Pan Asian Water Solutions Limited Annual Report 2008

8/14/2019 Pan Asian Water Solutions Limited Annual Report 2008

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Financial highlights

t r ver (S$million)

2004 2005 2006 2007 2008

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2004 2005 2006 2007 2008

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Financial Highlights 1Corporate Pro le 3Chairmans Statement 4Board of Directors 6Management Team 8

Group Structure 10Water Cycle 12Operations Review 13Corporate Governance 15Financial Statements 29

contEnts

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coRPoRatEPRoFilE

Established in 1979, Singapore Exchange-listed Pan AsianWater Solutions Limited (PAWSL) is a one-stop providerof piping system solutions, primarily for the water puri cationand wastewater treatment industry.

PAWSL supplies an extensive product range with approximately750 items of ductile iron pipes, valves, gates, couplings andother accessories. With over 25 years of industry experienceand strong technical expertise, we also offer consultancyservices in the design of complex piping systems con gurationas well as fabrication services to customize our products to suitour customers stringent requirements.

In 2007, the Group acquired a 51% stake in Teacly (S) Pte Ltd,

which specializes in sewer pipe renovation, relining andrehabilitation works. With this strategic acquisition, the Groupwas able to penetrate into new growth areas and delivera full spectrum of piping solutions from engineering design,equipment procurement to construction and maintenanceworks for our customers.

Headquartered in Singapore, PAWSL has over 250 employeesacross operations in Hong Kong, Shanghai and Jakarta, anda representative of ce in Vietnam. The Groups customer basestretches across 14 countries including Asia, Middle East, andother parts of the world. With our proven credentials, PAWSLis the preferred partner for local utility authorities and privatecontractors engaged in the development of major water projects.

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chaiRmansstatEmEnt

Mr R ch rd K h Chy H gExecutive Chairman

DeaR ValueD SHaReHolDeRS,FY2008 has been a de ning year for Pan Asian WaterSolutions Limited (PAWSL or the Group) as weachieved a new milestone in our nancial performanceand set in place strategies to ensure our continuedgrowth in the years ahead.

The water industry in Asia is on the threshold of amajor transformation as rapid population growthand urbanization have placed unprecedented stresson the water resource and infrastructure of variouscountries. Across Asia, a dire shortage of fresh waterresource and proper treatment facilities have ledto serious pollution issues and impeded economicgrowth. As such, many governments have identi edthe development of sustainable water resources as akey priority and earmarked signi cant investments to

develop their countrys water supply network and watertreatment capabilities.

In view of this uptrend, we believe that prospects forthe water sector continue to remain positive despitethe current macroeconomic uncertainty. The emphasison water infrastructure development will increase theavailability of new and quality water projects and open uppreviously closed segment of the vast water industry forprivate sector participation.

For PAWSL, we have established our market position asan integrated water piping specialist and looks to buildupon our success by taking on higher value projects andbreaking into new market segments.

SoliD FinanCial PeRFoRManCeThe Group achieved a respectable net pro t of S$2.66million in FY2008, a signi cant jump from S$0.88 millionin FY2007. This is backed by a surge in sales, which grewto S$122.2 million from S$44.7 million a year ago. Thesterling nancial performance underscored our successin securing large-scale regional public sector contracts.

Riding on increased global demand for water-relatedservices and technology, we stepped up our businessdevelopment efforts in FY2008 and have been rewardedwith vital contract wins in geographical markets suchas Cambodia, Brunei and Ireland. We have alsoreestablished our presence in existing markets with newcontract wins for major government projects, especially inSingapore and Vietnam. Sales from these two countries

alone amounted to over S$108 million in FY2008.



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We acquired a 51% stake in the pipe relining andrehabilitation business under Teacly (S) Pte Ltd inFY2007 to expand our service offerings and transformthe Group into a one-stop provider of water pipingsolutions. This is still a relatively new business forthe Group and we are con dent of achieving greateref ciency and margin improvements when we are ableto better integrate the business into our other operations.

GRowtH anD exPanSion StRateGieSThe wastewater treatment and water infrastructuredevelopment industry is expected to remain resilientdespite a global economic recession. The Groupbelieves that growth opportunities continues to presentthemselves as local and regional governments continueto invest heavily in infrastructure development projects,including water infrastructure in an effort to stimulate theailing economies and create demand for constructionmaterials and services.

In Singapore - the near term prospect for the waterindustry remains positive. During a recent meeting at theSingapore Water Association, the Public Utilities Board(PUB) has con rmed that it will be calling tendersworth approximately S$800 million for upcoming majorwater infrastructure projects in FY2009. Some of thesemajor projects include the Marina Reservoir RecirculationScheme (MRRS), Active Beautiful Clean (ABC) WatersProgramme, Lower Seletar Waterworks and twomembrane bioreactor plants.

With more than 20 years of industry track record andhaving previously supported PUB on many of its majorprogrammes, we believe PAWSL is in a strong position toparticipate in these upcoming projects and will be focusing

our efforts on securing more local contracts in 2009.

We will also continue to build our overseas marketsby leveraging on our strong Singapore brand name.Singapore has one of the most recognised watermanagement and treatment technology and services inAsia, and our experience in handling major PUB projectsde nitely gives us an edge in securing regional contracts.

In Vietnam and Hong Kong - we are expecting somemajor government water infrastructure projects inFY2009 and are con dent of clinching some contractsfor the supply of water piping and systems. Outside ofAsia, we are also looking at penetrating into regionssuch as the Middle East, which is a huge market for thepotable water treatment industry, especially for seawaterdesalination, and would have demand for piping systemsand networks.

Apart from organic growth, we may also look towardsmergers and acquisitions for growth, especially ata time when the value of quality assets has fallen toundemanding valuations. We will continue to exploreand evaluate acquisition opportunities that will enhanceshareholders value.

DiViDenDSIn view of tightening credit conditions, the Board ismaintaining a prudent dividend strategy with a view toreward shareholders fairly while maintaining enoughcash for future expansion. For FY2008, the Directorshave proposed a nal tax exempt (one-tier) dividend of0.5 Singapore cent per share, representing a total netdividend payout of approximately S$625,000 or 23.47%of full-year earnings.

aCKnowleDGeMent anD aPPReCiationOn behalf of the Board of Directors, I wish to convey myheartfelt appreciation to our dedicated management andstaff who have worked exceptionally hard to make oursterling nancial performance in FY2008 possible.

I would also like to thank my fellow board members for theirwise counsel and strategic directions over the past year.

Lastly, I would like to thank our strategic partners, businessassociates, bankers and last but not least our valuedshareholders for their continued support and trust in theCompany as we aim to grow from strength to strength.

Mr R ch rd K h Chy H gExecutive Chairman

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boaRd oFdiREctoRs

R r K c ye heExecutive Chairman

Mr Koh was appointed as a Non-executive Director from 26 May 2008 and wassubsequently appointed as the Executive Chairman on 20 March 2009. As ExecutiveChairman, he is responsible for the overall management of the Groups operations andformulating and implementing the Groups business strategies. He was the founderand managing director of the Company from 1980 to 1991, and was its chairman from1991 to 2004. He resigned as a director in 2004 to pursue his other business interestswhen the Company was preparing for its listing. From 2004 to March 2009, Mr Kohhad developed and managed a valve manufacturing business in the PRC and has beenthe director of Sinzhong Valves & Fitting (Wuxi) Co., Ltd.

Mr Koh is the brother of our Managing Director and CEO, Mr Koh Tiam Teng and thefather of our Non-executive Director, Mr Koh Eddie.

Mr Koh will be subject to retirement pursuant to Article 117 of the Companys Articlesof Association at the forth-coming Annual General Meeting.

K t teManaging Director and CEO

Mr Koh is instrumental in the business development and operational aspects of ourbusiness, including negotiating for major contracts, attending international trade fairs toaccess the latest available technologies as well as sourcing for new distributorships.

Mr Koh joined the Group in 1981 and worked through the ranks to the positionof Sales Manager in the Group where he was responsible for securing sales,maintaining client relationships and regular contact with customers and principals aswell as securing new distributorships. In 1999, he won one of the top ten nalists inthe Enterpreneur of the Year award from the Rotary-ASME (Association of Small andMedium Enterprises) for spearheading the growth of our Group. He holds a Bachelorof Arts from the Nanyang University of Singapore and is currently the Vice-President

of the Singapore Khoh Clan-Association.

Mr Koh will be subject to retirement by rotation at the forth-coming AnnualGeneral Meeting.



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K E eNon-Executive Director

g b K k Independent Non-ExecutiveDirector

W Y lIndependent Non-ExecutiveDirector

Mr Koh has been re-designated as non-executive director with effect from 1 June2008. Prior to this, he was the Companys executive director responsible for businessdevelopment, sales and marketing of our export sales operations, since 1997. He joinedthe Group in 1991 and has more than 18 years of experience in business developmentand sales and marketing of piping systems and related accessories to the governmentagencies and private developers. From 1991 to 1993, he was the Group Regional SalesManager responsible for expanding the customer base and market share in Brunei andIndonesia. From 1993 to 1996, his portfolio expanded to include Hong Kong, Malaysiaand Vietnam markets. In particular, he was responsible for business development of ourdistribution business to Asian Development Bank and World Bank funded projects. Heholds a Bachelor of Engineering from National University of Singapore.

Mr Wu was appointed as an Independent Director on 20 March 2009. He has been anadvocate and solicitor for the last 22 years and is currently the managing director of WuLLC, a law corporation in Singapore. He advises on corporate and commercial laws andalso carries out litigation work. Mr Wu graduated from the National University of Singaporein 1985 with a Degree of Bachelor of Laws (Second Class Honours, Upper Division). He isalso an independent director of Jiutian Chemical Group Limited and See Hup Seng Limited,

companies listed on the SGX-ST.

Mr Wu will be subject to retirement pursuant to Article 117 of the Companys Articles ofAssociation at the forth-coming Annual General Meeting.

Mr Goh was appointed as an Independent Director on 20 March 2009. He is a certi edpublic accountant and is currently the principal of Goh Boon Kok & Co, an accounting rmin Singapore. He has been in practice since 1974 and before setting up his own practice,he had more than 10 years of work experience in both public and private sectors, includingthe Inland Revenue Authority of Singapore, Economic Development Board, a locally listedshipyard and USA-based multinational pharmaceutical company. Mr Goh graduated fromthe University of Singapore with a Degree of Bachelor of Accountancy. He is a fellow ofthe Chartered Institute of Management Accountants, UK, and associate of the CharteredInstitute of Secretaries and Administrators, UK. Mr Goh is also an independent director ofseveral companies listed on the SGX-ST, including Super Coffeemix Manufacturing Limited,Magnus Energy Group Ltd and Adroit Innovations Limited.

Mr Goh will be subject to retirement pursuant to Article 117 of the Companys Articles ofAssociation at the forth-coming Annual General Meeting.

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managEmEnttEam

mr l c hGroup Financial Controller

Mr Lau is responsible for theGroups overall strategic nancialplanning, accounting and reportingfunctions. He also overseesthe investors relations, humanresource, general administration andinformation technology functionsof the Group. Mr Lau graduatedfrom The Association of CharteredCerti ed Accountants, UnitedKingdom and has more than 13years of experience in the nancialand accounting eld.

mr c ee be c , dGeneral Manager of Sales

Mr Chee is responsible for theoverall sales and marketing andbusiness development functionsof the Company, focusing primarilyin the marketing and promotion ofour products and services to waterpuri cation and wastewater treatmentplant system providers and publicutilities boards. He oversees themaintenance of good rapport andregular contact with customers andprincipals, through regular productupdates and sharing of best practicesin the piping systems processdesigns and installation technologies.He holds Diplomas in ManagementStudies and Electronics andCommunications from the SingaporeInstitute of Management andSingapore Polytechnic respectivelyand has more than 16 years ofexperience in the industry.

mr t K k c eSenior Manager, Sales & Operations

Mr Tan is responsible for theCompanys overall operationalfunctions from warehousing,logistics, inventory control, pipelinefabrications and engineeringservices. He also takes charge of thesourcing, development, sales andmarketing of Companys products.He holds pre-university quali cationsand has more than 25 years ofexperience in the industry.



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mr P c d w, s eveGeneral ManagerINDO-CHINA OPERATIONS

Mr Phua is stationed in Ho ChiMinh City of ce, Vietnam and isresponsible for P / L operation. Hefocuses on sales, marketing andbusiness development, primarily in thewater, wastewater and environmentsectors. He travels widely to manyprovinces for businesses, regularlyin contact with key clients. Hegraduated with a Master in BusinessAdministration from Henley / BrunelUniversity, United Kingdom and hasmore than 20 years of experience inthe industry.

mr te Yew le , ErGeneral ManagerPA WATER SO LUTIONS (SHANGHAI)LIMITED

Mr Teo is responsible for thesubsidiarys overall businessoperations in The Peoples Republicof China, including both the domesticmarket and export market. He hasmore than 20 years of experiencein the building and constructionsector and has been placed withthe responsibility to ensure that thesubsidiarys business will grow fromstrength to strength. He holds aDiploma in Sales and Marketing fromthe Marketing Institute of Singapore.

mr Kw K h , h rveyGeneral ManagerPAN ASIAN WATER SOLUTIONS (HK)LIMITED

Mr Kwan is responsible for thesubsidiarys overall sales, marketingand business developments, primarilyin the marketing and promotion ofour products and services to HongKong W.S.D., D.S.D., consultantsand contractors. His responsibilitiesinclude regular updates of productinformation to customers, ensuringprompt deliveries to customersand monitoring of stock ordering.He holds a Diploma in MechanicalEngineering awarded by SenecaCollege, Toronto, Canada and hasmore than 10 years of experience inthe industry.

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gRouPstRuctuRE

Pan asian WatER

solutions limitEd

P a W ers (hK) l e 100%

Pa W er s(s ) l e 100%

Pt P aW er s 100%

P aE eer P e l 100%

Pa W er eP e l 100%

te y (s) P e l 51%

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hEad oFFicEP a W er s l e2 Tractor RoadSingapore 627966Tel : 65-6268 7227Fax : 65-6268 9679Website : www.pawater.com.sg

subsidiaRiEsP a E eer P e. l .2 Tractor RoadSingapore 627966Tel : 65-6268 7227Fax : 65-6268 9679E-mail : [email protected]

Pa W er e P e. l .2 Tractor RoadSingapore 627966Tel : 65-6268 7227Fax : 65-6268 9679E-mail : [email protected]

te y (s) P e. l .10 Kranji WaySingapore 739425Tel : 65-6368 5738

Fax : 65-6368 9550E-mail : [email protected]

P a W er s( hK ) l eRm 1707 17/F Multi eld Plaza3-7A Prat Avenue, TST KowloonHong KongTel : 852-2376 2992Fax : 852-2376 2662E-mail : [email protected]

Pa W er s( s ) l eUnit No.: #11-04 Super OceanFinance Center Building2067 Yan An Road ( West ),Shanghai 200335, PR ChinaTel : 86-21 6295 1208Fax : 86-21 6295 1308E-mail : [email protected]

Pt P a W er sJl. Raya Artha GadingRukan Sentra Bisnis Artha Gading(Gading Kirana Barat IX) Blok A6 BNo. 21 Kelapa GadingJakarta Utara 14240IndonesiaTel : 62-21 4587 3985Fax : 62-21 4587 3986

E-mail : [email protected]

REPREsEntatiVE oFFicEP a W er s l e115 Phan Xich LongWard 7, District Phu NhuanHo Chi Minh CityVietnamTel : 848-517 4373Fax : 848-517 4375E-mail : [email protected]

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The Group achieved a 173.4% r e in revenue to a record-high ofs$122.2 inFY2008 from S$44.7 million a year ago. This outstanding performance was achievedon the back of increased regional contract wins, particularly in key markets Singaporeand Vietnam - and growing contribution from our relining and rehabilitation business.

In FY2008, the Group successfully tendered for and completed various major PUBcontracts in Singapore. In particular, it had secured a S$7.0 million contract to supplypiping components to Singapores fth and largest NEWater plant to be constructedat Changi. It had also secured a S$3.9 million contract to supply special valvesand dismantling joints to the piping components to a 80 km NEWater infrastructuretransmission pipeline from Changi to Jurong. The NEWater sector is expected to bea key focus of the governments initiative to develop sustainable water resources andthe Groups participation in these large-scale projects will stand it in good stead tosecure more related contracts in future.

Outside of the government sector, the Group also bene ted from contract wins tosupply piping components to various public and private property developments the most prominent being a S$1.3 million contract for Singapores twin integratedresorts at Marina Bay and Sentosa.

With such strong order ows, sales from Singapore rose nearly S$40 million or308% to S$52.8 million from S$12.9 million, constituting 43.2% of overall revenue.

In Vietnam, the Group secured one of its largest contracts to date a S$22.09 millioncontract to supply water piping components such as ductile iron pipes, valves andaccessories for the Nhon Trach Water Supply Project. This is a landmark project inVietnam, which will see the construction of water pipelines to connect the Nhon TrachWater treatment facility, which has a daily production capacity of 200,000 m3/day,to 10 industrial zones and three urban areas around the Nhon Trach Industrial Zone

No 6 sector.

oPERationsREViEW

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This project is signi cant as it opened the way for morepublic sector contracts in Vietnam. Subsequently, wesecured major contracts to supply pipes and othercomponents to the Kenh Dong Water Supply SystemProject worth approximately S$6.85 million as well asother smaller projects. With substantial deliveries andcompletion of these new contracts, sales to Vietnammore than doubled to S$54.8 million from S$20.6million in FY2007.

In line with the higher revenue, gross pro t jumped 99.2%to S$13 million from S$6.5 million a year ago. However,gross pro t margin declined marginally to 10.7% from14.7% as the Group faced pricing pressures for ourorders in Vietnam as we secured larger orders.

Administrative rose 39.8% and marketing and distributionexpenses rose 38.4%, respectively due to substantiallyincreased business activities. The Group had also madeprudent write-down of its inventories and provisions fordoubtful debts of S$0.85 million and S$0.64 million,respectively, in view of the current economic downturnand declining prices of commodities such as steel andother raw materials.

Net pro t attributable to equity shareholders rose toS$2.66 million or 2.13 cents on a per-share basis,representing a 202% jump from S$0.88 million or0.71 cent per share, a year ago.

In FY2008, the Group generated S$0.8 million of positiveoperating cash ow as compared to a negative cash owof S$0.8 million a year ago. Cash and equivalent rose toS$5.1 million as at 31 December 2008 from S$3.3 millionas at 31 December 2007 versus borrowings of S$10.3million and S$4.2 million, respectively. The Groupsborrowings are mainly short-term facilities to fund workingcapital requirements.

businEss sEgmEntsThe Groups core business segments continue to exhibitstrong growth despite challenging macroeconomicconditions. Demand for potable water, waste watertreatment and NEWater remains strong as both regionaland local governments continue to issue tenders for waterrehabilitation and waste water treatment projects.

P e W erThe Groups potable water business segment remainsthe main growth driver. Sales from this segment rose140% to S$84.6 million from S$35.2 million in FY2007with new contracts secured for the supply of water pipesand related accessories in countries such as Singapore,Vietnam, Brunei, Cambodia, Hong Kong and others.

W ew erThe Groups wastewater business segment continues todisplay strong growth potential. Revenue contribution fromthis segment jumped to S$25 million from S$5.8 million inFY2007, as we recognized full-year contribution & higherwork done from our subsidiary, Teacly (S) Pte Ltd.

Acquired in June 2007, Teacly has enabled the Groupto secure new projects for sewer pipe renovation,rehabilitation and relining works with its unique trenchlesstechnology. It is currently completing a 100km sewer piperelining contract awarded by PUB in FY2007.

nEW erBased on our strong track records in our involvement inthe Ulu Pandan NEWater plant in FY2006, the Group hassecured another NEWater project at Changi in FY2008as outlined in the second paragraph above. This has led tohigher sales contribution from this segment, which rose toS$10.4 million from S$1.8 million a year ago.



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CorporategovernanCe

Our Board of Directors and Management are committed to maintaining a high standard of corporategovernance to protect the interests of our shareholders and enhance the performance of the Company andits subsidiaries (Group).

This Report describes the Companys corporate governance processes and structures that were in placethroughout the nancial year 2008, with speci c reference to the principles and guidelines of the Code ofCorporate Governance 2005 (Code) and where applicable the Listing Manual of the Singapore ExchangeSecurities Trading Limited (SGX-ST).

BOARD MATTERS

th B ds C duc f I s aff i s

p i ci l 1: e y c m y sh uld b h d d by ff c i B d l d d c l h c m y. thB d is c ll c i ly s sibl f h succ ss f h c m y. th B d w ks wi h M m

chi his d h M m m i s cc u bl h B d

The Board comprises ve directors of whom two Executive Directors, one Non-Executive Director and twoIndependent Directors. Together, the Directors bring a wide range of business, legal and nancial experiencesand expertise relevant to the Group.

Richard Koh Chye Heng Chairman (with effect from 20 March 2009)Koh Tiam Teng Managing Director and Chief Executive Of cer (with effect from 20 March 2009)Koh Eddie Non-Executive Director (with effect from 1 June 2008)Wu Yu Liang Independent Director (appointed on 20 March 2009)Goh Boon Kok Independent Director (appointed on 20 March 2009)Lim Ho Seng Independent Director (resigned on 20 March 2009)Ang Miah Khiang Independent Director (resigned on 20 March 2009)Wong Meng Yeng Independent Director (resigned on 20 March 2009)

The Boards key responsibilities include providing leadership and supervision to the Management of theCompany and the subsidiaries with a view to protecting shareholders interests and enhancing long-termshareholder value.

The Boards principal responsibilities are to:

a) guide the formulation of the Groups overall long-term strategic objectives and directions. This includes settingthe Groups policies and strategic plans and monitoring the achievement of these corporate objectives;

b) establish goals for management and monitor the achievement of these goals;

c) ensure management leaderships high quality, effectiveness and integrity; and

d) review internal controls, risk management, nancial performance and reporting compliance.


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p asi W S lu i s Limi dannual report 2008

16

Corporate governanCecontinued

The Board has adopted a set of internal controls and guidelines which set out authority and approval proceduresand limits for investments and divestments, capital expenditure and cheque signatory arrangements.

The Board conducts scheduled meetings at least four times a year to coincide with the announcement of theGroups half-year and full-year results. Ad-hoc meetings are convened as and when they are deemed necessary inbetween the scheduled meetings to deliberate on strategic matters and policies including signi cant acquisitionsand disposals, annual budget, review of the performance of the business and any signi cant transactions orcorporate developments. At the meetings of the Board the Directors are free to discuss and openly challengethe views presented by Management and other Directors. The decision making process is an objective one.

The Board met ve times during the year 2008. The Companys Articles of Association provide for the Boardto convene meetings via teleconferencing and electronic means. In lieu of physical meetings, written resolutionswere also circulated for approval by members of the Board.

The number of meetings and Directors attendance at the Board meetings held during the year 2008 are asfollows :-

numb f m i s numb f m i sh ld d d

Koh Tiam Teng 5 5Richard Koh Chye Heng 5 4Koh Eddie 5 5Lim Ho Seng 5 5Wong Meng Yeng 5 5Ang Miah Khiang 5 5Wu Yu Liang 5 Goh Boon Kok 5

The Board is supported by key board committees namely, Audit Committee, Remuneration Committee and

Nominating Committee to which are delegated speci c key roles and responsibilities.

The Company will provide a formal letter to newly appointed Directors upon their appointment setting out theirstatutory duties and responsibilities as Directors. All new and existing Directors are provided with backgroundinformation about the Groups history and core values, its strategic direction and corporate governance practicesas well as industry speci c knowledge.

Board members are also encouraged to attend seminars and receive training to improve themselves in thedischarge of their duties and responsibilities as Directors. The Company works closely with professionals to provideDirectors with information relating to changes in relevant laws, regulations and accounting standards.


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B d C m si i a d B l c

p i ci l 2: th sh uld b s d i d d l m h B d, which is bl x cisbj c i jud m c ff i s i d d ly, i icul , f m M m . n i di idu l

sm ll u f i di idu ls sh uld b ll w d d mi h B ds d cisi m ki .

The Company endeavours to maintain a strong and independent element on the Board. The criterion ofindependence is based on the de nition given in the Code. The Independent Directors have con rmed thatthey do not have any relationship with the Company, its related companies or its of cers that could interfere, orbe reasonably perceived to interfere, with the exercise of the Directors independent business judgement witha view to the best interests of the Group. The Nominating Committee (NC) has reviewed and determinedthat the then Independent Directors namely Mr. Lim Ho Seng, Mr. Wong Meng Yeng and Mr. Ang Miah Khiangare independent. The independence of each Director is reviewed annually by the NC.

Mr Wong Meng Yeng was due to retire at the forthcoming Annual General Meeting (AGM) pursuant to Article107 of the Companys Article of Association. Mr Wong has tendered his resignation on 19 March 2009 andhis resignation was accepted by the Board on 20 March 2009.

Mr Lim Ho Seng and Mr Ang Miah Khiang also tendered their resignations on 19 March 2009 and theirresignations were accepted by the Board. Mr Wu Yu Liang and Mr Goh Boon Kok were subsequently appointedto the Board on 20 March 2009.

With the resignations of the two NC members, the Executive Chairman had sought assistance from networkingsuch as corporate legal rms for introduction of the new directors. The Board assesses the new candidatesfor the new positions and considered, among other things, their competencies required by the Board to ful lltheir responsibilities. The Board noted their independence before accepting their appointments.

The Board is of the opinion that the two new independent directors, who have been classi ed as independentunder the Board Composition section, are indeed independent.

The Board is of the opinion that its current size and composition is appropriate for decision making, takinginto account the scope and nature of the Groups operations. The Board members provide a range of corecompetencies in accounting, nance, legal, business management experience and expertise and industryknowledge that provide effective direction for the Group.

The Company has complied with the recommendation under the Code for Independent Directors making upat least one-third of the Board.

The pro les of the Directors are found on pages 6 to 7 of this Annual Report.


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18

Ch i m a d Chi f ex cu i of c

p i ci l 3: th sh uld b cl di isi f s sibili i s h f h c m y h w kif h B d d h x cu i s sibili y f h c m ys busi ss which will su b l c f

w d u h i y, such h i di idu l s s c sid bl c c i f w

The Code of Corporate Governance states that the roles of the Chairman and the Chief Executive Of cershould in principle be separated to ensure an appropriate balance of power, increased accountability andgreater capacity of the Board for independent decision making. The Board is of the view then that in the bestinterests of the Company a single leadership structure was adopted to facilitate decision making with Mr KohTiam Teng, an Executive Director, assuming the roles of Chairman and Chief Executive Of cer.

With effect from 20 March 2009, the roles of the Chairman and Chief Executive Of cer are undertaken byseparate persons so as to create a clear division of responsibilities.

Mr Richard Koh Chye Heng, founder of the Company has been appointed as Executive Chairman of theCompany to develop the business, formulate and implement the business strategies of the Group.

Mr Koh Tiam Teng relinquish his role as Executive Chairman but remains as Chief Executive Of cer andManaging Director of the Company and will be responsible for the day-to-day management and operationsof the Group.

Our Executive Chairman is guided by recommendations provided by the Chairman of the Audit Committee,Chairman of the Nominating Committee, Chairman of the Remuneration Committee, Group Financial Controllerand the Company Secretary and responsible for, among others,

(a) lead the Board to ensure its effectiveness on all aspects of its role;

(b) direct meetings of the Board and set Board meeting agenda in consultation with the Companys senior

management;

(c) promote high standards of corporate governance and assist in ensuing compliance of the Companysguidelines on corporate governance;

(d) ensure effective communication with its shareholders; and

(e) facilitate effective contribution of non-executive directors.

The Chief Executive Of cer and Managing Director is the most senior executive in the Company and has fullexecutive responsibilities over the operations for the Group.

Both the Executive Chairman and Chief Executive Of cer and Managing Director exercise control over quality,quantity and timeliness of the ow of information between management and the Board.



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B d M mb shi

p i ci l 4 : th sh uld b f m l d s c ss f h i m f w Di c s h B d

All the Nominating Committee (NC) members are non executive Directors, the majority of whom are independentof management.

Chairman : Ang Miah Khiang (resigned on 20 March 2009)Member : Lim Ho Seng (resigned on 20 March 2009)Chairman : Wu Yu Liang (appointed on 20 March 2009)Member : Goh Boon Kok (appointed on 20 March 2009)Member : Koh Eddie

The Chairman of the NC is independent and is not associated in any way with the substantial shareholdersof the Company.

Mr Ang Miah Khiang and Mr Lim Ho Seng tendered their resignations on 19 March 2009 and their resignationswere accepted by the Board on 20 March 2009. Mr Wu Yu Liang and Mr Goh Boon Kok were subsequentlyappointed as Chairman and a member of the NC respectively on 20 March 2009.

Mr Wu Yu Liang a managing director of WU LLC, has more than 15 years of working experience in advisingon corporate and commercial laws as well as doing litigation work.

Mr Goh Boon Kok a principal of Goh Boon Kok & Co, a Certi ed Public Accountant, has more than 10 years ofworking experience with both public and private sectors ranging from Inland Revenue Department, Economic& Development Board, a local listed shipyard and USA-based multi-national pharmaceutical company.

The NC is established for the purposes of ensuring that there is a formal and transparent process for all board

appointments. It has adopted written terms of reference de ning its membership, administration and duties.The Committee met twice in the year 2008, attended by all members.

The duties and responsibilities of the NC are as follows: a) To determine the criteria for the appointment of new Directors;b) To set up a process for the selection of such appointment;c) To review nominations for the appointment of Directors to the Board;d) To make recommendations to the Board on all board appointments;e) To re-nominate Directors having regard to the directors contribution and performance;f) To determine annually whether or not a Director is independent; and

g) To make recommendation to the Board the performance criteria and appraisal process to be used for theevaluation of the individual Directors as well as the effectiveness of the Board as a whole, which criteriaand process shall be subject to Boards approval.



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The Articles of Association of the Company currently require one-third of the Directors to retire and subjectthemselves to re-election by the shareholders at every Annual General Meeting. In addition, all Directors of theCompany shall retire from of ce at least once every three years.

Details of the Board members quali cations and experience are found on pages 6 to 7.

As Mr Lim Ho Seng, Mr Ang Miah Khiang and Mr Wong Meng Yeng have resigned from the Board on 20March 2009, the director now due for retirement for rotation under Article 107 of the Companys Articles ofAssociation at the forthcoming is Mr Koh Tiam Teng.

The NC has recommended that Mr Koh Tiam Teng and Mr Richard Koh Chye Heng, Mr Wu Yu Liang and MrGoh Boon Kok, who are retiring at the forthcoming AGM, to be re-elected. Mr Richard Koh Chye Heng, Mr WuYu Liang and Mr Goh Boon Kok are retiring under Article 117 of the Companys Articles of Association.

The retiring directors have offered themselves for re-election/re-appointment. The Board has accepted therecommendations of the NC.

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

Di c p si i D f I i i l D f L sa i m r - l c i

Koh Tiam Teng Chairman,Chief Executive Of cer andManaging Director 8 July 1983 23 April 2007

Koh Eddie Non-Executive Director 1 December 1989 23 April 2008Lim Ho Seng Independent Director 9 July 2004 23 April 2007Ang Miah Khiang Independent Director 9 July 2004 23 April 2008

Wong Meng Yeng Independent Director 9 July 2004 21 April 2006Richard Koh Chye Heng Non-Executive Director 26 May 2008 NAWu Yu Liang Independent Director 20 March 2009 NAGoh Boon Kok Independent Director 20 March 2009 NA



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B d p f m c

p i ci l 5 : th sh uld b f m l ss ssm f h ff c i ss f h B d s wh l d hc ibu i by ch Di c h ff c i ss f h B d

The NC has established an appraisal process to assess the performance and effectiveness of the Board asa whole as well as the contribution of individual Directors. It focuses on a set of criteria which include theevaluation of the size and composition of the Board, the Boards access to information, Board process andaccountability, Board performance in relation to discharging its principal responsibilities and the Directorsstandard of conduct.

The NC reviews and determines the independence of each Director and assesses the effectiveness of theBoard as a whole and of individual Directors. The NC has reviewed and assessed the effectiveness of theBoard based on the criteria approved by the Board. The NC is of the opinion that each member of the Boardhad been effective during the year 2008 having regard to the active participation of each Board member duringeach Board and Committee meeting.

acc ss t I f m i

p i ci l 6 : I d ful ll h i s sibili i s, B d m mb s sh uld b id d wi h c m l ,d qu d im ly i f m i i B d m i s d - i b sis

The Board is furnished with Board papers prior to a Board meeting. These papers are issued in suf cient timeto enable the Directors to obtain additional information or explanations from the Management, if necessary.The Board papers include minutes of the previous meeting, reports relating to investment proposals, budgets,

nancial results announcements, and reports from various committees, internal and external auditors.

The Directors may communicate directly with the Management team and the Company Secretary on all matters

whenever they deem necessary. The Company Secretary attends all Board meetings and is responsible forrecording minutes of the proceedings.

The Company currently does not have a formal procedure for Directors to seek independent and professionaladvice in the furtherance of their duties. However, Directors may, on a case-to-case basis, propose to the Boardfor such independent and professional advice, at the Companys expense.



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22

REMUNERATION MATTERS

p c du s F D l i r mu i p lici s

p i ci l 7 : th sh uld b f m l d s c du f xi h mu i ck sf i di idu l Di c s. n Di c sh uld b i l d i d cidi his w mu i

The Remuneration Committee (RC) is established for the purposes of ensuring that there is a formal andtransparent procedure for xing the remuneration packages of individual Directors. The overriding principle isthat no Director should be involved in deciding his own remuneration. The RC has adopted written terms ofreference that de nes its membership, roles and functions and administration.

The members of the RC are :-

Chairman : Wong Meng Yeng (resigned on 20 March 2009)Member : Ang Miah Khiang (resigned on 20 March 2009)Member : Lim Ho Seng (resigned on 20 March 2009)Chairman : Wu Yu Liang (appointed on 20 March 2009)Member : Goh Boon Kok (appointed on 20 March 2009)Member : Koh Eddie

All of the RC members are non executive Directors, majority of whom are independent of management. TheRC has experience in the eld of executive compensation. The RC may seek professional advice wherenecessary.

The RC met twice in the year 2008, attended by all the members.

Mr Wong Meng Yeng was the Chairman of the RC. Mr Wong Meng Yeng was due to retire at the forthcomingAnnual General Meeting pursuant to Article 107 of the Companys Article of Association. Mr Wong has tendered

his resignation on 19 March 2009 and his resignation was accepted by the Board on 20 March 2009.

Mr Ang Miah Khiang and Mr Lim Ho Seng tendered their resignations on 19 March 2009 and their resignationswere accepted by the Board. Mr Wu Yu Liang and Mr Goh Boon Kok were subsequently appointed as Chairmanand a member of the RC respectively on 20 March 2009.

The duties and responsibilities of the RC are as follows:

a) To review and recommend to the Board in consultation with senior Management a framework of remunerationfor Executive Directors, Chief Executive Of cer (CEO) and senior Management staff;

b) To review the remuneration packages of all managerial staff, if any, that are related to any of the executive

Directors or CEO; andc) To recommend to the Board in consultation with senior Management and the Chairman of the Board, theExecutives and other Employees incentive schemes.



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L l f Mix f r mu i

p i ci l 8 : th l l f mu i sh uld b i c , i d m i h Di c sd d u h C m y succ ssfully bu c m i s sh uld id yi m f his u s .

a si i c i f h mu i s ci lly h f ex cu i Di c s, sh uld b li k d c d i di idu l f m c

The RC reviews the remuneration of all Directors and key executives and approves recommendations onremuneration policies and packages for such persons. The review covers all aspects of remuneration includingbut not limited to Directors fees, salaries, allowances, bonuses, options and bene ts-in-kind.

The remuneration of Executive Directors is based on Service Agreements dated 9 July 2004 and which aredisclosed to shareholders in the Companys Prospectus dated 8 September 2004. The Service Agreementsare for an initial period of three years with effect from 1 June 2004 for Mr. Koh Tiam Teng and Mr. Koh Eddie.The Service Agreements had been renewed on year to year basis.

The remuneration of Executive Chairman, Mr Richard Koh Chye Heng is based on Service Agreement dated20 March 2009 and the Service Agreement is for a period of three years with effect from 20 March 2009.

The Independent Directors are paid Directors fees for their efforts and time spent, responsibilities and contributionto the Board, subject to approval by shareholders at the Annual General Meeting.

Annual reviews are carried out by the RC to ensure that key executives are appropriately rewarded, having dueregard to the nancial and commercial health and business needs of the Group.



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24

Discl su r mu ip i ci l 9 : e ch c m y sh uld id cl discl su f i s mu i licy, l l d mix f

mu i , d h c du s f s i mu i , i h C m ys u l . I sh uldid discl su i l i i s mu i lici s bl i s s u d s d h li k

b w mu i id Di c s d k y x cu i s d f m c

The breakdown of remuneration of the Directors and key management staff of the Company for the year ended31 December 2008 is set out below :

r mu i B d u S$250,000

n m Fix d S l y/ o hF s v i bl B s

I d d Di c sLim Ho Seng 100% Wong Meng Yeng 100% Ang Miah Khiang 100%

K y M m S ffChee Beng Choon, Douglas 79% 21% Tan Kok Cheng 75% 25% Lau Choon Hoong 80% 20% Phua Chai Dow, Steven 61% 39% Teo Yew Leong, Eric 79% 21% Kwan Koon Ho, Harvey 89% 11%

ex cu i Di cKoh Eddie (redesignated to NonExecutive Director on 1 June 2008) 73% 6% 21%

Remuneration Band from S$250,001 to S$500,000

ex cu i Di cKoh Tiam Teng 59% 27% 14%

n ex cu i Di c sRichard Koh Chye Heng (appointed on 26 May 2008) 100%

(appointed to Executive Chairman on 20 March 2009)Koh Eddie (appointed on 1 June 2008) 100%

The remuneration of the Directors and key executives is reviewed by the RC and is disclosed in the AnnualReport. The Board is of the opinion that it is not necessary to invite the shareholders to approve the Boardsannual remuneration report and policy.



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ACCOUNTABILITY AND AUDIT

acc u bili y

p i ci l 10 : th B d sh uld s b l c d d u d s d bl ss ssm f h C m ysci l f m c , si i d s c s

For the nancial performance reporting via the SGXNET announcement to SGX-ST and the Annual Report to theshareholders, the Board has a responsibility to present a fair assessment of the Groups nancial performanceand position including the prospects of the Group.

The Board ensures that the Management maintains a sound system of internal control to safeguard theshareholders investment and the Groups assets.

The Management provides all members of the Board with a monthly management report. The Board membersreview the monthly management report and meet to approve the Groups half-year and full year nancial result.All Board papers are given prior to any Board meeting to facilitate effective discussion and decision making.

audi C mmi

p i ci l 11 : th B d sh uld s blish audi C mmi (aC) wi h w i ms f f cwhich cl ly s u i s u h i y d du i s

The Audit Committee (AC) comprises three members, all of whom are Non-Executive, majority of whom areindependent of management.

Chairman : Lim Ho Seng (resigned on 20 March 2009)Member : Wong Meng Yeng (resigned on 20 March 2009)Member : Ang Miah Khiang (resigned on 20 March 2009)Chairman : Goh Boon Kok (appointed on 20 March 2009)

Member : Wu Yu Liang (appointed on 20 March 2009)Member : Koh Eddie

Mr Wong Meng Yeng was due to retire at the forthcoming Annual General Meeting (AGM) pursuant to Article107 of the Companys Article of Association. Mr Wong has tendered his resignation on 19 March 2009 andhis resignation was accepted by the Board on 20 March 2009.

Mr Lim Ho Seng and Mr Ang Miah Khiang also tendered their resignations on 19 March 2009 and theirresignations were accepted by the Board. Mr Goh Boon Kok and Mr Wu Yu Liang were subsequently appointedas Chairman and a member of the AC respectively on 20 March 2009.

The members have the appropriate accounting or related nancial management experience or expertise.

The Board is of the opinion that the members of the AC have suf cient nancial management and expertiseand experience in discharging their duties and responsibilities.



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The role of the AC is to assist the Board in discharging its responsibilities to safeguard the Companys assets,maintain adequate accounting records, develop and maintain effective systems of internal controls.

The functions and responsibilities of the AC include the following:

a) To review the audit plan, system of internal accounting controls and the audit report with the externalauditors;

b) To review the assistance given by the Companys of cers to the external auditors;c) To review the independence and objectivity of the external auditors annually;d) To nominate external auditors for re-appointment;e) To review the nancial statements of the Company and the half year and full year nancial results and the

respective announcements before submission to the Board of Directors;f) To review signi cant nancial reporting issues and judgments having regard to the requirements of the

Listing Manual of the SGX-ST; andg) To review and approve interested person transactions.

In discharging the above duties, the AC con rms that it has full access to and co-operation from Managementand is given full discretion to invite any Director or Executive Director to attend its meetings. In addition, theAC has also been given reasonable resources to enable it to perform its functions properly.

The AC meets with the internal auditors and external auditors separately, at least once a year, without thepresence of Management.

The AC has conducted an annual review of the volume of non-audit services rendered by the external auditorsto the Group to satisfy itself that the nature and extent of such services will not prejudice the independenceand objectivity of the auditors before recommending their re-nomination to the Board.

During the year 2008, the AC met 5 times and the details of attendance were as follows:

numb f m i s numb f m i sh ld d d

Lim Ho Seng 5 5Wong Meng Yeng 5 5Ang Miah Khiang 5 5

The Company has put into place a whistle-blowing framework, endorsed by the Audit Committee, whereemployees of the Company may, in con dence, raised concerns about possible corporate improprieties inmatters of nancial reporting or other matters.



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I l c ls

p i ci l 12 : th B d sh uld su h h M m m i i s s u d sys m f i lc ls s f u d h sh h ld s i s m s d h C m ys ss s

The Board believes that, in the absence of any evidence to the contrary, the system of internal controls maintainedby the Companys Management provides reasonable assurance against material nancial misstatements orloss and includes the safeguarding of assets, the maintenance of proper accounting records, the reliability of

nancial information, compliance with appropriate legislation, regulation and best practices and the identi cationand management of business risks.

The Board notes that no system of internal control can provide absolute assurance against the occurrence ofmaterial errors, poor judgement in decision-making, human error, fraud or other irregularities.

I l audi

p i ci l 13 : th C m y sh uld s blish i l udi fu c i h is i d d f hc i i i s i udi s

The Company has appointed LTC & Associates as its internal auditors from the nancial year 2008. The internalauditors report directly to the Audit Committee. The functions of the internal auditors include the review of theeffectiveness of the Companys material internal controls, nancial, operational and compliance controls, andrisk management.

C mmu ic i wi h Sh h ld sp i ci l 14 : C m i s sh uld i ul , ff c i d f i c mmu ic i wi hsh h ld s

The Company endeavours to communicate regularly, effectively and fairly with its shareholders.

The Board ensures that materials and information helpful to shareholders are released on a timely basis. Allannouncements are communicated to the shareholders through SGXNET.

p i ci l 15 : C m i s sh uld c u sh h ld ici i a u l g lM i s, d ll w sh h ld s h u i y c mmu ic h i i ws i us m s

ff c i h C m y

The Annual General Meeting (AGM) is the principal forum for dialogue with shareholders. There is an openquestion and answer session at which shareholders may raise questions or share their views regarding theproposed resolutions and the Companys businesses and affairs.

In addition, the Chairman of the respective committees and the external auditors will be present at the AGMto address any queries from the shareholders.



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DeaLIngS In SeCUrItIeS

The Company has set out guidelines to the Directors and key executives of the Group in relation to dealings inthe Companys securities. These guidelines prohibit the Directors and key executives from dealing in the listedsecurities of the Group while in possession of material or price sensitive information and during the periodcommencing one month before the announcement of the Companys half-year and full-year nancial resultsand ending on the date of announcement of the relevant nancial results.

All Directors and key executives of the Company are also advised to observe insider trading laws at all timeseven when dealing in the Companys securities within the permitted trading period.

IntereSteD perSon tranSaCtIonS poLICY

The Company has adopted an internal policy in respect of any transactions with interested persons and hasset out the procedures for review and approval. The Audit Committee has reviewed the interested persontransactions for the nancial year 2008 conducted pursuant to the shareholders mandate obtained in accordancewith Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited and is satis edthat the transactions were on normal commercial terms.

The aggregate value of interested person transactions entered into during the nancial year 2008 pursuantto Rule 920 is as follows:

n m f i s d s

a lu f ll i s ds s c i s du i

h ci l y u d i w( xcludi s c i s l ssh $100,000 d s c i s

c duc d u d sh h ld sm d u su rul 920)

a lu fll i s d s

s c i s c duc du d sh h ld s m d

u su rul 920( xcludi s c i s l ss

h $100,000)

Duvalco International Pte Ltd $5,701,040Sin Zhong Valves & Fittings(Wuxi) Co Ltd

$1,083,992

MaterIaL ContraCtS

There were no material contracts of the Company or any of its subsidiary companies involving the interests ofthe Managing Director, each Director or controlling shareholder, either still subsisting at the end of the nancialyear or entered into since the end of the previous nancial year.



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Directors Report 30Statement by Directors 34Independent Auditors Report 35Consolidated Income Statement 37Balance Sheets 38Statement of Changes in Equity 39Consolidated Cash Flow Statement 41

Notes to the Financial Statements 42Statistics of Shareholdings 96The Proposed Renewal of theShareholders Mandate for InterestedPersons Transactions 98Notice of Annual General Meeting 110Proxy Form

ContentS

DIreCtorSreport anD

FInanCIaLStateMentS

www. w .c m.s 29


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DIreCtorS report

The directors of the company are pleased to present their report together with the audited nancial statementsof the company and of the group for the nancial year ended 31 December 2008.

1. Di c s D f r

The directors of the company in of ce at the date of this report are:

Executive Director: Koh Tiam Teng

Non-executive and Independent Directors: Lim Ho SengWong Meng YengAng Miah KhiangKoh Eddie (redesignated on 1 June 2008)Richard Koh Chye Heng (appointed on 26 May 2008)

2. a m s e bl Di c s acqui B s by M s f h acquisi i f Sh s dD b u s

Neither at the end of the nancial year nor at any time during the nancial year did there subsist anyarrangement whose object is to enable the directors of the company to acquire bene ts by means ofthe acquisition of shares or debentures in the company or any other body corporate.

3. Di c s I s s i Sh s d D b u s

The directors of the company holding of ce at the end of the nancial year had no interests in the

share capital and debentures of the company and related corporations as recorded in the registerof directors shareholdings kept by the company under section 164 of the Companies Act, Cap. 50except as follows:

D m d i sn m f di c s dc m i s i which i s s h ld a b i i f y /d f a d f y

i mI h C m y numb f sh s f lu

Koh Tiam Teng 100,000,000 100,000,000Koh Eddie 100,000,000 100,000,000

Richard Koh Chye Heng(A)

100,000,000 100,000,000


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3. Di c s I s s i Sh s d D b u s (c d)Di c i s h ld i h m f Di c s

n m f di c s dc m i s i which i s s h ld a b i i f y a d f yI h c m y Xu Ji Zu H ldi s p . L d. numb f sh s f lu

Koh Tiam Teng 600,040 600,040Koh Eddie 750,052 750,052Richard Koh Chye Heng 1 (A) 1 (A)

By virtue of section 7 of the Companies Act, Cap. 50, Koh Tiam Teng, Koh Eddie and Richard KohChye Heng are deemed to have an interest in all the related corporations of the company. The directorsinterests as at 21 January 2009 were the same as those at the end of the year.

(A) Richard Koh Chye Heng is holding 1 golden share in Xu Jia Zu Holdings Pte Ltd and by virtue ofXu Jia Zu Holdings Pte Ltds Memorandum & Articles of Association, he is deemed to, or have theability to exercise dominant in uence over the parent company as well as the listed company.

4. C c u l B s f Di c s

Since the beginning of the nancial year, no director of the company has received or become entitledto receive a bene t which is required to be disclosed under section 201(8) of the Companies Act, Cap.50 by reason of a contract made by the company or a related corporation with the director or chiefexecutive of cer or controlling shareholder or with a rm of which he is a member, or with a company inwhich he has a substantial nancial interest except disclosed in the nancial statements. A director ofthe company received remuneration from related corporation in his capacity as director of the relatedcorporation.

There were certain transactions (shown in the nancial statements) with corporations in which certaindirectors have an interest.

5. o i s k u U issu d Sh s

During the nancial year, no option to take up unissued shares of the company or any corporation inthe group was granted.

DIreCtorS reportcontinued


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6. o i s ex cis d

During the nancial year, there were no shares of the company or any corporation in the group issuedby virtue of the exercise of an option to take up unissued shares.

7. U issu d Sh s U d o i

At the end of the nancial year, there were no unissued shares of the company or any corporation inthe group under option.

8. I d d audi s

The independent auditors, RSM Chio Lim LLP, have expressed their willingness to accept re-appointment.

9. audi C mmi

The members of the audit committee at the date of this report are as follows:

Lim Ho Seng (Chairman)Wong Meng YengAng Miah Khiang

The audit committee performs the functions speci ed by section 201B(5) of the Companies Act. Amongothers, it performed the following functions:

Reviewed with the independent external auditors their audit plan; Reviewed with the independent external auditors their report on the nancial statements and theassistance given by the companys of cers to them;

Reviewed with the internal auditors the scope and results of the internal audit procedures and theirevaluation of the companys internal accounting control;

Reviewed the nancial statements of the group and the company prior to their submission to thedirectors of the company for adoption; and

Reviewed the interested person transactions (as de ned in Chapter 9 of the Listing Manual ofSGX).



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9. audi C mmi (C d)

Other functions performed by the audit committee are described in the report on corporate governanceincluded in the annual report. It also includes an explanation of how independent auditors objectivityand independence is safeguarded where the independent auditors provide non-audit service.

The audit committee has recommended to the board of directors that the independent auditors, RSMChio Lim LLP, be nominated for re-appointment as auditors at the next annual general meeting of thecompany.

10. Subs qu D l m s

There are no signi cant developments subsequent to the release of the groups and the companyspreliminary nancial statements, as announced on 23 February 2009, which would materially affect thegroups and the companys operating and nancial performance as of the date of this report.

On Behalf of The Directors

K h ti m tDirector

rich d K h Chy HDirector

6 March 2009


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In the opinion of the directors, the nancial statements set out on pages 37 to 95 are drawn up so as to givea true and fair view of the state of affairs of the group and of the company as at 31 December 2008 and theresults, changes in equity and cash ows of the group and the changes in equity of the company for the yearended on that date and at the date of this statement there are reasonable grounds to believe that the companywill be able to pay its debts as and when they fall due.

On Behalf of The Directors

K h ti m t

Director

rich d K h Chy HDirector

6 March 2009

StateMent BY DIreCtorS


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We have audited the accompanying nancial statements of Pan Asian Water Solutions Limited and its subsidiaries(the group) set out on pages 37 to 95, which comprise the balance sheets of the group and the company asat 31 December 2008, and the income statement, statement of changes in equity and cash ow statementof the group, and statement of changes in equity of the company for the year then ended, and a summary ofsigni cant accounting policies and other explanatory notes.

M m s r s sibili y f h Fi ci l S m s

Management is responsible for the preparation and fair presentation of these nancial statements in accordancewith the provisions of the Singapore Companies Act, Cap. 50 (the Act) and Singapore Financial ReportingStandards. This responsibility includes:

(a) devising and maintaining a system of internal accounting controls suf cient to provide a reasonableassurance that assets are safeguarded against loss from unauthorised use or disposition; and transactionsare properly authorised and that they are recorded as necessary to permit the preparation of true and fairincome statement and balance sheet and to maintain accountability of assets;

(b) selecting and applying appropriate accounting policies; and

(c) making accounting estimates that are reasonable in the circumstances.

I d d audi s r s sibili y

Our responsibility is to express an opinion on these nancial statements based on our audit. We conductedour audit in accordance with Singapore Standards on Auditing. Those standards require that we comply withethical requirements and plan and perform the audit to obtain reasonable assurance whether the nancialstatements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thenancial statements. The procedures selected depend on the auditors judgment, including the assessment

of the risks of material misstatement of the nancial statements, whether due to fraud or error. In making thoserisk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentationof the nancial statements in order to design audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the entitys internal control. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness of accountingestimates made by management, as well as evaluating the overall presentation of the nancial statements.

We believe that the audit evidence we have obtained is suf cient and appropriate to provide a basis for our

audit opinion.

InDepenDent aUDItorS reportto the Members of Pan Asian Water Solutions Limited

(Registration No: 197902790N)


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n s g u C m y2008 2007 2008 2007$000 $000 $000 $000

aSSetSn -Cu ass sProperty, Plant and Equipment 11 6,380 8,243 4,215 3,601Investments in Subsidiaries 12 1,574 1,406Other Assets 13 71 78 71 78t l n -Cu ass s 6,451 8,321 5,860 5,085

Cu ass sInventories 14 8,520 5,973 6,991 2,700Deferred Tax Assets 9 440 Trade and Other Receivables 15 33,025 20,451 29,358 17,618Other Assets 16 1,008 862 443 524Cash and Cash Equivalents 17 5,561 3,317 2,890 1,947t l Cu ass s 48,554 30,603 39,682 22,789t l ass s 55,005 38,924 45,542 27,874

eQUItY anD LIaBILItIeSequi yShare Capital 18 8,947 8,947 8,947 8,947Other Reserves 19 (90) (267) Retained Earnings 8,046 5,896 6,831 4,352equi y, a ibu bl equi y H ld s f h p , t l 16,903 14,576 15,778 13,299Minority Interest 747 519 t l equi y 17,650 15,095 15,778 13,299 n -Cu Li bili i s

Deferred Tax Liabilities 9 81 220 81 81Other Financial Liabilities 20 662 866 213 185Total Non-Current Liabilities 743 1,086 294 266

Cu Li bili i sIncome Tax Payables 1,171 83 528 73Other Financial Liabilities 20 9,680 3,365 7,160 1,937Trade and Other Payables 21 25,761 19,295 21,782 12,299t l Cu Li bili i s 36,612 22,743 29,470 14,309t l Li bili i s 37,355 23,829 29,764 14,575t l equi y d Li bili i s 55,005 38,924 45,542 27,874

The accompanying notes form an integral part of these nancial statements

BaLanCe SHeetSAs at 31 December 2008


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Sh o h r i d t l Mi i y t lg u : C i l r s s e i s equi y I s equi y

$000 $000 $000 $000 $000 $000

Cu Y :Opening Balance at 1 January 2008 8,947 (267) 5,896 14,576 519 15,095Items of Income and Expense

Recognised Directly in Equity:Exchange Differences on Translating

Foreign Subsidiaries 166 166 166Net Income Recognised Directly in Equity 166 166 166Pro t for the Year 2,661 2,661 228 2,889Total Recognised Income for the Year 166 2,661 2,827 228 3,055Other Movements in Equity:Transfer to Statutory Reserve (Note 19) 11 (11) Dividends Paid (Note 22) (500) (500) (500)Cl si B l c 31 D c mb 2008 8,947 (90) 8,046 16,903 747 17,650

Note 19

p i us Y :Opening Balance at 1 January 2007 8,947 (123) 5,248 14,072 14,072Items of Income and Expense

Recognised Directly in Equity:Acquisition of Subsidiary (Note 23) 410 410Exchange Differences on Translating

Foreign Subsidiaries (68) (68) (68)Net Income Recognised Directly in Equity (68) (68) 410 342Pro t for the Year 885 885 109 994Total Recognised Income and

Expense for the Year (68) 885 817 519 1,336Other Movements in Equity:Dividends Paid (Note 22) (313) (313) (313)Transfer from Other Reserves (76) 76 Total Other Movements in Equity (76) (237) (313) (313)Cl si B l c 31 D c mb 2007 8,947 (267) 5,896 14,576 519 15,095

Note 19


StateMentS oF CHangeS In eQUItYYear Ended 31 December 2008


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StateMentS oF CHangeS In eQUItYYear Ended 31 December 2008

Sh o h r i d t lC m y: C i l r s s e i s equi y

$000 $000 $000 $000

Cu Y :Opening Balance at 1 January 2008 8,947 4,352 13,299Pro t for the Year 2,979 2,979

Total Recognised Income for the Year 2,979 2,979Other Movements in Equity:Dividends Paid (Note 22) (500) (500)Cl si B l c 31 D c mb 2008 8,947 6,831 15,778

p i us Y :Opening Balance at 1 January 2007 8,947 76 3,301 12,324Pro t for the Year 1,288 1,288Total Recognised Income for the Year 1,288 1,288Other Movements in Equity:Transfer from other reserve (76) 76 Dividends Paid (Note 22) (313) (313)Total Other Movements in Equity: (76) (237) (313)

Cl si B l c 31 D c mb 2007 8,947 4,352 13,299Note 19



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g u2008 2007$000 $000

C sh Fl ws f m o i ac i i i sPro t Before Tax 3,550 1,246Adjustment for:

Depreciation of Property, Plant and Equipment 5,963 783Gain on Disposal of Property, Plant and Equipment (133) (160)Impairment Losses on Other Assets 5 Loss on Disposal of Investment 13 Interest Income (8) (87)Interest Expense 364 89

Operating Cash Flow before Changes in Working Capital 9,754 1,871Trade and Other Receivables (12,574) (11,864)Other Assets (146) (750)Inventories (2,547) (2,968)Trade and Other Payables 6,466 13,059Net Cash Flows From / (Used In) Operations Before Interest and Tax 953 (652)

Income Taxes Paid (152) (140)Net Cash Flows Generated / (Used In) From Operating Activities 801 (792)

C sh Fl ws F m I s i ac i i i sDisposal of Property, Plant and Equipment 241 702Purchase of Property, Plant and Equipment (Note 11) (3,528) (5,818)Net Cash Out ow from Acquisition of Subsidiary (Note 23) (231)Purchase of Other Assets (39) Proceeds from Sale of Other Assets 28 Interest Received 8 87Net Cash Flows Used in Investing Activities (3,290) (5,260)

C sh Fl ws F m Fi ci ac i i i sInterest Paid (364) (89)Dividends Paid to Equity Shareholders (500) (313)Increase in Borrowings 5,741 2,280Finance Lease Repayments (781) (152)Net Cash Flows From Financing Activities 4,096 1,726

n eff c f exch r Ch s i C s lid i Subsidi i s 163 (70)

n I c s / (D c s ) i C sh d C sh equi l s 1,770 (4,396)Cash and Cash Equivalents, Cash Flow Statement, Beginning Balance 3,317 7,713

C sh d C sh equi l s, C sh Fl w S m , e di B l c (n 17) 5,087 3,317The accompanying notes form an integral part of these nancial statements

ConSoLIDateD CaSH FLoW StateMentYear Ended 31 December 2008


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1. g l

The company is incorporated in Singapore with limited liability. The nancial statements are presentedin Singapore dollars and they cover the parent and the groups subsidiaries.

The nancial statements were approved and authorised for issue by the board of directors on 6March 2009.

The companys principal activities are those relating to supply of piping systems and related accessoriesfor use in water and wastewater infrastructure developments. It is listed on Catalist which is a marketon Singapore Exchange Securities Trading Limited.

The principal activities of the subsidiaries are described in Note 12 below.

The registered of ce: 2 Tractor Road, Singapore 627966. The company is domiciled in Singapore.

Many countries in the region and elsewhere, including Singapore, are experiencing economic dif cultiesas a consequence of the current turmoil in the worldwide nancial markets. This has resulted in violent

uctuations in foreign currency exchange rates, volatile share and commodity prices, uncertainty of theavailability of bank nance to suppliers and customers and a slowdown in growth. The current nancialcrisis has affected and will continue to have an adverse impact on the companys business, nancialcondition, results of operations, cash ows and prospects for the foreseeable future. The recoverabilityof the assets and the ability of the company to maintain or pay its debts as they mature are dependent toa large extent on the ef cacy of the scal and other measures undertaken by these countries to achieveeconomic recovery. These measures are beyond the companys control.

2. Summ y f Si i c acc u i p lici s

acc u i C i

The nancial statements have been prepared in accordance with the Singapore Financial ReportingStandards (FRS) as issued by the Singapore Accounting Standards Council as well as all relatedInterpretations to FRS (INT FRS) and the Companies Act, Cap 50. The nancial statements are preparedon a going concern basis under the historical cost convention except where an FRS requires an alternativetreatment (such as fair values) as disclosed where appropriate in these nancial statements.

noteS to tHe FInanCIaL StateMentS31 December 2008


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2. Summ y f Si i c acc u i p lici s (C d) B sis f p s i

The purchase accounting method is used for the consolidated nancial statements that include thenancial statements made up to the balance sheet date each year of the company and all of its directly

and indirectly controlled subsidiaries. Consolidated nancial statements are the nancial statementsof the group presented as those of a single economic entity. The consolidated nancial statementsare prepared using uniform accounting policies for like transactions and other events in similarcircumstances. All signi cant intragroup balances and transactions, including income, expenses anddividends, are eliminated in full on consolidation. The results of the investees acquired or disposed ofduring the nancial year are accounted for from the respective dates of acquisition or up to the datesof disposal which is the date on which effective control is obtained of the acquired business until thatcontrol ceases. On disposal the attributable amount of goodwill if any is included in the determinationof the gain or loss on disposal.

The companys nancial statements have been prepared on the same basis, and as permitted by theCompanies Act, Cap. 50, no income statement is presented for the company.

B sis f p i f h Fi ci l S m s

The preparation of nancial statements in conformity with generally accepted accounting principlesrequires the management to make estimates and assumptions that affect the reported amounts of assetsand liabilities and disclosure of contingent assets and liabilities at the date of the nancial statementsand the reported amounts of revenues and expenses during the reporting period. Actual results coulddiffer from those estimates. The estimates and assumptions are reviewed on an ongoing basis. Apartfrom those involving estimations, management has made judgements in the process of applying theentitys accounting policies. The areas requiring managements most dif cult, subjective or complex

judgements, or areas where assumptions and estimates are signi cant to the nancial statements, are

disclosed at the end of this footnote, where applicable.

noteS to tHe FInanCIaL StateMentScontinued


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2. Summ y f Si i c acc u i p lici s (C d)

r u r c i i

The revenue amount is the fair value of the consideration received or receivable from the gross in owof economic bene ts during the year arising from the course of the ordinary activities of the entity andit is shown net of sales related taxes, estimated returns, discounts and volume rebates. Revenue fromthe sale of goods is recognised when signi cant risks and rewards of ownership are transferred tothe buyer, there is neither continuing managerial involvement to the degree usually associated withownership nor effective control over the goods sold, and the amount of revenue and the costs incurredor to be incurred in respect of the transaction can be measured reliably. Revenue from rendering ofservices that are of short duration is recognised when the services are performed and completed. Rentalrevenue is recognised on a time-proportion basis that takes into account the effective yield on the asseton a straight-line basis over the lease term. Interest is recognised using the effective interest method.Dividends on equity instrument are recognised in pro t or loss when the entitys right to receive paymentis established. Revenue from construction contracts is recognised in accordance with the accountingpolicy on construction contracts (see below).

em l y B s

Contributions to de ned contribution retirement bene t plans are recorded as an expense as they falldue. The entitys legal or constructive obligation is limited to the amount that it agrees to contribute toan independently administered fund which is the Central Provident Fund in Singapore (a governmentmanaged retirement bene t plan). For employee leave entitlement the expected cost of short-termemployee bene ts in the form of compensated absences is recognised in the case of accumulatingcompensated absences, when the employees render service that increases their entitlement to futurecompensated absences; and in the case of non-accumulating compensated absences, when theabsences occur. A liability for bonuses is recognised where the entity is contractually obliged or wherethere is constructive obligation based on past practice.



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I c m t x

The income taxes are accounted using the asset and liability method that requires the recognition oftaxes payable or refundable for the current year and deferred tax liabilities and assets for the futuretax consequence of events that have been recognised in the nancial statements or tax returns. Themeasurements of current and deferred tax liabilities and assets are based on provisions of the enactedor substantially enacted tax laws; the effects of future changes in tax laws or rates are not anticipated.Income tax expense represents the sum of the tax currently payable and deferred tax. Current and deferredincome taxes are recognised in the income statement except that when they relate to items that initiallybypass the income statement and are taken to equity, in which case they are similarly taken to equity.Deferred tax assets and liabilities are offset when they relate to income taxes levied by the same incometax authority. The carrying amount of deferred tax assets is reviewed at each end of the reporting yearand is reduced, if necessary, by the amount of any tax bene ts that, based on available evidence, arenot expected to be realised. A deferred tax amount is recognised for all temporary differences, unlessthe deferred tax amount arises from the initial recognition of an asset or liability in a transaction which(i) is not a business combination; and (ii) at the time of the transaction, affects neither accounting pro tnor taxable pro t (tax loss). A deferred tax liability is not recognised for all taxable temporary differencesassociated with investments in subsidiaries because (a) the company is able to control the timing ofthe reversal of the temporary difference; and (b) it is probable that the temporary difference will notreverse in the foreseeable future.

F i Cu cy t s c i s The functional currency is the Singapore dollar as it re ects the primary economic environment in whichthe entity operates. Transactions in foreign currencies are recorded in the functional currency at the ratesruling at the dates of the transactions. At each end of the reporting year, recorded monetary balancesand balances measured at fair value that are denominated in non-functional currencies are reported

at the rates ruling at the balance sheet and fair value dates respectively. All realised and unrealisedexchange adjustment gains and losses are dealt with in the income statement except when deferred inequity as qualifying cash ow hedges. The presentation is in the functional currency.



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46


t sl i f Fi ci l S m s f o h e i i s

Each entity in the group determines the appropriate functional currency as it re ects the primary economicenvironment in which the entity operates. In translating the nancial statements of an investee forincorporation in the consolidated nancial statements the assets and liabilities denominated in currenciesother than the functional currency of the company are translated at year end rates of exchange and theincome and expense items are translated at average rates of exchange for the year. The componentsof shareholders equity are stated at historical value. The resulting translation adjustments (if any) areaccumulated in a separate component of equity until the disposal of that investee.

B wi C s s

All borrowing costs that are interest and other costs incurred in connection with the borrowing of fundsthat are directly attributable to the acquisition, construction or production of a qualifying asset thatnecessarily take a substantial period of time to get ready for their intended use or sale are capitalisedas part of the cost of that asset until substantially all the activities necessary to prepare the qualifyingasset for its intended use or sale are complete. Other borrowing costs are recognised as an expensein the period in which they are incurred. The interest expense is calculated using the effective interestrate method.

p y, pl d equi m

Depreciation is provided on a straight-line basis to allocate the gross carrying amounts less their residualvalues over their estimated useful lives of each part of an item of these assets. The annual rates ofdepreciation are as follows:

Leasehold land and buildings - Over the terms of lease that are from 2% to 5.5%.

Plant and equipment - 10% to 33.33%.Construction in progress - Not depreciated

For plant and equipment purchased speci cally for a long term contract, depreciation is provided on astraight-line basis over the life of the contract.

An asset is depreciated when it is available for use until it is derecognised even if during that period theitem is idle. Fully depreciated assets still in use are retained in the nancial statements.



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p y, pl d equi m (C d)

Property, plant and equipment are carried at cost on initial recognition and after initial recognition at costless any accumulated depreciation and any accumulated impairment losses. The gain or loss arisingfrom the derecognition of an item of property, plant and equipment is determined as the differencebetween the net disposal proceeds, if any, and the carrying amount of the item and is recognised inthe income statement. The residual value and the useful life of an asset is reviewed at least at each

nancial year-end and, if expectations differ signi cantly from previous estimates, the changes areaccounted for as a change in an accounting estimate, and the depreciation charge for the current andfuture periods are adjusted.

Cost also includes acquisit

Documents

Pan Asian Water Solutions Limited Annual Report 2008