s operations and to mitigate the effects of fluctuations in cash flows.

Interest rate risk

The Group’s exposure to changes in interest rates relates primarily to interest-earning financial assets and interest-bearing financial liabilities. Interest rate risk is managed by the Group on an on-going basis with the primary objective of limiting the extent to which net interest expense could be affected by an adverse movement in interest rates.

Foreign currency risk

The Group incurs foreign currency risk on sales and purchases that are denominated in currencies other than Singapore dollars. The currencies giving rise to this risk are primarily the sterling pound, US Dollars, Malaysia Ringgit, Canadian Dollars and Euros.

The Group uses forward exchange contracts to hedge its foreign currency risk. Where necessary, the forward exchange contracts are rolled over at maturity at market rates.

In respect of other monetary assets and liabilities held in currencies other than the Singapore dollars, the Group ensures that the net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates where necessary to address short-term imbalances.

pg 53


Group and Company

2005 2004

Notional Fair Value Notional Fair Value Amount Payable Amount Receivable

$ $ $ $

Forward exchange contract:

- Recognised 4,355,984 (88,859) 1,063,770 11,859

- Unrecognised 3,703,320 (67,618) 23,934,767 470,319

8,059,304 (156,477) 24,998,537 482,178

23 Financial Instruments (cont’d)

Financial instruments

The valuation of financial instruments not recognised in the profit and loss account reflects amounts which the Company expects to pay or receive to terminate the contracts or replace the contracts at their current market rate at the balance sheet date.

The notional amount and fair value of financial instruments in the financial statement are:

Owing to the nature of the Group’s operations, most of the transactions have maturity dates of less than one year.

Fair value

The fair value of forward foreign exchange contracts is determined using forward foreign exchange market rates at the balance sheet date.

The fair value of the Group’s long-term unquoted equity investments cannot be reliably determined because of the lack of the quoted market prices. However, management believes that their carrying amounts recorded at balance sheet reflect their recoverable values. The other financial instruments of the Company comprise mainly current monetary assets and liabilities with their fair values approximating the carrying amounts.

24 Subsequent Events

Subsequent to balance sheet date, the directors proposed the payment of a net dividend of $262,400 (2004: Nil) in respect of the financial year under review. The dividends have not been provided for.


annual report 2005

shareholding statistics as at 16 November 2005

Authorised Share Capital - S$10,000,000Issued & Fully paid-up capital - S$5,248,000Class of Equity Security - Ordinary Shares of S$0.08 each fully paid upVoting Rights of Ordinary Shareholders - On a show of hands : 1 vote for each member - On a poll : 1 vote for each ordinary share

ANALYSIS OF SHAREHOLDINGS

Range of Shareholdings No. of Shareholders % No. of Shares %

1,000 - 10,000 424 64.05 2,594,000 3.95 10,001 - 1,000,000 234 35.35 10,437,000 15.91 1,000,001 and above 4 0.60 52,569,000 80.14

662 100.00 65,600,000 100.00

SHAREHOLDING HELD IN HANDS OF PUBLIC

As at 16 November 2005 the percentage of shareholdings held in the hands of the public was approximately 22.25% and Rule 723 of the Listing Manual is complied with.

TOP 21 SHAREHOLDERS LIST

S/NO Name No. of Shares Held %

1 Kor Hock Lai 25,462,500 38.81 2 Lee Thian Guan John 23,462,500 35.77 3 United Overseas Bank Nominees Pte Ltd 2,444,000 3.73 4 Chong Kam Len 1,200,000 1.83 5 DBS Nominees Pte Ltd 515,000 0.79 6 OCBC Securities Private Ltd 436,000 0.66 7 Leung Wai Leung 348,000 0.53 8 HL Bank Nominees (S) Pte Ltd 300,000 0.46 9 OCBC Nominees Singapore Pte Ltd 275,000 0.42 10 Ong Ming Hor 216,000 0.33 11 Kok Kim Chong or Kok Xiu Hua 200,000 0.30 12 Tan Citi Time Pte Ltd 187,000 0.29 13 Phillip Securities Pte Ltd 186,000 0.28 14 Koh Meng Chuan 184,000 0.28 15 Lim Pin Kong 150,000 0.23 16 Nora Ee Siong Chee 150,000 0.23 17 Hong Leong Finance Nominees Pte Ltd 115,000 0.18 18 Kuat Bee Bee 115,000 0.18 19 Goh Choon Eng 114,000 0.17 20 Lee Yi Xuan 110,000 0.17 21 Sim Hock Heng 110,000 0.17

56,280,000 85.81

SUBSTANTIAL SHAREHOLDERS

Name of substantial shareholder Direct Interest Deemed Interest Total Percentage (%)

Kor Hock Lai 25,462,500 - 25,462,500 38.81% Lee Thian Guan John 25,462,500 - 25,462,500 38.81%

pg 55

notice of annual general meeting

NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at Orchid Country Club, Sapphire Suite I, 1 Orchid Club Road, Singapore 769162 on Friday, 30 December 2005 at 9.30am to transact the following business:-

AS ORDINARY BUSINESS

1 To receive and consider the Directors’ Report and Audited Accounts for the financial year ended 30 September 2005 and the Auditors’ Report thereon. [Resolution 1]

2 To declare a first and final dividend of 0.5 cent per share less tax for the financial year ended 30 September 2005. [Resolution 2]

3 To approve the payment of Directors’ fee of S$70,000 for the financial year ended 30 September 2005. (2004 : S$70,000) [Resolution 3]

4 (a) To re-elect Mr Ho Kah Leong who is retiring in accordance with Article 91 of the Company’s Articles of Association, as Director of the Company. [See explanatory note (i)] [Resolution 4(a)]

(b) To re-elect Mr Lee Nyen Fatt who is retiring in accordance with Article 91 of the Company’s Articles of Association, as Director of the Company. [See explanatory note (ii)] [Resolution 4(b)]

5 To re-appoint KPMG as Auditors and to authorise the Directors to fix their remuneration. [Resolution 5]

AS SPECIAL BUSINESS

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

(a) That pursuant to Section 161 of the Companies Act, Cap. 50 and the listing rules of the Singapore Exchange Securities Trading Limited (“SGX-ST”), authority be and is hereby given to the Directors of the Company to allot and issue whether by way of rights, bonus or otherwise (i) shares; (ii) convertible securities; (iii) additional convertible securities (where an adjustment to the number of convertible securities to which a holder is originally entitled to is necessary as a result of any rights, bonus or other capitalization issues by the Company), notwithstanding that such authority may have ceased to be in force at the time such additional convertible securities are issued, provided that the adjustment does not give the holder of the convertible securities a benefit that a shareholder does not receive; and/or (iv) shares arising from the conversion of securities in (ii) and additional convertible securities in (iii) above, notwithstanding that such authority may have ceased to be in force at the time the shares are to be issued, and any such issue may be made at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit PROVIDED THAT

(i) the aggregate number of shares and convertible securities to be issued pursuant to this resolution shall not exceed 50% of the issued share capital of the Company, of which the aggregate number of shares and convertible securities issued other than on a pro rata basis to existing shareholders of the Company shall not exceed 20% of the issued share capital of the Company; and


annual report 2005

(ii) subject to such manner of calculation as may be prescribed by the SGX-ST, for the purpose of this resolution, the percentage of the issued share capital shall be based on the Company’s issued share capital at the time this resolution is passed, after adjusting for:-

(a) new shares arising from the conversion or exercise of convertible securities;

(b) new shares arising from the exercise of share options which are outstanding or subsisting at the time this resolution is passed, provided that the aforesaid options were granted in compliance with Part VIII of Chapter 8 of the Listing Manual of the SGX-ST; and

(c) any subsequent consolidation or subdivision of the Company’s shares,

and, further, unless revoked or varied by the Company in general meeting, the authority conferred by this resolution shall 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 the earlier.

[See explanatory note (iii)] [Resolution 6(a)]

(b) That approval be and is hereby given to the Directors of the Company to offer and grant options in accordance with the provisions of the Dayen Employee Share Option Scheme (including options over shares at a subscription price per share set at a discount to the market price of a share) and to allot and 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 the options under the Dayen Employee Share Option Scheme, provided that the aggregate number of shares to be issued pursuant to the Dayen Employee Share Option Scheme shall not exceed 15% of the issued share capital of the Company from time to time.

[See explanatory note (iv)] [Resolution 6(b)]

7 To transact any other business that may be properly transacted at an Annual General Meeting. [Resolution 7]

By Order of the Board

Darren Tan Poon GuanCompany Secretary

Singapore13 December 2005

notice of annual general meeting (cont’d)

pg 57

NOTICE OF BOOKS CLOSURE DATE

Notice is hereby given that the Transfer Book and Register of Members of the Company will be closed on 7 January 2006 for the purpose of determining members’ entitlements to the first and final dividend to be approved by members at the Company’s Annual General Meeting to be held on 30 December 2005.

Duly completed transfers received by the Company’s Registrar, M & C Services Private Limited, at 138 Robinson Road #17-00, The Corporate Office, Singapore 068906, up to 5.00 p.m. on 6 January 2006 will be registered before entitlements to the dividend are determined.

Members whose Securities Accounts with the Central Depository (Pte) Limited are credited with shares at 5.00 p.m. on 6 January 2006 will be entitled to the dividend.

The dividend, if approved at the Annual General Meeting, will be paid on 18 January 2006.

EXPLANATORY NOTES :

(i) Mr Ho Kah Leong, if re-elected, will remain as the Chairman of the audit committee, a member of the nominating committee and remuneration committee and will be considered as independent director.

(ii) Mr Lee Nyen Fatt, if re-elected, will remain as the Chairman of the remuneration committee, a member of the audit committee and nominating committee and will be considered as independent director.

(iii) Resolution 6(a), if passed, will authorise the Directors of the Company to allot and issue shares and convertible securities in the capital of the Company up to an amount not exceeding 50% of the Company’s issued share capital with an aggregate sub-limit of 20% of the Company’s share capital issued other than on a pro rata basis to shareholders of the Company. The Company cannot rely on the authority given under Resolution 5(a) for an issue of convertible securities if the maximum number of shares to be issued upon conversion cannot be determined at the time of issue of the convertible securities.

(iv) Resolution 6(b), if passed, will empower the Directors to offer and grant options and to allot and issue shares in the capital of the Company pursuant to the Dayen Employee Share Option Scheme provided that the aggregate number of shares to be issued shall not exceed 15% of the issued share capital of the Company from time to time.

PROXIES :

A member entitled to attend and vote at the Annual General Meeting may appoint not more than two proxies to attend and vote on his behalf and where a member appoints more than one proxy, the proportion of the shareholding concerned to be represented by each proxy shall be specified in the form of proxy. A proxy need not be a member of the Company. The instrument appointing a proxy must be deposited at the registered office of the Company at 6 Woodlands Industrial Park E1 Singapore 757729 not less than 48 hours before the time set for the holding of the Annual General Meeting.

notice of annual general meeting (cont’d)

This page is intentionally left blank.

I/We

of

being a member/members of DAYEN ENVIRONMENTAL LIMITED hereby appoint

Name Address NRIC/Passport Proportion of Number Shareholdings (%)

and/or (delete as appropriate)

as my/our proxy/proxies to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the Annual General Meeting of DAYEN ENVIRONMENTAL LIMITED to be held at Orchid Country Club, Sapphire Suite I, 1 Orchid Club Road, Singapore 769162 on 30 December 2005 at 9.30 a.m. and at any adjournment thereof.

(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the Ordinary Resolutions as set out in the Notice of Annual General Meeting. In the absence of specific directions, the proxy/proxies will vote or abstain as he/they may think fit, as he/they will on any other matter arising at the Annual General Meeting.)

NO ORDINARY RESOLUTIONS FOR AGAINST

Ordinary Business: 1. To receive and consider Directors and Auditors’ Reports and Accounts

2. To declare a first and final dividend

3. To approve Directors’ fees

4. To re-elect Directors :

(a) Mr Ho Kah Leong

(b) Mr Lee Nyen Fatt

5. To re-appoint KPMG as Auditors

Special Business:

6. (a) To authorise Directors to issue shares pursuant to Section 161 of the Companies Act, Cap. 50 (b) To authorise Directors to offer and grant options and/or allot shares pursuant to the Dayen Employee Share Option Scheme

7. Any other ordinary business

Dated this day of 2005.

Signature(s) of member(s) or Common SealIMPORTANT :-PLEASE READ NOTES OVERLEAF

proxy form annual general meetingDAYEN ENVIRONMENTAL LIMITED(Incorporated in the Republic of Singapore)Registration No. 198602051G

IMPORTANT:

1. For investors who have used their CPF monies to buy the Company’s shares, the Annual Report is forwarded to them at the request of their 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 Annual General Meeting as OBSERVERS have to submit their requests through their respective Agent banks so that their Agent banks may register with the Company Secretary of Dayen Environmental Limited not less than 48 hours before the time appointed for holding the meeting.

Total Number of Shares Held:

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, Cap. 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 may appoint not more than two proxies, whether a member or not, to attend and vote instead of him.

3 Where a member appoints more than one proxy, the proportion of the shareholding concerned to be represented by each proxy shall be specified in the form of proxy.

4 The instrument appointing a proxy must be deposited at the registered office of the Company at 6 Woodlands Industrial Park E1 Singapore 757729, not less than forty-eight (48) hours before the time appointed for the holding of the Annual General Meeting.

5 The instrument appointing a proxy must be under the hand of the appointor or his attorney. Where the instrument appointing a proxy is executed by a corporation, it must be executed either under its common seal or under the hand of an attorney or a duly authorised officer of the corporation.

6. Where an instrument appointing a proxy is signed on behalf of the appointer by an attorney, the letter or power of attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with the instrument of proxy, failing which the instrument may be treated as invalid.

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

GENERAL:

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

proxy form (cont’d)

Dayen Environmental Limited6 Woodlands Industrial Park E1 Singapore 757729 t: (65) 6365 0652 f: (65) 6365 1025 website: www.dayen.com.sg email: [email protected]

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