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					China EnerSave Limited
Annual Report 2005




Renewable Energy
Harnessing Energy From Agricultural Waste
CONTENTS


Corporate Information                01
Chairman/CEO’s Message               02
Board of Directors                   05
Key Management                       08
Organisation Structure               10
Significant Events                    11
At a Glance [Financial Highlights]   13
Financial Contents                   19
Corporate Information
                                                               01




                                                               China EnerSave annual report 2005
BOARD OF DIRECTORS       COMPANY SECRETARIES
Non-Executive Chairman   Ms Tan Ching Chek
Mr Chou Kong Seng        Ms Lo Swee Oi
(Independent Director)

Chief Executive Officer   REGISTERED OFFICE
Mr Koo Ah Seang          China EnerSave Limited
                         (Regn. No. 199706776D)
Executive Director       80 Raffles Place #21-20
Mr Tay Wee Kwang         UOB Plaza 2
                         Singapore 048624
Mr Chiah Kok Khun        Tel      : (65) 6535 4248
(Independent Director)   Fax      : (65) 6535 0553
                         Email : enquiries@enersavegroup.com
Mr How Peck Huat         Website : www.enersavegroup.com
(Independent Director)

                         REGISTRAR AND
AUDIT COMMITTEE          SHARE TRANSFER OFFICE
Mr Chiah Kok Khun        Lim Associates (Pte) Ltd
(Chairman)               10 Collyer Quay #19-08
                         Ocean Building
Mr Chou Kong Seng        Singapore 049315

Mr How Peck Huat
                         AUDITORS
                         Moores Rowland
NOMINATING COMMITTEE     133 Cecil Street #15-02
Mr How Peck Huat         Keck Seng Tower
(Chairman)               Singapore 069535
                         Partner-in-charge
Mr Chiah Kok Khun        Mr Cheng Toon Wah
                         Year of Appointment: 2005
Mr Tay Wee Kwang

                         ADVOCATES & SOLICITORS
REMUNERATION COMMITTEE   Stamford Law Corporation
Mr Chou Kong Seng        Wong Partnership
(Chairman)               Yeo Wee Kiong Law Corporation

Mr Chiah Kok Khun
                         PRINCIPAL BANKERS
Mr How Peck Huat         United Overseas Bank Limited
                         Moscow Narodny Bank Limited
                                    Chairman/CEO’s Message
02
China EnerSave annual report 2005




                                    After-tax profit attributable to shareholders
                                    increased to S$1.1 million. This was primarily
                                    due to the positive effects of our business
                                    restructuring.

                                        Dear Valued Shareholders,

                                        Review of Operations
                                        We are pleased to report that the Group achieved a net profit
                                        attributable to shareholders of S$1.1 million for 2005.

                                        Turnover was reduced significantly by 42% to S$18.4 million (2004:
                                        S$31.9 million) because of the divestment of our Home Furnishing
                                        and Manufacturing divisions in the second half of FY2004. The
                                        Engineering Division which contributed the
                                        bulk of the 2005 turnover also saw its turnover
                                        declined from S$23.5 million in 2004 to S$18.2
                                        million due mainly to a reduction in revenue
                                        derived from the provision of engineering
                                        services and supplies to our Huizhou renewable
                                        energy project .

                                        However despite the lower revenue, after-tax
                                        profit attributable to shareholders increased
                                        to S$1.1 million (2004:S$0.2 million). This was primarily due to the
                                        positive effects of our business restructuring.

                                        In 2005, we disposed of our majority stake in our associated
                                        company, Ideas Electronics (S) Pte Ltd, thus completing the
                                        divestment process in respect of our loss-making Manufacturing
                                        Divisions. With this process completed, we are now able to focus
                                        on the development of our remaining core businesses, namely the
                                        Engineering and the Renewable Energy divisions.

                                        We made good progress during the year on the completion of our
                                        Huizhou renewable energy project (which is based on the conversion
                                        of waste to energy). However, a decision was made late in the
                                        year to upgrade the project’s operating capacity to cater for the
                                                                         03




                                                                         China EnerSave annual report 2005
                         increasing waste disposal requirements of
                         Huizhou. As a result, the project is expected
                         to commence operations only in the latter
                         half of 2006.

                        In the second-half of 2005, we also
                        completed feasibility studies on two
                        other renewable energy projects in
                        Sichuan Province. Situated in Neijiang and
                        Dujiangyan respectively, these proposed
                        projects, unlike the Huizhou project, are
                        based on the conversion of agricultural
                        biomass to energy. Both Neijiang and
                        Dujiangyan have extensive farming
                        communities allowing ready access to
                        agricultural biomass. We are now in
the process of finalising design and tender documents for the
construction of the biomass power plants and shall provide updates
on the progress of these proposed projects at the appropriate
time.

Corporate Developments
We obtained approval in December 2005 to enter into an
agreement with Value Capital Asset Management Limited (“Value
Capital”) which will allow us to issue unsecured, non-interest
bearing convertible notes up to S$30 million to Value Capital. Since
then, S$4 million of convertible notes had been issued to Value
Capital of which S$3 million has been converted in early 2006
into 25,029,021 new shares in the capital of the Company. The
funds raised pursuant to this agreement with Value Capital will
be utilized for our renewable energy projects as well as general
working capital needs.

We announced in February 2006, the proposed acquisition of the
entire share capital of Golden Way Holding Pte Ltd (“Golden Way”)
for a consideration of S$2,774,080. The principal assets of Golden
Way comprise various commercial properties which are tenanted
out. The consideration will be satisfied by the allotment and issue of
17,338,000 ordinary shares in the Company to the vendor at S$0.16
per share, representing a 18.5% premium over the Company’s share
price of S$0.135 as at the date immediately prior to the transaction.
                                    Chairman/CEO’s Message
04
China EnerSave annual report 2005




                                    Completion of this transaction is still pending but when completed,
                                    should further improve the capital base of the Company and also
                                    provide us with an additional revenue stream.

                                    We have also on 24 February 2006 announced a proposal to
                                    undertake a capital reduction exercise (“Capital Reduction”)
                                    pursuant to section 78C of the Companies Act (Cap. 50). The purpose
                                    of the proposed Capital Reduction is to rationalise the balance
                                    sheet of the Company to more accurately reflect the value of its
                                    underlying assets, and thus the financial position of the Company.
                                    In addition, the elimination of past accumulated losses will enhance
                                    the Company’s ability to pay future dividends. The proposed capital
                                    reduction exercise will be subject to shareholders’s approval at a
                                    General Meeting to be convened.

                                    Shareholder Returns
                                    In July 2005, we allotted and issued 56,212,995 bonus warrants to
                                    reward shareholders for their loyalty and continuing support for
                                    the Company.

                                    In addition to the above, the Board has also recommended a first
                                    and final dividend of 0.10 Singapore cent (one tier) per ordinary
                                    share for approval at the forthcoming Annual General Meeting.

                                    Appreciation
                                    On behalf of our fellow directors, we would like to extend our
                                    heartfelt gratitude to Mr Tan Chuan Thye who elected to step
                                    down as a director of the Board during the year. His valuable
                                    contributions during his many years of active commitment to the
                                    Group will always be appreciated.

                                    We would like to extend our sincere appreciation to our customers,
                                    bankers, business associates and shareholders who have been
                                    supporting us throughout the years. To the management team
                                    and employees, we are grateful for their unwavering commitment
                                    and dedication in growing together with the Company every step
                                    of the way.



                                    Chou Kong Seng                   Koo Ah Seang
                                    Non executive Chairman           Chief Executive Officer

                                    Date: 20 March 2006
Board Of Directors
                                                                                     05




                                                                                     China EnerSave annual report 2005
                                                                    Left to right:
                                                                    Chou Kong Seng
                                                                    Koo Ah Seang
                                                                    Tay Wee Kwang
                                                                    Chiah Kok Khun
                                                                    How Peck Huat




Chou Kong Seng
NON EXECUTIVE CHAIRMAN
Mr Chou was first appointed as a Director in December 1997 and
was last re-elected as a Director at the Annual General Meeting
held on April 30, 2004. He is the Chairman of the Board and is
an independent director. He also serves as the Chairman of the
Remuneration Committee and a member of the Audit Committee.
He is presently a non-executive chairman of Creative Master
Bermuda Limited and a Director of Acma Ltd. Prior to joining Acma
in 1994, he was a senior manager with an international public
accounting firm in Singapore that he joined in 1981.
Mr Chou was admitted as an associate member of the Institute
of Chartered Accountants in England and Wales in 1981 and is
a member of the Institute of Certified Public Accountants of
Singapore.


Koo Ah Seang
CHIEF EXECUTIVE OFFICER
Mr Koo was appointed as the Group’s CEO and Director in June
2003 to turn around the business. He is responsible for the
overall business developments of the Group and focuses on
formulating and implementing the Group’s operations towards
internationalization. He also re-engineered and spear headed
the Group’s diversifications into renewable energy as a new core
business segment.
                                    Board Of Directors
06
China EnerSave annual report 2005




                                    He is a non-executive director of Shining Corporation Limited and a
                                    member of the Audit and Chairman of Remuneration Committees
                                    of Penguin Boat International Limited. He is also an Independent
                                    Director and Chairman of Audit Committee of China Fashion
                                    Holdings Limited.
                                    Mr Koo holds a Bachelor of Commerce from the University of
                                    Auckland (New Zealand). He is also a FCPA of the Institute of
                                    Certified Public Accountants of Singapore.


                                    Tay Wee Kwang
                                    EXECUTIVE DIRECTOR
                                    Mr Tay is the Executive Director of the Company. He has extensive
                                    experience in the China market and is responsible for business
                                    development for the group. Mr Tay was first appointed as a
                                    Executive Director in September 1997 and was last re-elected as
                                    a Director at the Annual General Meeting held on June 23, 2000.
                                    He also serves as a member of the Nominating Committee of the
                                    company.
                                    He joined the Admiralty Group in 1991 and was largely responsible
                                    for developing the Admiralty Group’s mechanical & electrical
                                    engineering business in the PRC. He has more than 16 years of
                                    engineering and project management experience in Singapore
                                    and the PRC. Prior to joining the Admiralty Group, he worked as the
                                    technical director of a Singapore company involved in engineering
                                    projects in Beijing, PRC from 1989 to 1991.
                                    Mr Tay holds a Master of Business Administration from the
                                    University of Hull, United Kingdom and a Bachelor of Science in
                                    Electrical & Electronic Engineering from Robert Gordon’s University,
                                    Scotland, United Kingdom. He also holds a post-graduate Diploma
                                    in Building Science and post-graduate Diploma in Knowledge
                                    Engineering from the National University of Singapore.
                                    Mr Tay is a member of the Chartered Institute of Building
                                    Services Engineer, United Kingdom and the Institute of Engineers
                                    Singapore. He is also a member of Singapore institute of Directors.
                                    He is a Chartered Building Services Engineer, United Kingdom
                                    and a licensed Electrical Worker with the Public Utilities Board
                                    in Singapore.
Board Of Directors
                                                                        07




                                                                        China EnerSave annual report 2005
Chiah Kok Khun
INDEPENDENT DIRECTOR
Mr Chiah was appointed as a director in June 2002 and was last
re-elected as a director on April 20, 2005. He is the Chairman of the
Audit Committee and a member of the Nominating Committee
and Remuneration Committee.
He is an advocate & solicitor and a partner of a law firm in
Singapore. He has been with the firm since 1992. Prior to that, he
had worked as a judicial officer in the Singapore Legal Service and
had served as Magistrate, Deputy Registrar of the Subordinate
Courts, Coroner, President of the Juvenile Court and Referee of the
Small Claims Tribunal.
Mr Chiah holds a Bachelor of Laws (Honours) from the National
University of Singapore.


How Peck Huat
INDEPENDENT DIRECTOR
Mr How was first appointed as an independent director of the
Company on May 5, 2004.
He also serves as the Chairman of Nominating Committee and a
member of both the Audit and Remuneration Committees.
Mr How has held various senior appointments in public service,
especially the Economic Development Board. He was the Managing
Director of Temasek Holdings, Hong Kong/ East Asia from 1998 to
2003 and held various directorships in financial-based companies.
He is currently based in Hong Kong as an Advisor to Management
Capital Limited.
He graduated with a Bachelor of Business Administration from
the University of Hawaii in 1971 and with an MBA from the same
University in 1973.
                                    Key Management
08
China EnerSave annual report 2005




                                    Tan Fong Nee
                                    GROUP FINANCIAL CONTROLLER
                                    Ms Tan joined the Group as a Financial Controller in 2004. She is
                                    responsible for the financial management of the Group covering
                                    accounting, treasury, merger and acquisition, tax and financial
                                    control and reporting.
                                    Ms Tan has more than 10 years of experience in auditing,
                                    accounting and financial management. Prior to joining the Group,
                                    she held senior positions in finance with public listed companies
                                    and a leading Irish MNC.
                                    Ms Tan graduated with a Degree in Accountancy from the University
                                    of Monash, Australia. She is also a non-practising member of CPA
                                    Australia and the Malaysia Institute of Accountants.



                                    Ho Chee Seng
                                    DIRECTOR OF ENERSAVE POWER PTE LTD
                                    GENERAL MANAGER OF ADMIRALTY ENGINEERING PTE LTD
                                    Mr Ho joined the Group as a Senior Manager in 2005. He is a key
                                    member of the team dedicated to Enersave’s Renewal Energy
                                    business, focusing on the development of technology and its
                                    overseas operations.
                                    Prior to joining the Group, Mr Ho was in the aerospace industry for
                                    more than 17 years. He held management positions in both private
                                    and public listed companies, and was involved in the development
                                    and execution of major projects. He has also developed new
                                    businesses overseas as well as the setting up of their operations.
                                    Mr Ho holds a Master of Science and Degree in Mechanical
                                    Engineering from the National University of Singapore.



                                    Chen Ming Lien
                                    DIRECTOR OF ENERSAVE POWER BUILDERS PTE LTD
                                    Mr Chen is the Founding Member of Enersave Power Builders Pte.
                                    Ltd. (Formerly known as United Constrade Pte. Ltd.), where he was
                                    largely responsible for the overall function and development of
                                    the company.
Key Management
                                                                       09




                                                                       China EnerSave annual report 2005
In the construction industry for over 22 years, Mr Chen’s experience
and expertise has helped steer the company through multiple
high-value projects, undertaking landed housing, condominium,
commercial and industrial buildings as well as hospital upgrading
works. He holds a Diploma In Building from the Singapore
Polytechnic.



Seah Pansy
HUMAN RESOURCES / ADMIN MANAGER
Ms Seah joined the Group as Human Resources / Admin Manager in
2004. She is responsible for administration, the maintenance and
enhancement of information management systems and Human
Resource Management including compensation and benefits,
training and development and structuring of policies for the
Group.

Prior to her current position, she held senior position in various
organizations. Ms Seah had extensive experience in human
resources, sales and management spanning over the last 15 years.

Ms Seah holds a Bachelor Degree of Business in Business
Administration from RMIT University, Australia.



Cao Jian
PROJECT MANAGER
Mr Cao is the project manager dedicated to develop Enersave’s
proprietary Waste-to-Energy business in China. He is also the
chief representative of China EnerSave Ltd Huizhou Representative
Office. He joined the Group in 1997 in Singapore. With about 19
years extensive project management experience both in China
and in Singapore, Mr Cao co-ordinates, plans and provides contract
management for major projects. Since the end of 2003, he has
been our project manager for the waste-to-energy project located
in China Guang Dong Province Hui Zhou City.
Mr Cao holds MSc and Lecturer certificate in Civil Structure
Engineering and Certificate from BCA (Singapore) as qualified
M&E coordinator.
                                                 Organisation Structure
10
China EnerSave annual report 2005




                                                               SHAREHOLDERS




                                                                                 •   Audit Committee
                                                                 BOARD OF
                                                                                 •   Nominating Committee
                                                                 DIRECTORS
                                                                                 •   Remuneration Committee




                                                              CHIEF EXECUTIVE
                                                                  OFFICER




                                                                 EXECUTIVE
                                                                 DIRECTOR




                                                      Engineering                                 Energy
                                                        Services




                                                                         Procurement /         Renewable /
                                    Design & Build   M & E Services                          Waste to Energy
                                                                            Trading         Sustainable Energy
Significant Events
                                                                      11




                                                                      China EnerSave annual report 2005
May 2005
The Group has set up a representative office known as China
Enersave Limited-Huizhou Representative Office in the People’s
Republic of China. The representative office is established to
facilitate expansion of the renewable energy business in particular
the recovery of energy from agricultural waste by incineration
(Biomass).

The Group undertakes a proposed bonus issue of up to 57,303,000
warrants subscribing for 57,303,000 new ordinary shares of S$0.10
each in the capital of the Company.


July 2005
The Group has allotted and issued 56,212,995 Bonus Warrants to
shareholders holding shares in the capital of the Company.


August 05
The Group’s subsidiary, Huizhou Richway Waste-To-Energy Co. Ltd
has commenced test firing of its Huizhou WTE plant. The test
firing will ready the plant for commissioning and commencement
of commercial operations.

The Group has incorporated a wholly-owned subsidiary – Asia
Renewable Energy Private Limited for the purpose biomass as well
as other renewable projects.


September 2005
The Group embarks on a second renewable energy project in China.
This project involves the establishment of Neijiang Enersave
Biomass to Energy Co. Ltd, and it is a wholly-owned subsidiary of
Asia Renewable Energy Private Limited.


October 2005
The Group has entered into a Sale and Purchase Agreement to
divest 26% shareholding in Ideas Electronics (S) Pte Ltd. Following
the divestment, Ideas Electronics (S) Pte Ltd has ceased to be an
associated company of the Group.
                                    Significant Events
12
China EnerSave annual report 2005




                                    November 2005
                                    The Group undertakes a proposed notes issue (Notes Issue) to
                                    Value Capital Asset Management Limited of unsecured non-
                                    interest bearing notes due 2011 in aggregate amount of up to
                                    S$30,000,000. The proceeds from the Notes Issue will be used for
                                    the funding the Company’s existing and future renewable energy
                                    projects and additional working capital.


                                    December 2005
                                    An Extraordinary General Meeting was held on 23 December 2005
                                    and approval has been given to the Directors to create and issue,
                                    from time to time, to Value Capital Asset Management Limited
                                    (“Value Capital”) unsecured non-interest bearing notes due 2011
                                    with an aggregate principal amount of up to S$30,000,000.

                                    The Group has incorporated a wholly-owned subsidiary, Renewable
                                    Energy Holdings Pte Ltd, in Singapore.


                                    January 2006
                                    Value Capital has exercised to convert the aggregate principal
                                    amount of S$950,000 in respect of the first sub-tranches of Tranche
                                    1 Note. The aggregate number of new share allotted to Value
                                    Capital is 8,057,676 ordinary shares.

                                    The Group has established a company, Dujiangyan Enersave
                                    Biomass Energy Co Ltd in the People’s Republic of China. This is for
                                    the second biomass power plant in Sichuan Province. This project
                                    will be constructed as a BOO (Built, Own & Operate) arrangement.


                                    February 2006
                                    Value Capital has exercised to convert the aggregate amount
                                    of S$2,050,000 in Tranche 1 Note. The aggregate number of new
                                    shares allotted to Value Capital is 16,971,345 ordinary shares.

                                    The Group has announced a proposed acquisition of a subsidiary,
                                    Golden Way Holding Pte Ltd and has entered into a conditional Sale
                                    and Purchase Agreement dated 15 February 2006 with SLG Impex
                                    International Pte Ltd for the said acquisition of 1,000,000 ordinary
                                    shares in the capital of Golden Way Holding Pte Ltd, representing
                                    the entire issued and paid up share capital in the same.
At a Glance
                                                                       13




                                                                       China EnerSave annual report 2005
FINANCIAL HIGHLIGHTS

Turnover by industrial segment (S$’000)

35,000
                         31,876

30,000
                                    25,665
25,000
              18,359
20,000

15,000

10,000
                                                     Others
 5,000                                               Manufacturing

     0                                               Engineering
             FY2005     FY2004     FY2003

Decreased in the revenue by S$13.5 million or 42% was due mainly
to the Group divestment of its non-core business, in particular, the
Home Furnishing and Manufacturing divisions and the reduction
in revenue derived from the provision of engineering services and
supplies to the Huizhou WTE project.


Profit After Taxation Attributable to Equity Holders of the
Parent (S$’000)

 1,200        1,101


 1,000

   800

   600

   400
                          233
   200

     0                                           0

                                                 1,000

                                                 2,000

                                                 3,000

                                                 4,000
                                    (3,715)
             FY2005     FY2004     FY2003
                                     At a Glance
14
China EnerSave annual report 2005




                                     Profit After Taxation Attributable to Equity Holders of the
                                     Parent (S$’000) (cont’d)

                                     Overall, the profit attributable to shareholders in 2005 increased
                                     by S$0.868 million or 373% even though the Group’s revenue
                                     decreased by S$14 million or 42% as compared to 2004. The increase
                                     in PATMI was due mainly to better operating performance of the
                                     Engineering Division and the divestment of non-core business
                                     in 2004.


                                     Earnings Per Share (cents per share)

                                     1.0
                                                    0.49
                                     0.5
                                                            0.11
                                                    0.46
                                                                   0.11
                                       0

                                    (0.5)

                                    (1.0)
                                                                              (2.50)
                                    (1.5)

                                    (2.0)

                                    (2.5)

                                    (3.0)

                                    (3.5)                                                Diluted EPS
                                                                              (2.50)
                                    (4.0)                                                Basic EPS

                                    (4.5)

                                    (5.0)
                                               FY2005      FY2004         FY2003


                                     The increase in both basic and diluted earning per share in 2005
                                     by 0.38 cents and 0.35 cents respectively was contributed by the
                                     increase in the profit attributable to shareholders by S$0.868
                                     million in 2005.
At a Glance
                                                                         15




                                                                         China EnerSave annual report 2005
Status Report on Utilisation of Proceeds

1. Share placement of S$8 million that completed in 26 April 2004
 The details of this utilisation are provided in the following table:-

      Utilisation of Proceed                         (S$ in million)
  (a) Investment in Renewable Energy Project               6.7
  (b) Working capital for:-                                1.1
      - Repayment of loan
      - Operating expenses
  (c) Purchase of fixed assets                              0.2
      TOTAL                                                8.0
 As such, this placement proceeds has been fully utilised.


2. Proceeds from the unsecured non-interest bearing notes due
   2011 with an aggregate principal amount of up to S$30 million
   in six equal tranches of a principal amount of S$5 million per
   tranche (each a “Tranche”) and each tranche comprising five
   equal sub-tranches of S$1 million per sub-tranche (collectively
   the “Notes”).
 As at 20 March 2006, Value Capital has subscribed first, second,
 third and fourth subtranches of Tranche 1 Note amounting in
 aggregate to S$4 million. The proceeds from Notes Issue were
 used for:-

       Utilisation of Proceed                       (S$ in million)
  (a) Investment in Renewable Energy Project              2.4
  (b) Issuing Cost:-                                      0.285
      - Arrangement Fee
      - Legal Fee
       TOTAL                                              2.685
 Accordingly, the unutilised balance of proceeds from the Notes
 Issue is S$1.315 million.
 The company will continue to make periodic announcements on
 the utilisation of the proceeds from the Notes Issue as and when
 the proceeds are materially deployed.
                                    At a Glance
16
China EnerSave annual report 2005




                                    FINANCIAL HIGHLIGHTS
                                    Income Statements

                                                                                                   Administrative and
                                                                              2005       2004      Marketing Expenses
                                                                             S$'000     S$'000     Decrease in
                                                                                                   Administrative and
                                    Revenue                                  18,359     31,876     marketing expenses
                                                                                                   by S$2 million or 49%
                                                                                                   was due mainly to
                                    Cost of sales                            (15,148)   (25,698)   the disposal of the
                                                                                                   Group's interest in
                                                                                                   the Home Furnishing
                                    Gross Profit                               3,211      6,178
                                                                                                   division in the second
                                                                                                   half of 2004
                                    Other Income                                185        669

                                    Administrative and marketing expenses     (2,114)    (4,171)
                                                                                                   Other Expenses
                                                                                                   Reduction of other
                                    Other expenses                              (542)    (2,733)   expenses by S$2.2
                                                                                                   million or 80%
                                                                                                   was due mainly
                                    Finance costs                               (117)      (108)
                                                                                                   to the provisions
                                                                                                   made in 2004 for
                                    Share of Results of Associated Company       (66)         -    obsolete inventory
                                                                                                   and equipment
                                                                                                   amounting to S$2.2
                                    Operating Profit/(Loss)                      557        (165)   million.
                                                                                                   Share of results of
                                    Taxation                                    315        (481)   Associated Company
                                                                                                   This relates to the
                                    Profit / (Loss) after taxation               872        (646)   results of Beijing
                                                                                                   Admiralty Home
                                                                                                   Product Co. Ltd. The
                                    Attributable to:                                               Company ceased to
                                    Equity holders of the company             1,101        233     be a subsidiary of the
                                                                                                   Group at the end of
                                                                                                   2004.
                                    Minority interests                          (229)      (879)

                                                                                872        (646)
                                                                                                   Taxation
                                                                                                   Taxation was a credit
                                    Earnings per share (cents)                                     in 2005 due mainly
                                                                                                   to the recognition of
                                    Basic                                       0.49       0.11    deferred tax assets in
                                                                                                   respect of tax losses
                                                                                                   of a subsidiary.
                                    Diluted                                     0.46       0.11
                          At a Glance
                                                                                                 17




                                                                                                 China EnerSave annual report 2005
FINANCIAL HIGHLIGHTS
Balance Sheet


                                                        2005        2004      %Increase/
                                                       S$'000      S$'000     (Decrease)   (A)

NON-CURRENT ASSETS
Property, plant and equipment                           55,831     44,245           26
Investment in associates                                   565        631          (10)
Amount owing by associates                                   -        238          NM
Available-for-sale financial assets                       6,997      8,392          (17)
Long-term receivables                                    5,634      6,702          (16)
Intangible assets                                            -          1          NM
Deferred tax assets                                        343          -          NM
                                                        69,370     60,209
                                                                                           (B)
CURRENT ASSETS
Financial assets at fair value through profit or loss       796      1,236          (36)    (C)
Inventories                                                264        254             4
Contract work-in-progress                                6,529      1,967          232
Trade and other receivables                             18,388     14,535            27
Cash and cash equivalents                                5,066      8,109           (38)
                                                                                           (D)
                                                        31,043     26,101

Total assets                                           100,413     86,310

CAPITAL AND RESERVES
Share capital                                           22,485     22,485             -
Share premium                                           19,719     19,732            (0)
Reserves                                                 (7,470)    (7,128)           5
Shareholders' funds                                     34,734     35,089
Minority interests                                          830        823           1
Total equity                                            35,564     35,912
                                                                                           (F)
NON-CURRENT LIABILITIES
Interest-bearing liabilities                            35,716     27,767           29
Deferred tax liabilities                                     -         38
                                                        35,716     27,805

CURRENT LIABILITIES                                                                        (E)
Excess of progress billings over work-in-progress        1,935      3,860           (50)
Trade and other payables                                16,463     16,004             3
Provision for taxation                                      59        117          (50)
Interest-bearing liabilities                            10,406      2,612          298
                                                        28,863     22,593
Total liabilities                                       64,579     50,398
Total equity and liabilities                           100,143     86,310

NM : Not meaningful
                                    At a Glance
18
China EnerSave annual report 2005




                                    A) Property, plant and equipment
                                       Property, plant and equipment increased by S$12 million or 26% mainly due to the
                                       progress in construction of the Huizhou WTE project.

                                    B) Available-for-sale financial assets
                                       Decrease in available-for-sale financial assets by S$1.4 miilion was due to the
                                       measurement of financial asset at fair value as at the balance sheet date. The
                                       fair value difference of S$1.4 million has been taken to reserve in accordance with
                                       FRS 39.

                                    C) Contract work-in-progress
                                       Contract work-in-progress increased by by S$4.2 million or 218% was mainly due
                                       to certain engineering projects started in the fourth quarter of 2005 slated for
                                       completion in 2006.

                                    D) Trade and other receivables
                                       Increase in trade and other receivables by S$3.8 million or 27% was mainly due
                                       to the increase in prepayments particularly for the Huizhou WTE project.

                                    E) Interest-bearing liabilities (current)
                                       This comprises:-

                                                                                                   2005         2004
                                                                                                  S$'000       S$'000
                                         Term loan                                                 7,351        2,169
                                         Bank overdraft                                            1,880          360
                                         Trust receipts                                            1,098            -
                                         Finance lease liabilities                                    77           83
                                                                                                 10,406         2,612

                                         The term loan increased by S$5.2 million or 239% mainly due to the inclusion of
                                         the portion of the term loan for Huizhou WTE project falling within the twelve
                                         months after the balance sheet date.

                                    F)   Interest-bearing liabilities (non-current)
                                         Increase in the interest-bearing liabilities (non-current) by S$15.8 million was
                                         mainly due to the full drawdown of the term loan for the Huizhou WTE project
                                         in 2005 .
Financial Contents
                                         19




                                         China EnerSave annual report 2005
Directors’ Report                   20
Statement by the Directors          24
Report of the Auditors              25
Balance Sheets                      26
Income Statements                   27
Statement of Changes in Equity      28
Statement of Cash Flows             29
Notes to the Financial Statements   31
Corporate Governance                75
Statistics of Shareholdings         86
Statistics of Warrantholdings       88
Notice of Annual General Meeting    89
Proxy Form
                                    Directors’ Report
20
China EnerSave 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 year ended 31 December 2005.


                                    DIRECTORS

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

                                    Chou Kong Seng (Non-Executive Chairman)
                                    Koo Ah Seang   (Chief Executive Officer)
                                    Tay Wee Kwang (Executive Director)
                                    Chiah Kok Khun
                                    How Peck Huat


                                    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, debentures, warrants and share options
                                    in the Company and in related corporations (other than wholly-owned subsidiaries) are as follows:-

                                                                                                Held in the name
                                                                                          of the Directors or nominees          Deemed interest
                                    Name of the directors and corporation                  At beginning        At end      At beginning     At end
                                    in which interest are held                              of the year      of the year    of the year   of the year
                                    The Company
                                    China EnerSave Limited
                                    Ordinary shares of S$0.10 each
                                    Tay Wee Kwang                                              7,137,810       7,637,810              -             -
                                    Koo Ah Seang                                              13,172,000      13,672,000        173,000       173,000
                                    Options to subscribe for ordinary shares of S$0.10 each
                                    Tay Wee Kwang                                             550,000            550,000              -                 -
                                    Koo Ah Seang                                              750,000            750,000              -                 -
                                    Chou Kong Seng                                            200,000            200,000              -                 -
                                    Chiah Kok Khun                                            200,000            200,000              -                 -
                                    Bonus warrants to subscribe for ordinary shares of S$0.10 each
                                    Tay Wee Kwang                                                   -          2,439,453              -                 -
                                    Koo Ah Seang                                                         -     3,498,000              -        43,250


                                    By virtue of Section 7 of the Act, Tay Wee Kwang and Koo Ah Seang are deemed to have interests in other
                                    subsidiaries of China EnerSave Limited, all of which are wholly-owned, at the beginning and at the end of the
                                    financial year.

                                    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 of the financial year, or date of appointment if later, or at the end of the financial year.
Directors’ Report (cont’d)
                                                                                                                   21




                                                                                                                   China EnerSave annual report 2005
DIRECTORS’ INTEREST (CONT’D)

There were no changes in any of the above mentioned interests in the Company between the end of the
financial year and 21 January 2006.

Except as disclosed under the “Share Options” section of this report, 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.

Except as disclosed in this report and in Notes 20 and 29 to the financial statements, 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.


SHARE OPTIONS

The Employee Share Option Scheme (the “Scheme”) was approved and adopted by its members at an Extraordinary
General Meeting held on 23rd March 2004. The Scheme is administered by the Company’s Remuneration
Committee, comprising three directors, Chiah Kok Khun, Chou Kong Seng and Tay Wee Kwang.

Other information regarding the Scheme is set out below:-

•   The options vest one year after the grant date.

•   The options granted expire 9 years for employees and 4 years for non-executive directors after the vesting
    date unless they have been cancelled or have lapsed prior to that date.

At the end of the financial year, details of the options granted under the Scheme on the unissued ordinary
shares of S$0.10 each of the Company are as follows:-

                                                                                       Number
                                                                  Options             of option
                          Options                               outstanding            holders
Date of       Exercise outstanding                     Options     at 31                at 31
grant of      price per at 1 January Options Options cancelled/ December              December         Exercise
options        share        2005     granted exercised lapsed      2005                 2005            period
05/04/2004     S$0.225     3,940,000          -         -   2,640,000    1,300,000             2      05/04/2005
                                                                                                          to
                                                                                                      04/04/2014
05/04/2004     S$0.225       600,000          -         -    200,000       400,000             2      05/04/2005
                                                                                                          to
                                                                                                      04/04/2009
01/11/2004     S$0.162       450,000          -         -    450,000              -               -   01/11/2005
                                                                                                          to
                                                                                                      31/10/2014
                                    Directors’ Report (cont’d)
22
China EnerSave annual report 2005




                                    SHARE OPTIONS (CONT’D)

                                    Except as disclosed above, there were no unissued shares of the Company or its subsidiaries under options
                                    granted by the Company or its subsidiaries as at the end of the financial year.

                                    Details of options granted to directors of the Company under the Scheme are as follows:-

                                                                                      Aggregate              Aggregate
                                                                                   options granted       options exercised
                                                             Options granted            since                  since
                                                             for financial year     commencement           commencement         Aggregate options
                                                            31 December 2005        of Scheme to           of Scheme to        outstanding as at
                                     Name of Director        (including terms)    31 December 2005       31 December 2005      31 December 2005
                                     Tay Wee Kwang                    -                550,000                   -                  550,000
                                     Koo Ah Seang                     -                750,000                   -                  750,000
                                     Chou Kong Seng                   -                200,000                   -                  200,000
                                     Chiah Kok Khun                   -                200,000                   -                  200,000


                                    Since the commencement of the Scheme, no options have been granted to the controlling shareholders of
                                    the Company or their associates and no employee has been granted 5% or more of the total options available
                                    under the Scheme.

                                    The options granted by the Company do not entitle the holders of the options, by virtue of such holding, to any
                                    rights to participate in any share issue of any other company.


                                    AUDIT COMMITTEE

                                    The members of the Audit Committee at the date of this report are as follows:-

                                    Chiah Kok Khun (Chairman)
                                    How Peck Huat
                                    Chou Kong Seng

                                    The Audit Committee carries out its functions in accordance with Section 201B(5) of the Companies Act, Cap.
                                    50, the Listing Manual and the Code of Corporate Governance and performs the following:-

                                    (a)    reviews with the external auditors their audit plan, evaluation of the accounting controls, audit reports
                                           and any matters which the external auditors wish to discuss;

                                    (b)    reviews the half-yearly and annual financial statements, including announcements to shareholders and
                                           the Singapore Exchange Securities Trading Ltd prior to the submission to the Board;

                                    (c)    makes recommendations to the Board on the appointment of external auditors;

                                    (d)    reviews the assistance given by the Company’s officers to the external auditors;

                                    (e)    reviews related party transactions including interested person transactions (as defined in Chapter 9 of
                                           the Listing Manual of the Singapore Exchange), and
Directors’ Report (cont’d)
                                                                                                                                 23




                                                                                                                                 China EnerSave annual report 2005
AUDIT COMMITTEE (CONT’D)

(f)        reviews the independence of external auditors annually.

It held two meetings during the financial year.

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

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




On behalf of the Board of Directors




.......................................................                .......................................................
Chou Kong Seng                                                         Koo Ah Seang
Non-Executive Chairman                                                 Chief Executive Officer


Dated: 10 February 2006
                                    Statement by the Directors
24
China EnerSave annual report 2005




                                    In the opinion of the Directors of China EnerSave Limited:-


                                    (a)        the financial statements are drawn up so as to give a true and fair view of the state of affairs of the
                                               Group and of the Company as at 31 December 2005 and of the results, changes in equity and cash
                                               flows of the Group for 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




                                    .......................................................              .......................................................
                                    Chou Kong Seng                                                       Koo Ah Seang
                                    Non-Executive Chairman                                               Chief Executive Officer


                                    Dated: 10 February 2006
Report of the Auditors
TO THE MEMBERS OF CHINA ENERSAVE LIMITED                                                                                   25




                                                                                                                           China EnerSave annual report 2005
We have audited the accompanying financial statements of CHINA ENERSAVE LIMITED for the year ended 31
December 2005. 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 statements 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 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 so as to give a true and fair view of the state of affairs of the Group and
       of the Company as at 31 December 2005 and of the results, changes in equity and cash flows of the
       Group for the financial year ended on that date; and

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




                                                                   .....................................................
                                                                   Moores Rowland
Singapore: 10 February 2006                                        Certified Public Accountants
                                    Balance Sheets
26                                  AS AT 31 DECEMBER 2005
China EnerSave annual report 2005




                                                                                             Note              GROUP                     COMPANY
                                                                                                       2005             2004         2005       2004
                                                                                                      S$’000           S$’000       S$’000     S$’000

                                    Non-current assets
                                    Property, plant and equipment                             3        55,831           44,245          254           283
                                    Investment in subsidiaries                                4(a)          -                -        6,756         6,656
                                    Investment in associates                                  4(b)        565              631          762           762
                                    Amounts owing by associates                               4(b)          -              238            -             -
                                    Available-for-sale financial assets                        5(a)      6,997            8,392        6,000         6,000
                                    Long-term receivables                                     9         5,634            6,702        4,353         4,109
                                    Intangible assets                                         6             -                1            -             -
                                    Deferred tax assets                                      17           343                -            -             -
                                                                                                       69,370           60,209       18,125        17,810

                                    Current assets
                                    Financial assets at fair value through profit or loss      5(b)        796            1,237            -         1,329
                                    Inventories                                               7           264              253            -             -
                                    Contract work-in-progress                                 8         6,259            1,967            -             -
                                    Trade and other receivables                               9        18,388           14,535       20,933        25,021
                                    Cash and cash equivalents                                10         5,066            8,109        1,406         1,076
                                                                                                       30,773           26,101       22,339        27,426

                                    Total assets                                                      100,143           86,310       40,464        45,236

                                    Equity attributable to equity holders of the parent
                                    Share capital                                            11        22,485           22,485       22,485        22,485
                                    Share premium                                            13        19,719           19,732       19,719        19,732
                                    Reserves/(Losses)                                        14         (7,470)          (7,128)      (3,394)       (3,515)
                                                                                                       34,734           35,089       38,810        38,702
                                    Minority interests                                                     830              823            -             -
                                    Total equity                                                       35,564           35,912       38,810        38,702

                                    Non-current liabilities
                                    Interest-bearing liabilities                             16        35,716           27,767             -             -
                                    Deferred tax liabilities                                 17             -               38            34             -
                                                                                                       35,716           27,805            34             -

                                    Current liabilities
                                    Excess of progress billings over work-in-progress         8         1,935            3,860            -              -
                                    Trade and other payables                                 15        16,463           16,004        1,620          6,512
                                    Provision for taxation                                                 59              117            -             22
                                    Interest-bearing liabilities                             16        10,406            2,612            -              -
                                                                                                       28,863           22,593        1,620          6,534
                                    Total liabilities                                                  64,579           50,398        1,654          6,534

                                    Total equity and liabilities                                      100,143           86,310       40,464        45,236




                                           The annexed notes form an integral part of and should be read in conjunction with these financial statements
Income Statements
FOR THE YEAR ENDED 31 DECEMBER 2005                                                                                           27




                                                                                                                              China EnerSave annual report 2005
                                                                                      Note             GROUP
                                                                                                  2005       2004
                                                                                                 S$’000     S$’000



Revenue                                                                                18         18,359         31,876

Cost of sales                                                                                     (15,148)      (25,698)

Gross profit                                                                                         3,211         6,178

Other revenue                                                                          19             185           669
Administrative and marketing expenses                                                              (2,114)       (4,171)
Other expenses                                                                                       (542)       (2,733)
Finance costs                                                                          21            (117)         (108)
Share of results of an associated company                                                              (66)           -

Profit/(Loss) from operations before taxation                                           22             557             (165)

Taxation                                                                               23             315             (481)

Profit/(Loss) for the year                                                                             872             (646)

Attributable to:
Equity holders of the parent                                                                        1,101              233
Minority interests                                                                                   (229)            (879)
Profit/(Loss) for the year                                                                             872             (646)

Earnings per share (cents)

Basic                                                                                  24            0.49             0.11

Diluted                                                                                24            0.46             0.11




        The annexed notes form an integral part of and should be read in conjunction with these financial statements
                                                                                                                                  China EnerSave annual report 2005




                                                                                                                                                                      28
                                                                                                                                Total
                                                                                                                            Attributable
                                                          Fair   Share          Exchange                                      to Equity
                                         Share    Share  Value Option Capital Realignment Statutory Revaluation Accumulated Holders of Minority
                                        Capital Premium Reserve Reserve Reserve  Reserve   Reserve    Reserve      Losses    the Parent Interests Total
                                        S$’000 S$’000 S$’000 S$’000 S$’000       S$’000    S$’000     S$’000       S$’000      S$’000    S$’000 S$’000
GROUP
At 31 December 2003                 18,785       15,433          -       -     267          230          259      52   (7,701)    27,325        1,278     28,603
Acquisition of a subsidiary              -            -          -       -       -            -            -       -        -          -        1,088      1,088
Disposal of subsidiaries                 -            -          -       -       -            -            -       -        -          -         (582)      (582)
Transfer from statutory reserve          -            -          -       -       -            -         (259)      -        -       (259)          33       (226)
Transfer from capital reserve            -            -          -       -    (262)           -            -       -        -       (262)           -       (262)
Translation differences relating to
  financial statements of foreign
  subsidiaries                           -             -         -       -        -        (115)              -    -         -      (115)        (115)      (230)
Net (loss)/gain recognised directly
  in equity                              -            -          -       -    (262)        (115)        (259)      -       -        (636)         424       (212)
Issue of shares                      3,700        4,299          -       -       -            -            -       -       -       7,999            -      7,999
Net profit/(loss) for the year            -            -          -       -       -            -            -       -     233         233         (879)      (646)
                                                                                                                                                                      FOR THE YEAR ENDED 31 DECEMBER 2005




Value of employee services received
  for issue of share options             -             -         -    168         -            -              -    -         -       168             -       168

At 31 December 2004                     22,485   19,732          -    168         5         115               -   52   (7,468)    35,089          823     35,912

At 31 December 2004, previously
  reported                              22,485   19,732         -       -         5         115               -   52   (7,300)    35,089          823     35,912
Effects of adopting FRS 102                  -         -        -     168         -           -               -    -     (168)          -           -           -
At 31 December 2004, restated           22,485   19,732         -     168         5         115               -   52   (7,468)    35,089          823     35,912
Effects of adopting FRS 39                   -         -     (565)      -         -           -               -    -       (71)     (636)           -       (636)
At 1 January 2005, restated             22,485   19,732      (565)    168         5         115               -   52   (7,539)    34,453          823     35,276
Bonus warrant issue expenses                 -       (13)       -       -         -           -               -    -         -        (13)          -         (13)
Transfer from capital reserve                -         -        -       -        (5)          -               -    -         -         (5)          -          (5)
Fair value loss on available-for-sale
  financial assets                            -         -     (830)       -        -            -              -    -         -      (830)            -      (830)
Translation differences relating to
  financial statements of foreign
                                                                                                                                                                                                            Statement of Changes in Equity




  subsidiaries                               -         -         -       -        -         144               -    -         -       144          236        380
Net (loss)/gain recognised directly
  in equity                                  -       (13)    (830)       -       (5)        144               -    -       -        (704)         236       (468)
Net profit/(loss) for the year                -         -        -        -        -           -               -    -   1,101       1,101         (229)       872
Share options cancelled or lapsed            -         -        -     (116)       -           -               -    -       -        (116)           -       (116)

At 31 December 2005                     22,485   19,719     (1,395)    52         -         259               -   52   (6,438)    34,734          830     35,564


The annexed notes form an integral part of and should be read in conjunction with these financial statements
Statement of Cash Flows
FOR THE YEAR ENDED 31 DECEMBER 2005                                                                                         29




                                                                                                                            China EnerSave annual report 2005
                                                                                                     GROUP
                                                                                             2005             2004
                                                                                            S$’000           S$’000
Operating activities
 Profit/(Loss) before taxation                                                                    557                (165)
 Adjustments for :-
 Depreciation of property, plant and equipment                                                   240              542
 Value of employee services received for issue of share options                                      -            168
 Share options cancelled or lapsed                                                              (116)                -
 Amortisation of deferred development expenditure                                                    -            148
 Share of loss of an associated company                                                            66                -
 Gain on disposal of subsidiaries                                                                    -         (1,358)
 Gain on disposal of unlisted equity securities                                                   (17)           (229)
 Loss on disposal of listed equity securities                                                    178              203
 Goodwill written off                                                                                1               -
 Property, plant and equipment written off                                                           1            400
 Impairment loss of listed equity securities                                                     133              178
 Impairment loss of unlisted equity securities                                                     50             140
 Gain on disposal of property, plant and equipment                                                (39)             (77)
 Amortisation of goodwill                                                                            -              10
 Negative goodwill                                                                                  (6)              -
 Interest income                                                                                (112)              (15)
 Interest expense                                                                                117              108
 Exchange realignment                                                                            464             (202)
Operating profit/(loss) before working capital changes                                          1,517             (149)

Changes in working capital:-
Trade and other receivables                                                                    (2,547)        (6,451)
Inventory and work-in-progress                                                                 (4,303)          (679)
Cash deposits pledged                                                                             819           (802)
Trade and other payables                                                                         (368)        22,774
Cash (used in)/generated from operations                                                       (4,882)        14,693

Interest received                                                                                 112              15
Interest paid                                                                                    (117)          (108)
Income tax paid                                                                                  (124)            (75)
Cash (outflow)/inflow from operating activities                                                  (5,011)        14,525

Investing activities
Acquisition of interest in subsidiaries                                                             1           (8,359)
Purchase of property, plant and equipment                                                    (10,137)         (34,842)
Purchase of listed equity securities                                                             (772)         (4,355)
Proceeds from sale of listed equity securities                                                    780              956
Proceeds from sale of unlisted equity securities                                                    5              668
Proceeds from disposal of interest in subsidiaries                                                  -               (20)
Proceeds from disposal of property, plant and equipment                                           134              152
Exchange realignment                                                                           (1,856)             400
Cash outflow from investing activities                                                        (11,845)         (45,400)

Financing activities
Issue of additional shares                                                                          -          3,700
(Decrease)/Increase in share premium                                                              (13)         4,299
Proceeds from short-term borrowings                                                            5,182           2,511
Proceeds from long-term borrowings                                                             8,040          27,314
(Repayment of)/Proceeds from finance lease creditors                                               (97)           112
Cash inflow from financing activities                                                           13,112          37,936

Net (decrease)/increase in cash and cash equivalents                                           (3,744)          7,061
Cash and cash equivalents at beginning of year                                                  6,930            (131)
Cash and cash equivalents at end of year (Note 10)                                              3,186           6,930


      The annexed notes form an integral part of and should be read in conjunction with these financial statements
                                    Statement of Cash Flows (cont’d)
30                                  FOR THE YEAR ENDED 31 DECEMBER 2005
China EnerSave annual report 2005




                                    (A)    ACQUISITION AND DISPOSAL OF SUBSIDIARIES

                                           The attributable net assets of subsidiaries acquired and disposed of during the year are as follows:-



                                                                                                                                              GROUP
                                                                                                                                      2005             2004
                                                                                                                                     S$’000           S$’000
                                           Acquisition
                                           Property, plant and equipment                                                                       -          9,566
                                           Receivables                                                                                         -             33
                                           Cash and bank balance                                                                               2        12,317
                                           Payables                                                                                            -           (152)
                                           Minority interests                                                                                  -         (1,088)
                                           Net assets acquired                                                                                 2        20,676
                                           Reserve on consolidation                                                                           (1)             -
                                           Purchase consideration                                                                              1        20,676
                                           Less : Cash and cash equivalents of a subsidiary acquired                                          (2)      (12,317)

                                           Net cash (inflow)/outflow on acquisition of a subsidiary                                             (1)        8,359

                                           Disposal
                                           Property, plant and equipment                                                                       -          1,151
                                           Intangible assets                                                                                   -            152
                                           Inventory and work-in-progress                                                                      -          6,914
                                           Receivables                                                                                         -          5,403
                                           Cash and bank balance                                                                               -          1,174
                                           Payables                                                                                            -       (11,148)
                                           Short-term borrowings                                                                               -        (1,144)
                                           Provision for taxation                                                                              -               7
                                           Minority interests                                                                                  -         (1,005)
                                           Net assets disposed                                                                                 -          1,504
                                           Goodwill disposed                                                                                   -              26
                                           Realisation of statutory reserves                                                                   -           (208)
                                           Realisation of reserve on consolidation                                                             -           (175)
                                           Realisation of post-acquisition reserves in excess of investment                                    -           (400)
                                           Others                                                                                              -               5
                                           Gain on disposal                                                                                    -          1,358
                                           Sales consideration                                                                                 -          2,110
                                           Less: Shares swap                                                                                   -         (2,100)
                                           Less: Cash and cash equivalents of subsidiaries disposed                                            -             (30)

                                           Net cash outflow on disposal of subsidiaries                                                         -            (20)




                                          The annexed notes form an integral part of and should be read in conjunction with these financial statements
Notes to the Financial Statements
31 DECEMBER 2005                                                                                                        31




                                                                                                                        China EnerSave annual report 2005
These notes form an integral part of the financial statements.


1.     DOMICILE AND ACTIVITIES

       China EnerSave Limited (the “Company”) is incorporated and domiciled in Singapore with its registered
       office at 80 Raffles Place, #21-20 UOB Plaza 2, Singapore 048624.

       The principal activities of the Company are those of investment holding and provision of management
       services to its subsidiaries. The principal activities of subsidiaries are listed in Note 4(a) to the financial
       statements.

       The consolidated financial statements relate to the Company and its subsidiaries (referred to as the
       “Group”) and the Group’s interest in associates.


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 its operations:

       FRS 1 (revised)        Presentation of Financial Statements
       FRS 2 (revised)        Inventories
       FRS 8 (revised)        Accounting Policies, Changes in Accounting Estimates and Errors
       FRS 10 (revised)       Events After the Balance Sheet Date
       FRS 16 (revised)       Property, Plant and Equipment
       FRS 17 (revised)       Leases
       FRS 21 (revised)       The Effects of Changes in Foreign Exchanges Rates
       FRS 24 (revised)       Related Party Disclosures
       FRS 27 (revised)       Consolidated and Separate Financial Statements
       FRS 28 (revised)       Investment in Associates
       FRS 32 (revised)       Financial Instruments: Disclosure and Presentation
       FRS 33 (revised)       Earnings Per Share
       FRS 36 (revised)       Impairment of Assets
       FRS 38 (revised)       Intangible Assets
       FRS 39                 Financial Instruments: Recognition and Measurement
       FRS 102                Share-based Payment
       FRS 103                Business Combinations
                                    Notes to the Financial Statements (cont’d)
32                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

                                    2.1   Basis of preparation (cont’d)

                                          The effects of adopting the new/revised FRSs in 2005 are set out in Note 27.

                                          The financial statements are presented in Singapore dollars and rounded to the nearest thousand, unless
                                          otherwise stated. They are prepared on the historical cost basis except for the following assets and
                                          liabilities which are stated at fair value: certain property, plant and equipment and certain financial assets
                                          and financial liabilities.

                                          The preparation of financial statements in conformity with FRSs requires management to make
                                          judgements, estimates and assumptions that affect the application of policies and reported amounts of
                                          assets, liabilities, income and expenses. The estimates and associated assumptions are based on historical
                                          experience and various other factors that are believed to be reasonable under the circumstances, the
                                          results of which form the basis of making the judgements about carrying amounts of assets and liabilities
                                          that are not readily apparent from other sources.

                                          The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
                                          estimates are recognised in the period in which the estimate is revised, if the revision affects only that
                                          period, or in the period of the revision and future periods, if the revision affects both current and future
                                          periods.

                                    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 companies in which the Group has significant influence, but not control, over financial
                                          and operating policies.

                                          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 using the equity method of accounting. The
                                          Group’s investment in these entities includes goodwill on acquisition.

                                          Business combinations are accounted for under the purchase method. The cost of an acquisition is
                                          measured at 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.

                                          The excess of the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent
                                          liabilities over the cost of acquisition is credited to the income statements in the period of the
                                          acquisition.
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                    33




                                                                                                                    China EnerSave annual report 2005
2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

2.3   Foreign currencies

      Foreign currency transactions

      Transactions in foreign currencies are translated at foreign exchange rates ruling at the dates of the
      transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date
      are translated into Singapore dollars at foreign exchange rates ruling at that date. Foreign exchange
      differences arising from translation are recognised in the income statements. Non-monetary assets
      and liabilities measured at cost in a foreign currency are translated using exchange rates ruling at the
      date of the transaction. Non-monetary assets and liabilities measured at fair value in foreign currencies
      are translated to Singapore dollars at foreign exchange rates ruling at the dates the fair value was
      determined.

      Net investment in a foreign operation

      Exchange differences arising from monetary items that in substance form part of the Company’s net
      investment in a foreign operation, are recognised in the Company’s income statements. Such exchange
      differences are reclassified to equity in the consolidated financial statements only when the loan is
      denominated in either the functional currency of the Company or the foreign operation. Deferred
      exchange differences are released to the income statements upon disposal of the investment.

      Foreign operations

      Assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on the
      acquisition of foreign operations, are translated to Singapore dollars for consolidation at the rates of
      exchange ruling at the balance sheet date. Revenues and expenses of foreign operations are translated
      at exchange rates ruling at the dates of the transactions. Exchange differences arising on translation
      are recognised directly in equity. On disposal, accumulated translation differences are recognised in the
      consolidated income statements as part of the gain or loss on sale.

2.4   Intangible assets

      Goodwill

      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 on the acquisition of subsidiaries is presented as intangible assets. Goodwill on the
      acquisition of associates is presented together with investments in associates.

      Goodwill is tested for impairment on an annual basis as described in Note 2.13.

      Goodwill/negative goodwill previously written off against reserves

      Goodwill that has previously been taken to reserves is not taken to the income statements when (a) the
      business is disposed or (b) the goodwill is impaired. Similarly, negative goodwill that has previously been
      taken to reserves is not taken to the income statements when the business is disposed of.
                                    Notes to the Financial Statements (cont’d)
34                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

                                    2.5   Investments in financial assets

                                          (a) Classification

                                             The Group classifies its investments in financial assets in the following categories: financial assets at
                                             fair value through profit or loss, loans and receivables, and available-for-sale financial assets. The
                                             classification depends on the purpose for which the assets were acquired. Management determines
                                             the classification of its financial assets at initial recognition and re-evaluates the designation at every
                                             reporting date, with the exception that the designation of financial assets at fair value through profit
                                             or loss is not revocable.

                                             (i) Financial assets at fair value through profit or loss

                                                 This category has two sub-categories: financial assets held for trading, and those designated at fair
                                                 value through profit or loss at inception. A financial asset is classified in this category if acquired
                                                 principally for the purpose of selling in the short term or if so designated by management.
                                                 Assets in this category are classified as current assets if they are either held for trading or are
                                                 expected to be realised within 12 months after the balance sheet date.

                                             (ii) Loans and receivables

                                                 Loans and receivables are non-derivative financial assets with fixed or determinable payments
                                                 that are not quoted in an active market. They arise when the Group provides money, goods
                                                 or services directly to a debtor with no intention of trading the receivable. They are included
                                                 in current assets, except those maturing more than 12 months after the balance sheet date.
                                                 These are classified as non-current assets. Loans and receivables are included in trade and other
                                                 receivables on the balance sheet.

                                             (iii) Available-for-sale financial assets

                                                 Available-for-sale financial assets are non-derivatives that are either designated as available-for-
                                                 sale or not classified in the preceding category. They are included in non-current assets unless
                                                 management intends to dispose of the assets within 12 months after the balance sheet date.

                                          (b) Recognition and derecognition

                                             Purchases and sales of investments are recognised on trade-date – date on which the Group commits
                                             to purchase or sell the asset. Investments are derecognised when the rights to receive cash flows
                                             from the financial assets have expired or have been transferred and the Group has transferred
                                             substantially all risks and rewards of ownership.

                                          (c) Initial measurement

                                             Financial assets are initially recognised at fair value plus transaction costs except for financial assets
                                             at fair value through profit or loss, which are recognised at fair value.
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                    35




                                                                                                                    China EnerSave annual report 2005
2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

2.5   Investments in financial assets (cont’d)

      (d) Subsequent measurement

         Available-for-sale financial assets and financial assets at fair value through profit or loss are
         subsequently carried at fair value.

         Realised and unrealised gains and losses arising from changes in the fair value of the “financial assets
         at fair value through profit or loss” investment category are included in the income statement in
         the period in which they arise. Unrealised gains and losses arising from changes in the fair value
         of investments classified as available-for-sale are recognised in the fair value reserve within equity.
         When investments classified as available-for-sale are sold or impaired, the accumulated fair value
         adjustments in the fair value reserve within equity are included in the income statement.

      (e) Impairment

         The Group assesses at each balance sheet date whether there is objective evidence that a financial
         asset or a group of financial assets is impaired. In the case of equity investments classified as
         available for sale, a significant or prolonged decline in the fair value of the investment below its
         cost is considered in determining whether the investments are impaired. If any such evidence exists
         for available-for-sale financial assets, the cumulative loss – measured as the difference between the
         acquisition cost and the current fair value, less any impairment loss on that financial asset previously
         recognised in profit or loss – is removed from the fair value reserve within equity and recognised in
         the income statement. Impairment losses recognised in the income statement on equity investments
         are not reversed through the income statement, until the equity investments are disposed of.

         An impairment loss in respect of an investment in an equity instrument classified as available-for-sale
         is not reversed through the income statements.

2.6   Property, plant and equipment

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

      Property, plant and equipment acquired through finance leases are capitalised at the lower of its fair value
      and the present value of the minimum lease payments at the inception of the lease, less accumulated
      depreciation and impairment losses. Lease payments are apportioned between finance charges and
      reductions of the lease liability so as to achieve a constant rate of interest on the remaining balance of
      the liability. Finance charges are charged directly against the income statements. Capitalised leased
      assets are depreciated over the shorter of the economic useful life of the asset and the lease term.
                                    Notes to the Financial Statements (cont’d)
36                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

                                    2.6   Property, plant and equipment (cont’d)

                                          Depreciation is calculated to write off the cost of property, plant and equipment by the straight-line
                                          method over their estimated useful lives at the following annual rates, except for freehold land which is
                                          not depreciated.

                                          Leasehold land                        over the leasehold period of 27 years
                                          Buildings                                                          50 years
                                          Plant and machinery                                            5 - 10 years
                                          Furniture and equipment                                        3 - 10 years
                                          Office renovation                                              10 - 20 years
                                          Motor vehicles                                                      5 years

                                          The useful lives and residual values, if not insignificant, are reassessed annually.

                                          Leasehold land is initially recorded at cost. Leasehold land is subsequently stated at valuation, less
                                          accumulated depreciation and accumulated impairment losses.

                                          When an asset is revalued, any accumulated depreciation at the date of revaluation is eliminated against
                                          the gross carrying amount of the asset; the net amount is then restated to the revalued amount of
                                          the asset. Revaluation surpluses are taken to the asset revaluation reserve, unless they offset previous
                                          revaluation losses of the same asset that were taken to the income statement. Revaluation losses are
                                          taken to the asset revaluation reserve, to the extent that they offset previous revaluation surpluses of
                                          the same asset that were taken to the asset revaluation reserve. Other revaluation surpluses or losses
                                          are taken to the income statement. The Group has no fixed policy on the frequency of revaluations.

                                          The cost of self-constructed assets includes the cost of materials, direct labour and an appropriate
                                          proportion of production overheads.

                                          Interest costs on borrowings to finance the construction of property, plant and equipment are capitalised
                                          during the period of time that is required to complete and prepare the assets for its intended use. All
                                          other borrowing costs are expensed.


                                    2.7   Inventories

                                          Inventories are stated at the lower of cost and net realisable value. Cost comprises the cost of materials
                                          calculated on a weighted average basis and for work-in-progress and finished goods, cost also includes
                                          labour and certain proportions of fixed and variable factory overheads. In arriving at net realisable value,
                                          due allowance is made for any obsolete and slow-moving inventories.

                                          When inventories are sold, the carrying amount of those inventories is recognised as an expense in
                                          the period in which the related revenue is recognised. The amount of any allowance for write-down
                                          of inventories to net realisable value and all losses of inventories are recognised as an expense in the
                                          period the write-down or loss occurs. The amount of any reversal of any allowance for write-down of
                                          inventories, arising from an increase in net realisable value, is recognised as a reduction in the amount
                                          of inventories recognised as an expense in the period in which the reversal occurs.
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                         37




                                                                                                                         China EnerSave annual report 2005
2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

2.8    Contract work-in-progress

       Contract work-in-progress comprises uncompleted contracts. Contract work-in-progress is valued at
       cost plus a proportion of estimated profits earned to date, less progress billings. Cost comprises direct
       labour, materials and sub-contract costs. The proportion of profits earned to date is arrived at having
       regard to the nature and stage of completion of each contract. Full provision is made for anticipated
       losses to completion where applicable.

2.9    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 for 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, associates and
       joint ventures, 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.

2.10   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.

2.11   Trade and other receivables

       Trade and other receivables are stated at their estimated recoverable amounts.

       In estimating the recoverable amounts, known bad debts are written off and specific provisions are
       made for accounts considered to be doubtful.

2.12   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. Subsequent to initial recognition, interest-bearing liabilities are stated at
       amortised cost with any difference between cost and redemption value being recognised in the income
       statements over the period of the borrowings on an effective interest basis.
                                    Notes to the Financial Statements (cont’d)
38                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

                                    2.13   Impairment

                                           The carrying amounts of the Group’s assets are reviewed at each balance sheet date to determine
                                           whether there is any indication of impairment. If any such indication exists, the assets’ recoverable
                                           amounts are estimated. An impairment loss is recognised whenever the carrying amount of an asset or
                                           its cash-generating unit exceeds its recoverable amount. The impairment loss is charged to the income
                                           statements unless it reverses a previous revaluation, credited to equity, in which case it is charged to
                                           equity.

                                           Goodwill, intangible assets with indefinite useful lives are tested for impairment annually and as and
                                           when indicators of impairment are identified.

                                           Impairment losses recognised in respect of cash-generating units are allocated first to reduce the carrying
                                           amount of any goodwill allocated to cash-generating units (group of units) and then, to reduce the
                                           carrying amount of the other assets in the unit (group of units) on a pro rata basis.

                                           Calculation of recoverable amount

                                           The recoverable amount of the Group’s receivables carried at amortised cost is calculated as the present
                                           value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective
                                           interest rate computed at initial recognition of these financial assets). Receivables with a short duration
                                           are not discounted.

                                           The recoverable amount of other assets is the greater of their net selling price and value in use. In
                                           assessing value in use, the estimated future cash flows are discounted to their present value using
                                           a pre-tax discount rate that reflects current market assessments of the time value of money and the
                                           risks specific to the asset. For an asset that does not generate largely independent cash inflows, the
                                           recoverable amount is determined for the cash-generating unit to which the asset belongs.

                                           Reversals of impairment

                                           An impairment loss in respect of receivable carried at amortised cost is reversed if the subsequent
                                           increase in recoverable amount can be related objectively to an event occurring after the impairment
                                           loss was recognised.

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

                                           An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the
                                           carrying amount that would have been determined, net of depreciation or amortisation, if no impairment
                                           loss had been recognised.
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                   39




                                                                                                                   China EnerSave annual report 2005
2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

2.14   Associated companies

       An associated company is defined as a company, not being a subsidiary, in which the Group has a
       substantial interest (not less than 20% of the equity) and in whose financial and operating policy
       decisions the Group exercise significant influence.

       Associated companies are accounted for under the equity method whereby the Group’s share of profits
       of associated companies are included in the consolidated income statement, and the Group’s share of
       post-acquisition retained profits or losses and reserves are adjusted against the cost of the net assets
       acquired in the consolidated balance sheet. In the Company’s balance sheet, investment in associated
       companies is stated at cost, less impairment loss.

2.15   Financial instruments

       Financial assets and financial liabilities carried on the balance sheet include cash and cash equivalents,
       trade and other receivables and payables, loans and borrowings. The accounting policies on recognition
       and measurement of these items are disclosed in the respective accounting policies found in these
       Notes.

2.16   Provisions

       Provisions are recognised when the Group has a present obligation as a result of a past event where it is
       probable that it will result in an outflow of economic benefits that can be reasonably estimated.

2.17   Finance costs

       Interest expense and similar charges are expensed in the income statements 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 income statements using the effective interest rate method.


2.18   Employee benefits

       Share-based payments

       The share option scheme allows the Group’s employees to acquire shares of the Company. The fair value
       of options granted is recognised as an employee expense with a corresponding increase in equity. The
       fair value is measured at grant date and spread over the period during which the employees become
       unconditionally entitled to the options. At each balance sheet date, the company revises its estimates
       of the number of options that are expected to become exercisable. It recognises the impact of the
       revision of original estimates in employee expense and in a corresponding adjustment to equity over the
       remaining vesting period.

       The proceeds received net of any directly attributable transactions costs are credited to share capital
       (nominal value) and share premium when the options are exercised.
                                    Notes to the Financial Statements (cont’d)
40                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

                                    2.18   Employee benefits (cont’d)

                                           Defined contribution plans

                                           Contributions to defined contribution plans are recognised as an expense in the income statement as
                                           incurred.

                                    2.19   Segment reporting

                                           A segment is a distinguishable component of the Group that is engaged either in providing products or
                                           services (industry segment), or in providing products or services within a particular economic environment
                                           (geographical segment), which is subject to risks and rewards that are different from those of other
                                           segments.

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

                                           Inter-segment pricing is determined on an arm’s length basis.

                                           Segment results, assets and liabilities include items directly attributable to a segment. Segment assets
                                           consist primarily of property, plant and equipment, inventories, contract work-in-progress, receivables
                                           and operating cash and exclude items such as tax assets and interest receivables.

                                           Segment liabilities consist of operating liabilities and exclude items such as taxation and corporate
                                           borrowings. Unallocated items mainly comprise tax assets and taxation.

                                           Segment capital expenditure is the total cost incurred during the year to acquire segment assets that are
                                           expected to be used for more than one year.


                                           Industry segments

                                           The Group comprises the following main industry segments :-

                                           Engineering :-        This relates to the provision of mechanical and electrical engineering services, sale
                                                                 and maintenance of fire protection and security equipment and systems as well as
                                                                 construction related activities.

                                           Manufacturing :-      This was related to the manufacture and sale of electrical and electronic products
                                                                 as well as research and development activities in this area.

                                           Power :-              This relates to the provision of design, build and operate waste-to-energy and
                                                                 biomass plants and trading of by-products produced by its principal activities.
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                   41




                                                                                                                   China EnerSave annual report 2005
2.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)

2.19   Segment reporting (cont’d)

       Geographical segments

       The engineering and manufacturing segments are managed on a regional basis but operate in three
       principal geographical areas. Singapore is a major market for the provision of engineering services,
       manufacturing, sale of electrical and electronic products and as well as related construction activities.

       In presenting information on the basis of geographical segments, segment revenue is based on the
       geographical location of customers. Segment assets are based on the geographical location of the assets.

2.20   Revenue recognition

       Revenues from the sale of products are recognised when the significant risks and rewards of ownership
       have been transferred to the buyer.

       Revenues and results from contract works are recognised on the percentage of completion method
       measured by reference to the percentage of contract costs incurred to date to estimated total contract
       costs for the contract and any losses are provided for in the year in which they become known. Claims
       for additional contract compensation are not recognised until resolved.

       Revenue from services rendered is recognised upon acceptance by customers.

       Dividend income is recognised when the right to receive payment is established.

       Interest income is accrued on a time-apportioned basis on the principal outstanding and at the rates
       applicable.

       Rental income, accounting, administration, corporate guarantee and management fees are recognised
       on accrual basis.
                                    Notes to the Financial Statements (cont’d)
42                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    3      PROPERTY, PLANT AND EQUIPMENT



                                    GROUP                      AT                                 AT COST
                                                            VALUATION


                                                                        Construction   Plant       Furniture
                                                            Leasehold        In         and          and      Office       Motor
                                                               Land       Progress   Machinery    Equipment Renovation   Vehicles      Total
                                    2005                      S$’000       S$’000     S$’000        S$’000    S$’000      S$’000      S$’000
                                    Cost/Valuation
                                    At 1 January 2005           1,145       42,064         638         696        189         951      45,683
                                    Currency realignment           48        1,820           -            1         -            8      1,877
                                    Additions                       -       10,018           -          31         75           13     10,137
                                    Disposals/written off           -            -        (500)          (8)        -          (45)      (553)
                                    At 31 December 2005         1,193       53,902         138         720        264         927      57,144

                                    Accumulated
                                    Depreciation
                                    At 1 January 2005             117            -         516         385         43         377       1,438
                                    Currency realignment            6            -           -            -         -            2          8
                                    Charge for the year             -            -          20          93         20         107         240
                                    Disposals/written off           -            -        (411)          (3)        -          (43)      (457)
                                    Reclassification                42            -           -           5          -          37          84
                                    At 31 December 2005           165            -        125          480         63         480       1,313

                                    Net Book Value
                                    At 31 December 2005         1,028       53,902         13          240        201         447      55,831
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                                     43




                                                                                                                                     China EnerSave annual report 2005
3.      PROPERTY, PLANT AND EQUIPMENT (CONT’D)



GROUP                                         AT
                                   AT COST VALUATION                                 AT COST

                                   Freehold                Construction   Plant    Furniture
                                   Land and    Leasehold        In         and       and      Office     Motor
                                   Buildings      Land       Progress   Machinery Equipment Renovation Vehicles           Total
2004                                S$’000       S$’000       S$’000     S$’000     S$’000    S$’000    S$’000           S$’000
Cost/Valuation
At 1 January 2004                      426            -             -      3,259        1,526        783      1,144       7,138
Due to acquisition of subsidiary          -           -         9,547           -           21         -          -       9,568
Currency realignment                     (1)          -          (371)        (74)         (15)      (19)        (9)       (489)
Additions                                 -       1,046        33,466          31         246        171        569      35,529
Due to the disposal of
                                          -            -             -     (2,258)       (906)      (746)       (297)     (4,207)
subsidiaries
Revaluation                              -           99          (578)          -            -         -           -        (479)
Disposals/written off                 (425)           -             -        (320)       (174)         -        (456)     (1,375)
Reclassification                          -            -             -           -           (2)        -           -           (2)
At 31 December 2004                      -        1,145        42,064         638         696        189         951     45,683

Accumulated Depreciation
At 1 January 2004                      179            -              -     2,467        1,050        233         857      4,786
Due to acquisition of subsidiary         -            -              -          -            2          -           -          2
Currency realignment                     -            -              -        (60)         (10)        (8)         (9)       (87)
Charge for the year                      1            -              -       139          136        131         135        542
Disposals/written off                 (180)           -              -      (174)        (156)          -       (388)      (898)
Reclassification                          -          117              -          -            4          -         30        151
Due to the disposal of
                                          -            -             -     (1,856)       (641)      (313)       (248)     (3,058)
subsidiaries
At 31 December 2004                       -         117              -       516          385         43        377       1,438

Net Book Value
At 31 December 2004                       -       1,028        42,064        122          311        146        574      44,245



The leasehold land was revalued by Huizhou Shi Zhengda Certified Public Accountants in year 2004.

Included in property, plant and equipment for the Group are motor vehicles acquired on finance lease agreements,
the net book values as at 31 December 2005 totalled S$281,010 (2004: S$387,574).

The interest rate used to determine the amount of borrowing cost eligible for capitalisation is 5.184% (2004:
5.184%) per annum. The amount of borrowing cost capitalised during the period is S$2,120,882 (2004:
S$918,564).

If the leasehold land stated at revaluation had been included in the financial statements at cost less depreciation,
the net written down amount would have been S$938,837 (2004: S$939,434).
                                    Notes to the Financial Statements (cont’d)
44                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    3.   PROPERTY, PLANT AND EQUIPMENT (CONT’D)

                                          COMPANY                                                              Furniture
                                                                                                                 and           Office
                                                                                                              Equipment      Renovation          Total
                                                                                                                S$’000         S$’000           S$’000
                                          2005
                                          Cost
                                          At 1 January 2005                                                          222             185             407
                                          Additions                                                                   21              21              42
                                          Disposals                                                                   (2)              -              (2)
                                          At 31 December 2005                                                        241             206             447

                                          Accumulated Depreciation
                                          At 1 January 2005                                                           85              39             124
                                          Charge for the year                                                         50              19              69
                                          Disposals                                                                    -               -               -
                                          At 31 December 2005                                                        135              58             193

                                          Net Book Value
                                          At 31 December 2005                                                        106             148             254

                                          2004
                                          Cost
                                          At 1 January 2004                                                           84              46             130
                                          Additions                                                                  138             139             277
                                          At 31 December 2004                                                        222             185             407

                                          Accumulated Depreciation
                                          At 1 January 2004                                                           59              25              84
                                          Charge for the year                                                         26              14              40
                                          At 31 December 2004                                                         85              39             124

                                          Net Book Value
                                          At 31 December 2004                                                        137             146             283


                                         The depreciation charge for the Group is recognised in the following line items of the income statements:


                                                                                                                                 2005            2004
                                                                                                                                S$’000          S$’000

                                          Administrative and marketing expenses                                                        240           542
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                   45




                                                                                                                   China EnerSave annual report 2005
4(a)   INVESTMENT IN SUBSIDIARIES

                                                                                            COMPANY
                                                                                        2005       2004
                                                                                       S$’000     S$’000

       Unquoted shares, net of impairment loss                                              6,756          6,656

       Details of subsidiaries as at 31 December are:-
                                                                         Place of
                                                                        business/    Percentage
                                                                       Country of     of equity       Cost of
       Name of Company                     Principal activities      incorporation      held        investment
                                                                                     2005 2004      2005 2004
                                                                                          %           S$’000
       Held by the Company
       Admiralty Engineering Pte Ltd    Mechanical and electrical      Singapore      100    100 3,341 3,341
                                          engineering services
       Admiralty Technologies Pte Ltd   Maintenance of fire             Singapore      100    100     399    399
                                          prevention and
                                          protection systems
                                          and trading in related
                                          products
       AE Environmental Engineering     Business management            Singapore      100    100     473    473
        Pte Ltd (Formerly known as        and consultancy services
        Feiton Marketing Pte Ltd)         and general wholesale
                                          trade
       Hivern Investments Pte Ltd       Investment holding             Singapore      100    100 1,418 1,418
       Louisson Investments Pte Ltd     Investment holding             Singapore      100    100    50    50
                                          and trading
       EnerSave Power Builders Pte Ltd  General and renovation         Singapore      100    100 2,865 2,865
                                          contractors
       EnerSave Power Pte Ltd           Investment holding            Singapore       100    100       #      #
       Room Interior NZ Limited *       Furniture and home           New Zealand      100    100       1      1
                                          lifestyle products
                                          retailing and trading
       EnerSave Power Broker Limited ** Investment holding            Hong Kong       100    100      ##     ##
       Asia Renewable Energy            Investment holding            Singapore       100      -     100      -
        Private Limited
       Renewable Energy Holdings      Investment holding               Singapore      100       -      #       -
        Private Limited #####
       Held by Admiralty Engineering Pte Ltd
       Admiralty Engineering          Dealing in fire protection        Malaysia       100     90       -       -
        (M) Sdn Bhd +                   and security equipment
                                        and systems
                                    Notes to the Financial Statements (cont’d)
46                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    4(a)   INVESTMENT IN SUBSIDIARIES (CONT’D)

                                                                                                           Place of
                                                                                                          business/
                                                                                                         Country of       Percentage of          Cost of
                                           Name of Company                Principal activities         incorporation       equity held         investment
                                                                                                                          2005     2004       2005     2004
                                                                                                                               %                 S$’000
                                           Held by EnerSave Power Pte Ltd
                                           Richway Investment            Investment holding                Canada             55        55         -          -
                                           Management Limited +++
                                           Richway Investment            Investment holding              Hong Kong            55        55         -          -
                                             Management Limited **
                                           Held by Asia Renewable Energy Private Limited
                                           Dujiangyan EnerSave           Production of electric             China           100           -        -          -
                                           Biomass to Energy Co.,          power and heat with
                                             Ltd###                        biomass
                                           Neijiang EnerSave Biomass     Production of electric             China           100           -        -          -
                                             to Energy Co., Ltd####        power and heat with
                                                                           biomass
                                           Held by Richway Investment Management Limited
                                           Huizhou Richway               Operating of a waste-              China             95        95         -          -
                                             Waste-To-Energy Co., Ltd ++   to-energy power plant
                                                                           and trading of by-
                                                                           products produced by
                                                                           its principal activity
                                           Held by Louisson Investments Pte Ltd
                                           IDS Industries Sdn Bhd +      Trading of electronic            Malaysia          100       100          -          -
                                                                           ballasts and accessories
                                                                                                                                               8,647      8,547
                                           Less: Impairment loss                                                                              (1,891)    (1,891)
                                                                                                                                               6,756      6,656



                                           Subsidiaries audited by other firms of auditors
                                                                                        +++
                                            *     Moores Rowland, New Zealand                    Not required to be audited by the laws of country of
                                                                                                 incorporation
                                                                                        #
                                            **    KTC CPA Limited                                2 ordinary shares of S$1 each fully paid, held by the
                                                                                                 Company
                                            +                                           ##
                                                  C T Kuan & Co                                  2 ordinary shares of HK$1 each fully paid, held by the
                                                                                                 Company
                                            ++                                          ###
                                                  Huizhou Shi Zhengda Certified                   Incorporated on 15 December 2005 and the subsidiary has
                                                  Public Accountants                             not commenced operation
                                                                                        ####
                                                                                                 Incorporated on 22 September 2005 and the subsidiary has
                                                                                                 not commenced operation
                                                                                        #####
                                                                                                 Incorporated on 22 December 2005 and the subsidiary has
                                                                                                 not commenced operation
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                                  47




                                                                                                                                  China EnerSave annual report 2005
4(b)   INTEREST IN ASSOCIATES

                                                                          GROUP                     COMPANY
                                                                     2005       2004             2005      2004
                                                                    S$’000     S$’000           S$’000    S$’000

       Unquoted shares, at cost                                       1,263      1,263                   762         762
       Less: Impairment loss                                           (501)      (501)                    -           -
       Share of post-acquisition results                               (197)      (131)                    -           -
                                                                        565        631                   762         762
       Amounts owing by associates:-
       Non-current
       - Non-trade                                                          -     238                      -           -

       Details of associates as at 31 December are:-

                                                                     Place of
                                                                    business/
                                                                   Country of    Percentage of                  Cost
       Name of Company            Principal activities           incorporation    equity held             of investments
                                                                                 2005         2004        2005         2004
                                                                                          %                    S$’000
       Held by the Company
       Beijing Admiralty Home     Design, assemble,                 China            33          33            762         762
        Products Co. Ltd ^         manufacture furniture
                                   home products and sale of
                                   self made products
                                                                                                               762         762
       Held by subsidiary Louisson Investments Pte Ltd
       Kaizen Materials (S) Pte   Distributor of construction      Singapore         49          49            501         501
        Ltd ^^                     materials and equipment
                                   for industrial use
       Held by subsidiary EnerSave Power Broker Limited
       Richway Energy             Operating of a waste-to-        Hong Kong          48              -           -            -
         Investment (China)        energy plant and trading of
         Limited ^^^               by-products produced by
                                   its principal activity
                                                                                                           1,263       1,263

       ^
              Audited by Great Wall CPAs
       ^^
              Audited by BH Tan & Associates
       ^^^
              Audited by Cachet Certified Public Accountants Limited

       One of the investment in associates in year 2004 has been reclassified to financial assets at fair value
       through profit or loss so as to conform with current year’s presentation.
                                    Notes to the Financial Statements (cont’d)
48                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    4(b)   INTEREST IN ASSOCIATES (CONT’D)

                                           The impairment charge for the Group is recognised in the following line items of the income
                                           statements:

                                                                                                                               2005             2004
                                                                                                                              S$’000           S$’000

                                           Other expenses                                                                              -            501

                                           The financial information of the associates is as follows:
                                                                                                                                       GROUP
                                                                                                                               2005             2004
                                                                                                                              S$’000           S$’000

                                           Assets and liabilities
                                           Total assets                                                                          3,745           3,824

                                           Total liabilities                                                                     1,145           1,109

                                           Results
                                           Revenue                                                                               2,787           2,415

                                           Loss after taxation                                                                    (201)           (194)



                                    5.     OTHER FINANCIAL ASSETS

                                           (a) Available-for-sale financial assets

                                                                                                           GROUP                   COMPANY
                                                                                                   2005             2004       2005        2004
                                                                                                  S$’000           S$’000     S$’000     S$’000
                                                Balance at beginning of financial year
                                                - At cost                                              8,392          6,000       6,000            6,000
                                                - Effect of adoption of FRS 39 on
                                                    1 January 2005 (Note 27)                            (565)             -           -                -
                                                As restated                                            7,827          6,000       6,000            6,000
                                                Addition                                                   -          2,392           -                -
                                                                                                       7,827          8,392       6,000            6,000
                                                Fair value loss transferred to equity                   (830)             -           -                -
                                                Balance at end of financial year                        6,997          8,392       6,000            6,000
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                          49




                                                                                                                          China EnerSave annual report 2005
5.   OTHER FINANCIAL ASSETS (CONT’D)

     (a) Available-for-sale financial assets (cont’d)

        Available-for-sale financial assets include the following:

                                                            GROUP                                 COMPANY
                                                  2005              2004               2005                2004
                                                 S$’000     S$’000       S$’000       S$’000       S$’000       S$’000
                                                 At fair    At fair     At cost       At fair      At fair     At cost
                                                 value       value                    value         value


         Listed equity securities                     997      1,827       2,392              -           -           -
         Unlisted equity securities                 6,000      6,000       6,000          6,000       6,000       6,000
                                                    6,997      7,827       8,392          6,000       6,000       6,000



     (b) Financial assets at fair value through profit or loss

                                                                     GROUP                           COMPANY
                                                             2005             2004               2005       2004
                                                            S$’000           S$’000             S$’000     S$’000

         Balance at beginning of financial year
         - At cost/written down value                          1,237              1,189           1,329             71
         - Effect of adoption of FRS 39 on
             1 January 2005 (Note 27)                            (71)               -             (1,329)            -
         As restated                                           1,166            1,189                  -            71
         Additions                                               772            2,390                  -           426
         Reclassification from associate                            -            2,258                  -         2,258
         Disposals                                              (959)          (1,598)                 -             -
                                                                 979            4,239                  -         2,755
         Impairment loss                                        (183)          (3,002)                 -        (1,426)
         Balance at end of financial year                         796            1,237                  -         1,329
                                    Notes to the Financial Statements (cont’d)
50                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    5.   OTHER FINANCIAL ASSETS (CONT’D)

                                         (b) Financial assets at fair value through profit or loss (cont’d)

                                         Financial assets at fair value through profit or loss include the following:

                                                                                             GROUP                                COMPANY
                                                                                   2005              2004            2005                  2004
                                                                                  S$’000     S$’000       S$’000    S$’000         S$’000       S$’000
                                                                                  At fair    At fair     At cost    At fair        At fair     At cost
                                                                                  value       value                 value           value

                                          Listed equity securities                     709      1,029       1,213             -           -           -
                                          Unlisted equity securities                    87        208       3,282             -       1,329       2,755
                                                                                       796      1,237       4,495             -       1,329       2,755

                                         Current investments and long-term investments as at 1 January 2004 and 31 December 2004 have been
                                         reclassified into “available-for-sale financial assets” and “other financial assets at fair value through
                                         profit or loss” so as to conform to the presentation adopted in 2005. Available-for-sale financial assets
                                         are measured in accordance with the accounting policy as set out in Note 2.5 with effect from 1 January
                                         2005.

                                         The impairment charge for the Group is recognised in the following line items of the income
                                         statements:

                                                                                                                         2005                 2004
                                                                                                                        S$’000                S$’000


                                          Administrative and marketing expenses                                                     178                  -
                                          Other expenses                                                                              -                318
                                                                                                                                    178                318
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                  51




                                                                                                                  China EnerSave annual report 2005
6.   INTANGIBLE ASSETS

                                                                 Goodwill
                                                                    on         Development
                                                               Consolidation       Costs            Total
                                                                  S$’000          S$’000           S$’000
      GROUP
      Cost
      At 1 January 2005                                                   1                -            1
      Due to disposal of subsidiaries                                     -                -            -
      At 31 December 2005                                                 1                -            1

      Amortisation
      At 1 January 2005                                                   -                -            -
      Amortisation charge for the year                                    -                -            -
      At 31 December 2005                                                 -                -            -

      Impairment loss
      At 1 January 2005                                                   -                -            -
      Written off                                                        (1)               -           (1)
      At 31 December 2005                                                (1)               -           (1)

      Amortisation charge for 2004                                       10            148            158

      At 31 December 2005                                                 -                -            -

      At 31 December 2004                                                 1                -            1

     The amortisation and impairment charge is recognised in the following line items of the income
     statements:

                                                                                   2005             2004
                                                                                  S$’000           S$’000

      Administrative and marketing expenses                                                    1            158

7.   INVENTORIES

                                                                                           GROUP
                                                                                   2005             2004
                                                                                  S$’000           S$’000

      Raw materials                                                                      -               76
      Finished goods                                                                  265               336
                                                                                      265               412
      Less: Allowance for stock obsolescence - finished goods                            (1)            (159)
                                                                                      264               253
                                    Notes to the Financial Statements (cont’d)
52                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    8.   CONTRACT WORK-IN-PROGRESS

                                                                                                                               GROUP
                                                                                                                        2005           2004
                                                                                                                       S$’000      S$’000


                                          Costs plus attributable profits                                                70,447         62,560
                                          Less: Progress payments received and receivable                              (66,123)        (64,453)
                                                                                                                         4,324          (1,893)
                                          Comprising:-
                                          Work-in-progress                                                               6,259          1,967
                                          Excess of progress billings over work-in-progress                             (1,935)         (3,860)
                                                                                                                         4,324          (1,893)

                                    9.   TRADE AND OTHER RECEIVABLES

                                                                                                    GROUP                  COMPANY
                                                                                               2005       2004          2005      2004
                                                                                              S$’000     S$’000        S$’000    S$’000

                                          Trade receivables                                     5,407        8,295         303           2,516
                                          Allowance for doubtful receivables                     (102)      (1,066)          -               -
                                          Net receivables                                       5,305        7,229         303           2,516
                                          Tax recoverable                                          29           14           8               -
                                          Other receivables (i)                                 5,207        6,743       3,959           5,458
                                          Deposits                                                256          287          31              99
                                          Prepayments                                          10,036        4,623         279               -
                                          Retention debtors                                       650           34           -               -
                                          Amounts owing by minority shareholders
                                           of a subsidiary                                      2,322       2,275        2,322           2,275
                                          Amounts owing by subsidiaries:-
                                          - Trade                                                    -            -        98           4,026
                                          - Non-trade                                                -            -    18,069          14,744
                                          Amounts owing by associates:-
                                          - Non-trade                                              217          32         217              12
                                                                                               24,022      21,237      25,286          29,130
                                          Less: Receivables more than a year                    (5,634)     (6,702)     (4,353)         (4,109)
                                                                                               18,388      14,535      20,933          25,021

                                          (i) Other receivables                                 5,341       6,875        3,988           5,487
                                          Less: Allowance for doubtful receivables               (134)       (132)         (29)            (29)
                                                                                                5,207       6,743        3,959           5,458

                                         The amounts owing by subsidiaries are unsecured and with no fixed terms of repayment.
                                         Included in amounts owing by subsidiaries is an amount of S$NIL (2004: S$4,392,515) which bears
                                         interest of 7.0% (2004: 7.0%) per annum.
                                         The amounts owing by associates are unsecured, interest free and with no fixed terms of repayment.
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                 53




                                                                                                                 China EnerSave annual report 2005
10.   CASH AND CASH EQUIVALENTS

                                                                      GROUP                COMPANY
                                                         Note    2005       2004        2005      2004
                                                                S$’000     S$’000      S$’000    S$’000

      Cash at bank and in hand                                    4,034      1,772       1,406             72
      Deposits with financial institutions                         1,032      6,337           -          1,004
                                                                  5,066      8,109       1,406          1,076
      Bank overdrafts                                     16     (1,880)      (360)          -              -
                                                                  3,186      7,749       1,406          1,076
      Cash deposits pledged                                           -       (819)          -              -
      Cash and cash equivalents as stated in cash flows            3,186      6,930       1,406          1,076

      Included in the deposits with financial institutions is an amount of S$NIL (2004: S$818,800) pledged to
      a bank for bank facilities granted to a subsidiary.

      The deposits of the Group with financial institutions are renewable on monthly to yearly basis.

      The weighted average effective interest rates per annum relating to cash and cash equivalents excluding
      bank overdrafts, at the balance sheet date for the Group and Company are 3.87% (2004: 1.47%) and
      Nil% (2004: 1.13%) respectively.


11.   SHARE CAPITAL

                                                                                      GROUP AND COMPANY
                                                                                        2005           2004
                                                                                       S$’000      S$’000


       Authorised:-
       2,500,000,000 ordinary shares of S$0.10 each                                     250,000        250,000


       Issued and fully paid:-
       224,852,000 ordinary shares of S$0.10 each                                        22,485         22,485
                                    Notes to the Financial Statements (cont’d)
54                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    12.   EMPLOYEE SHARE OPTIONS

                                          The China EnerSave Limited Employee Share Options Scheme (the “Scheme”) of the Company was
                                          approved and adopted by its members at an Extraordinary General Meeting held on 23 March 2004.
                                          The Scheme is administered by the Company’s Remuneration Committee, comprising three directors,
                                          Chiah Kok Khun, Chou Kong Seng and Tay Wee Kwang.

                                          Other information regarding the Scheme is set out below:

                                          (a) The options vest one year after the grant date.

                                          (b) The options granted expire 9 years for employees and 4 years for non-executive directors after the
                                              vesting date unless they have been cancelled or have lapsed prior to that date.

                                          At the end of the financial year, details of the options granted under the Scheme on the unissued
                                          ordinary shares of S$0.10 each of the Company are as follows:

                                                                                         Lapsed/
                                                             At         Granted         Cancelled   Exercised
                                          Date of         beginning      during           during     during     At end of         Exercise
                                          grant            financial     financial        financial    financial    financial           price       Exercise
                                          of options        year          year             year       year        year           per share      period

                                          05/04/2004       3,940,000               -    2,640,000           -        1,300,000    S$0.225    05/04/2005 to
                                                                                                                                              04/04/2014
                                          05/04/2004         600,000               -      200,000           -         400,000     S$0.225    05/04/2005 to
                                                                                                                                              04/04/2009
                                          01/11/2004         450,000               -      450,000           -                -    S$0.162    01/11/2005 to
                                                                                                                                              31/10/2014

                                                           4,990,000               -    3,290,000           -        1,700,000



                                          The fair value of services received in return for share options granted are measured by reference to the
                                          fair value of share options granted. The estimate of the fair value of the services received is measured
                                          based on a Black-Scholes model.

                                          Date of grant of options                                     05/04/2004          05/04/2004        01/11/2004

                                          Fair value of share options and assumptions

                                          Fair value at measurement date                                 S$0.0947           S$0.0572          S$0.0724
                                          Share price                                                      S$0.23             S$0.23            S$0.17
                                          Exercise price                                                  S$0.225            S$0.225           S$0.162
                                          Expected volatility                                               10%                10%               10%
                                          Expected option life                                            10 years            5 years          10 years
                                          Risk-free interest rate                                           5%                  5%               5%
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                        55




                                                                                                                        China EnerSave annual report 2005
12.   EMPLOYEE SHARE OPTIONS (CONT’D)

      The expected volatility is based on the historical volatility adjusted for any changes to future volatility due
      to publicly available information.

      There are no market conditions associated with the share option grants. Service conditions and non-
      market performance conditions are not taken into account in the grant date fair value measurement of
      the services received.


13.   SHARE PREMIUM

                                                                     GROUP                      COMPANY
                                                             2005             2004          2005       2004
                                                            S$’000           S$’000        S$’000     S$’000

      Balance at beginning                                    19,732           15,433        19,732         15,433
      Premium from issue of shares                                  -           4,592              -         4,592
      Less: Issue expenses                                        (13)           (293)           (13)         (293)
      Balance at end                                          19,719           19,732        19,719         19,732

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


14.   RESERVES/(LOSSES)

                                                                     GROUP                      COMPANY
                                                             2005            2004          2005            2004
                                                            S$’000           S$’000        S$’000         S$’000


       Accumulated losses                                      (6,438)         (7,468)       (3,446)         (3,683)
       Revaluation reserve                                           52               52             -             -
       Share option reserve                                          52           168               52         168
       Currency translation reserve                               259             115                -             -
       Capital reserve arising on consolidation                       -               5              -             -
       Fair value reserve                                      (1,395)                 -             -             -
                                                               (7,470)         (7,128)       (3,394)         (3,515)
                                    Notes to the Financial Statements (cont’d)
56                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    14.   RESERVES/(LOSSES) (CONT’D)

                                          The currency translation reserve comprises:

                                          (a) foreign exchange differences arising from the translation of the financial statements of foreign
                                              operations whose functional currencies are different from the functional currency of the Company;

                                          (b) the exchange differences on monetary items which form part of the Group’s net investment in the
                                              foreign operation, provided certain conditions are met.

                                          The fair value and revaluation reserves include the cumulative net change in the fair value of available-
                                          for-sale investments until the investment is derecognised, and the surpluses arising from the revaluation
                                          of leasehold land.

                                          The share option reserve comprises the cumulative value of employee services received for the issue of
                                          share options. When the option is exercised, the amount from the share option reserve is transferred to
                                          share premium. When the share options expire, the amount from the share option reserve is transferred
                                          to accumulated profits.

                                          The accumulated losses of the Group include the amount of S$66,289 (2004: S$NIL) attributable to
                                          associates.


                                    15.   TRADE AND OTHER PAYABLES

                                                                                                      GROUP                     COMPANY
                                                                                              2005            2004          2005          2004
                                                                                             S$’000           S$’000        S$’000        S$’000


                                           Trade payables                                        2,073           2,305                3            3
                                           Other payables                                      11,157           11,233               56      1,611
                                           Accrued contract costs                                1,175           1,410                -            -
                                           Accrued operating expenses                            1,983            964           179           418
                                           Amounts owing to subsidiaries:-
                                           - Trade                                                     -                -             -            1
                                           - Non-trade                                                 -                -      1,382         4,479
                                           Amounts owing to associates:-
                                           - Non-trade                                                75               92             -            -
                                                                                               16,463           16,004         1,620         6,512


                                          The amounts owing to subsidiaries are unsecured and with no fixed terms of repayment.

                                          The amounts owing to associates are unsecured, interest-free and with no fixed terms of repayment.
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                  57




                                                                                                                  China EnerSave annual report 2005
16.   INTEREST-BEARING LIABILITIES

                                                                                            GROUP
                                                                          Note     2005             2004
                                                                                   $’000            $’000
      Non-current liabilities
      Finance lease liabilities                                                         200              291
      Unsecured long-term loans                                                      35,516           27,476
                                                                                     35,716           27,767
      Current liabilities
      Finance lease liabilities                                                          77               83
      Unsecured bank overdrafts                                            10         1,880              360
      Secured short-term loans                                                            -            2,169
      Unsecured short-term loans                                                      1,569                -
      Unsecured long-term loans                                                       5,782                -
      Trust receipts                                                                  1,098                -
                                                                                     10,406            2,612

      Total borrowings                                                               46,122           30,379

      Maturity of liabilities (excluding finance lease liabilities)

                                                                                            GROUP
                                                                                   2005             2004
                                                                                   $’000            $’000

      Within 1 year                                                                  10,329            2,529
      After 1 year but within 5 years                                                28,082           24,960
      After 5 years                                                                   7,434            2,516
      Total borrowings                                                               45,845           30,005

      Finance lease liabilities

      At 31 December, the Group had obligations under finance leases that are repayable as follows:-

                          Payments       Interest    Principal       Payments    Interest       Principal
                            2005           2005        2005            2004        2004           2004
                           S$’000         S$’000      S$’000          S$’000      S$’000         S$’000

      Within 1 year                 91          14           77             98             15                83

      After 1 year but
       within 5 years              234          34          200            342             51               291
      After 5 years                  -           -            -              -              -                 -
                                   234          34          200            342             51               291

                                   325          48          277            440             66               374
                                    Notes to the Financial Statements (cont’d)
58                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    16.   INTEREST-BEARING LIABILITIES (CONT’D)

                                          The weighted average effective interest rate is 5.99% (2004: 5.98%).

                                          As at 31 December 2004

                                          a) The term loans of S$1,638,854 were secured by cash deposits amounting to S$818,800. Interest
                                             was charged at 5.418% per annum.

                                          b) The term loan of S$530,099 was secured by listed equity securities. Interest was charged at 0.75%
                                             per annum below the average prime lending rates of the three local banks.


                                    17.   DEFERRED TAXATION

                                          GROUP

                                          Movements in deferred tax assets and liabilities (prior to offsetting of balances) during the year are as
                                          follows:

                                                                                                                           (Charged)/
                                                                                                                           Credited to
                                                                                                                At           Income             At
                                                                                                            1 January      statement       31 December
                                                                                                               2005         (Note 23)          2005
                                                                                                              S$’000          S$’000          S$’000

                                          Deferred tax liabilities
                                          Property, plant and equipment                                             (38)           (14)            (52)

                                          Deferred tax assets
                                          Other items                                                                 -              5              5
                                          Tax value of loss carry-forward                                             -            390            390
                                                                                                                      -            395            395



                                          Deferred tax liabilities and assets 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 fiscal tax authority.
                                          The amounts determined after appropriate offsetting are included in the balance sheet as follows:-

                                                                                                                              2005            2004
                                                                                                                             S$’000          S$’000

                                          Deferred tax assets                                                                      395                -
                                          Deferred tax liabilities                                                                  (52)            (38)
                                                                                                                                   343              (38)
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                    59




                                                                                                                    China EnerSave annual report 2005
17.   DEFERRED TAXATION (CONT’D)

      Certain deferred tax assets have not been recognised in the balance sheet as it is not probable that future
      taxable profit will be available against which the Group can utilise the benefits. Such unrecognised
      deferred tax assets are as follows:-

      Unrecognised deferred tax assets

                                                                                        2005             2004
                                                                                       S$’000           S$’000

      Tax losses                                                                                 -           641
      Capital allowance                                                                          -             1
                                                                                                 -           642

18.   REVENUE

      GROUP

      Revenue represents trading sales and services after allowance for goods returned and trade discounts,
      revenue recognised on contract works under the percentage of completion method, dividend income
      and proceeds from sale of investments and excluding intra-group transactions.

                                                                                                GROUP
                                                                                        2005             2004
                                                                                       S$’000           S$’000

      Sale of goods                                                                        4,234           6,913
      Revenue recognised on contract works                                                10,967          19,140
      Rendering of services                                                                2,270           2,278
      Dividend income                                                                         11              38
      Sale of listed equity securities                                                       780           3,466
      Accounting and administration fees                                                      67               4
      Corporate guarantee fees                                                                30               -
      Rental                                                                                   -              24
      Management fees                                                                          -              13
                                                                                          18,359          31,876

19.   OTHER REVENUE

                                                                                                GROUP
                                                                                        2005             2004
                                                                                       S$’000           S$’000

      Interest income:
      - Banks                                                                                  62             15
      - Others                                                                                 50              -
      Other income                                                                             73            654
                                                                                              185            669
                                    Notes to the Financial Statements (cont’d)
60                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    20.   STAFF COSTS

                                                                                                                            GROUP
                                                                                                                    2005             2004
                                                                                                                   S$’000           S$’000

                                          Salaries and allowances                                                      2,299           4,351
                                          Bonus                                                                           98             413
                                          CPF/SOCSO                                                                      207             309
                                          Value of employee services received for issue of share options                   -             168
                                          Share options cancelled or lapsed                                             (116)              -
                                          Medical fees                                                                    11              13
                                          Recruitment                                                                      2              10
                                          Staff benefits                                                                   21               2
                                          Staff welfare and training                                                      70              96
                                          Temporary staff                                                                  -              95
                                          Levy                                                                            33              24
                                                                                                                       2,625           5,481

                                          Directors’ remuneration:
                                          - Directors of the Company                                                     832             442
                                          - Other directors of subsidiaries                                              268           1,007
                                          CPF - directors of the Company                                                  32              10
                                                - other directors of subsidiaries                                         14              58
                                                                                                                       1,146           1,517

                                                                                                                       3,771           6,998

                                          The number of persons employed at the end of the financial year:-

                                          Full time (include salaried directors)                                        147             144

                                          The key management personnel comprises directors of the Group and Company and their compensations
                                          are disclosed in the above note.

                                    21.   FINANCE COSTS

                                                                                                                            GROUP
                                                                                                                    2005             2004
                                                                                                                   S$’000           S$’000

                                          Interest on trust receipts                                                      14              10
                                          Interest on bank overdraft and term loans                                       82              68
                                          Interest on finance leases                                                       17              30
                                          Others                                                                           4               -
                                                                                                                         117             108
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                    61




                                                                                                                    China EnerSave annual report 2005
22.   PROFIT/(LOSS) FROM OPERATIONS BEFORE TAXATION

      The following items have been included in arriving at profit/(loss) from operations:
                                                                                               GROUP
                                                                                      2005              2004
                                                                                     S$’000            S$’000

      Allowance for stock obsolescence                                                          -         1,812
      Amortisation of development expenditure                                                   -           148
      Amortisation of goodwill                                                                  -            10
      Bad debts written off                                                                    31             -
      Non-audit fees paid to auditors:
      - Auditors of the Company                                                                 -           10
      Depreciation of property, plant and equipment                                           240          542
      Directors’ fees                                                                         195          192
      Directors’ remuneration other than fees:
      - Directors of the Company                                                              864           452
      - Other directors of subsidiaries                                                       282         1,065
      Exchange loss, net                                                                         -          245
      Loss on disposal of inventories                                                         107              -
      Impairment loss of listed equity securities                                             133           178
      Impairment loss of associated company                                                      -          501
      Impairment loss of unlisted equity securities                                             50          140
      Operating lease expenses                                                                105             30
      Staff costs                                                                           2,625         5,481
      Property, plant and equipment written off                                                  1          400
      Exchange gain, net                                                                       (90)            -
      Gain on disposal of property, plant and equipment                                        (39)          (77)
      Dividend income from investments                                                           -           (38)
      Gain on disposal of subsidiaries                                                           -       (1,358)
      Gain on disposal of unlisted equity securities                                           (17)        (229)
      Loss on disposal of listed equity securities                                            178           203
      Reversal of allowance of doubtful debts                                                  (12)           (9)
                                    Notes to the Financial Statements (cont’d)
62                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    23.   TAXATION

                                                                                                                                  GROUP
                                                                                                                          2005             2004
                                                                                                                         S$’000           S$’000

                                          Tax expense attributable to profit/(loss) is made up of:

                                          Current tax
                                          Current year                                                                            35           489
                                          Under/(Over) provision in prior years                                                   31             (8)
                                                                                                                                  66           481
                                          Deferred taxation
                                          Movement in temporary differences                                                   (405)                -
                                          Under provision in prior years                                                        24                 -
                                                                                                                              (381)                -

                                          Tax (credit)/expense                                                                (315)            481

                                          The tax expense on the results for the financial year differs from the amount of income tax determined by
                                          applying the Singapore standard rate of income tax to profit/(loss) before taxation due to the following
                                          factors:-

                                                                                                                                  GROUP
                                                                                                                          2005            2004
                                                                                                                         S$’000           S$’000


                                          Profit/(Loss) before tax                                                             557            (165)

                                          Tax at the applicable tax rate of 20%                                               111              (33)
                                          Tax effect of:
                                          - non-deductible expense                                                            152           1,204
                                          - deferred tax benefits not recognised                                                  -            268
                                          - utilisation of deferred tax benefits not previously recognised                    (181)           (861)
                                          Effects of different tax rates in other countries                                     12               (2)
                                          Tax exemptions                                                                       (46)            (73)
                                          Under/(Over) provision of income tax in prior years                                   55               (8)
                                          Deferred tax benefits recognised                                                    (386)                -
                                          Others                                                                               (32)            (14)
                                          Tax (credit)/expense                                                               (315)            481
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                  63




                                                                                                                  China EnerSave annual report 2005
24.   EARNINGS PER SHARE

      (a) Basic earnings per share

         Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the
         Company by the weighted average number of ordinary shares outstanding during the financial
         year.

                                                                                       2005          2004
                                                                                      S$’000        S$’000

          Net profit attributable to members of the Company                                1,101             233

                                                                                       2005          2004
                                                                                      No. of        No. of
                                                                                      shares        shares
                                                                                      (’000)        (’000)

          Weighted average number of ordinary shares in issue for basic
          earnings per share                                                            224,852       212,519

                                                                                       2005          2004

          Basic earnings per share (cents per share)                                       0.49           0.11

         The comparative earnings per share figures for 2004 has been adjusted to include the effects of
         adopting the revised FRS (Note 27 (b)).

      (b) Diluted earnings per share

         For the purpose of calculating diluted earnings per share, the weighted average number of ordinary
         shares in issue is adjusted to take into account the dilutive effect arising from the warrant.
                                    Notes to the Financial Statements (cont’d)
64                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    24.   EARNINGS PER SHARE (CONT’D)

                                          (b) Diluted earnings per share (cont’d)

                                             The effect of the exercise of warrant on the weighted average number of ordinary shares in issue is
                                             as follows:

                                                                                                                                2005          2004
                                                                                                                               S$’000        S$’000

                                              Net profit attributable to members of the Company                                     1,101            233

                                                                                                                                2005          2004
                                                                                                                               No. of        No. of
                                                                                                                               shares        shares
                                                                                                                               (’000)        (’000)
                                              Weighted average number of ordinary shares outstanding for
                                              basic earnings per share                                                          224,852       212,519

                                              Adjustment for assumed conversion from warrant                                     13,301             -
                                                                                                                                238,153       212,519

                                                                                                                               2005          2004

                                              Diluted earnings per share (cents per share)                                          0.46          0.11



                                             Employee share options to purchase 1,700,000 ordinary shares at S$0.225 per share were outstanding
                                             during the year but were not included in the computation of the diluted earnings per share because
                                             these options were antidilutive. The options which expire on 04/04/2014 and 04/04/2009, were still
                                             outstanding as at 31 December 2005.

                                    25.   OPERATING LEASE COMMITMENTS

                                                                                                          GROUP                    COMPANY
                                                                                                 2005             2004          2005         2004
                                                                                                 S$’000           S$’000       S$’000        S$’000


                                           Lease payments due within 1 year                             292              155           111          111


                                           Lease payments due after 1 year but within 5 years           173              177            37          148
26.   SEGMENTAL INFORMATION
                                                                                                                                                             31 DECEMBER 2005




      BY INDUSTRY                                                                                                                Consolidated
                                      Engineering        Power          Manufacturing        Others            Eliminations          Total
                                     2005    2004     2005   2004       2005    2004      2005    2004        2005     2004     2005     2004
                                    S$’000   S$’000   S$’000 S$’000     S$’000   S$’000   S$’000   S$’000    S$’000   S$’000   S$’000     S$’000
      Revenue
      Sales to third parties        18,238   32,576       -         -        -   2,085      121     6,271         -   (9,056) 18,359      31,876
      Inter-segment revenue          4,432    1,884       -         -        -     199    1,984     3,736    (6,416) (5,819)       -           -
      Total revenue                 22,670   34,460       -         -        -   2,284    2,105    10,007    (6,416) (14,875) 18,359      31,876

      Result
      Segment profit/(loss)           1,048    2,688       -         -        -    (337)    (308)   (2,408)                       740          (57)

      Unallocated items (net)                                                                                                        -          -

      Profit/(Loss) from
       operations                                                                                                                740          (57)

      Finance costs                                                                                                              (117)      (108)
      Share of results of an
        associated company                                                                                                       (66)          -
      Taxation                                                                                                                   315        (481)
      Profit/(Loss) for the year
        before minority interests                                                                                                872        (646)

      Minority interests                                                                                                         229         879

      Net profit for the year                                                                                                   1,101         233
                                                                                                                                                                                Notes to the Financial Statements (cont’d)




                                                                                                                         China EnerSave annual report 2005
                                                                                                                                                             65
                                                                                                        China EnerSave annual report 2005




                                                                                                                                            66




26.   SEGMENTAL INFORMATION (CONT’D)
                                                                                                                                            31 DECEMBER 2005




      BY INDUSTRY                               Engineering      Power       Manufacturing     Others    Consolidated Total
                                                2005   2004   2005   2004     2005   2004   2005   2004   2005      2004
                                               S$’000 S$’000 S$’000 S$’000   S$’000 S$’000 S$’000 S$’000 S$’000    S$’000

      Other Segmental Information
      Segment assets                           17,472 18,061 66,793 49,655        -      - 15,535    18,594    99,800      86,310

      Unallocated assets                                                                                          343           -
      Consolidated total assets                                                                               100,143      86,310

      Segment liabilities                      11,848 10,645 52,362 37,537        -      -    310     2,061    64,520      50,243

      Unallocated liabilities                                                                                      59         155

      Consolidated total liabilities                                                                           64,579      50,398

      Capital expenditure                         75    401 10,020 34,702         -      2     42      424     10,137      35,529

      Depreciation and amortisation expenses     168    198       -      -        -    234     72      268        240         700

      Impairment loss                            183    819       -      -        -      -       -        -       183         819
                                                                                                                                                               Notes to the Financial Statements (cont’d)
                                                                                                                                                                 31 DECEMBER 2005




26.   SEGMENTAL INFORMATION (CONT’D)




      BY GEOGRAPHICAL                  Singapore              Asia                 Others                  Eliminations         Consolidated Total
      LOCATION
                                     2005      2004       2005      2004        2005         2004         2005       2004         2005         2004
                                    S$’000    S$’000     S$’000    S$’000      S$’000       S$’000       S$’000     S$’000       S$’000       S$’000

      Revenue
      Sales to third parties         13,109    19,848      5,165      21,001        85           83            -     (9,056)       18,359      31,876
      Inter-segment revenue           2,175     5,593      4,241         226         -            -       (6,416)    (5,819)            -           -
      Total revenue                  15,284    25,441      9,406      21,227        85           83       (6,416)   (14,875)       18,359      31,876



      Other Segmental Information

      Segment assets                 63,541    36,693     67,278     102,553        75         624       (30,751)   (53,560)     100,143       86,310

      Capital expenditure              117         718    10,020      34,807            -            4         -          -        10,137      35,529
                                                                                                                                                                                    Notes to the Financial Statements (cont’d)




                                                                                                                             China EnerSave annual report 2005
                                                                                                                                                                 67
                                    Notes to the Financial Statements (cont’d)
68                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    27.   CHANGES IN ACCOUNTING POLICIES

                                          The accounting policies set out in Note 2 have been applied in preparing the financial statements for the
                                          year ended 31 December 2005.

                                          The effects on adoption of the following FRS in 2005 are set out below:

                                          (a) FRS 39 Financial Instruments: Recognition and Measurement

                                             Classification and consequential accounting for financial assets and financial liabilities

                                             (i) Previously, the Group’s equity investments, which were intended for sale in the short-term, were
                                                 stated at the lower of cost and market value on an aggregated portfolio basis, with changes in
                                                 market value included in the income statement. In accordance with FRS 39, these investments
                                                 are now classified as “financial assets at fair value through profit and loss” and are initially
                                                 recognised at fair value and subsequently re-measured to fair value at the balance sheet date
                                                 with all gains and losses recognised in income statement in the period in which the change in
                                                 fair value arises. This change was effected prospectively from 1 January 2005 and consequently
                                                 affected the following balance sheet items as at 1 January 2005.

                                                                                                                         GROUP         COMPANY
                                                                                                                         S$’000         S$’000

                                                 Increase/(decrease) in:
                                                 Financial assets at fair value through profit or loss                           (71)       (1,329)
                                                 Accumulated losses                                                             (71)       (1,329)



                                             (ii) Under FRS 39, the investments in equity interests of other companies are classified as “available-
                                                  for-sale financial assets” and are initially recognised at fair value and subsequently measured at
                                                  fair value at the balance sheet date with all gains and losses other than impairment loss taken
                                                  to equity. Impairment losses are taken to income statement in the period it arises. On disposal,
                                                  gains and losses previously taken to equity are included in the income statement.

                                                 The change was effected prospectively from 1 January 2005 and consequently affected the
                                                 following balance sheet items as at 1 January 2005.

                                                                                                                                        GROUP
                                                                                                                                        S$’000

                                                 Increase/(decrease) in:
                                                 Available-for-sale financial assets (non-current)                                            (565)
                                                 Fair value reserve                                                                          (565)
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                69




                                                                                                                China EnerSave annual report 2005
27.   CHANGES IN ACCOUNTING POLICIES (CONT’D)

      (b) FRS 102 Share-based Payments

         Previously, the provision of share options to employees did not result in any charge in the income
         statement. The Group and Company recognised an increase in share capital and share premium
         when the options were exercised. On adoption of FRS 102, an expense is recognised in the income
         statement for share options issued with a corresponding increase in the share option reserve.

         This change was affected restropectively for share option granted after 22 November 2002 and not
         yet vested by 1 January 2005. Consequently, the following previously reported balances as at/for the
         year ended 31 December 2004 were adjusted.

                                                                                               GROUP AND
                                                                                                COMPANY
                                                                                                  S$’000

         Increase/(decrease) in:
         Accumulated losses                                                                           (168)
         Share option reserve                                                                          168

         Administrative and marketing expenses                                                          168
         Total profit                                                                                   (168)
         Basic earnings per share (cents per share)                                                   (0.08)
         Diluted earnings per share (cents per share)                                                 (0.08)



      (c) Future changes in FRS

         The Group has not applied the new or amended standards and interpretations that have been issued
         as of balance sheet date but are not yet effective.

         The following new or amended standards and interpretations do not apply to the activities of the
         Group:

         FRS 40                       Investment Property
         FRS 106                      Exploration for and Evaluation of Mineral Resources
         FRS 19 (Amendment)           Employee Benefits – Actuarial gains and losses, group plan and
                                         disclosures
         FRS 39 (Amendment)           Financial Instruments: Recognition and Measurement – Cash flow hedge
                                         accounting of forecast intragroup transactions
         INT FRS 105                  Rights to Interests arising from Decommissioning, Restoration and
                                         Environmental Rehabilitation Funds

         The Group expects the adoption of INT FRS 104 – Determining whether an Arrangement contains
         a Lease will not have a significant impact on the financial statements in the period of initial
         application.
                                    Notes to the Financial Statements (cont’d)
70                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    28.   DIRECTORS’ REMUNERATION

                                          Number of directors of the Company in remuneration bands is as follows:-
                                                                                                                          2005            2004

                                          S$500,000 and above                                                                      1                -
                                          S$250,000 to below S$500,000                                                             1                1
                                          Below S$250,000                                                                          3                5
                                                                                                                                   5                6



                                    29.   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.

                                          Other than disclosed elsewhere in the financial statements, the transactions with related parties are as
                                          follows:

                                                                                                                                  GROUP
                                                                                                                          2005             2004
                                                                                                                         S$’000           S$’000

                                          Rental from associated companies                                                         -               13

                                          Administration and accounting fees from associated companies                             -                9

                                          Interest income from associated companies                                                -                1



                                          Transactions with key management personnel

                                          Directors of the Company also participate in the China EnerSave Limited Employee Share Option Scheme.
                                          No share options (2004: 1,900,000) were granted to the directors of the Company during the year. The
                                          share options that were granted in 2004 were on the same terms and conditions as those offered to
                                          other employees of the Company as described in Note 12. At the balance sheet date, 1,700,000 (2004:
                                          1,900,000) of those share options were outstanding.
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                        71




                                                                                                                        China EnerSave annual report 2005
30.   CONTINGENT LIABILITY (UNSECURED)

      The Company has given corporate guarantees against banking facilities of its subsidiaries totalling:-



                                                                                           2005              2004
                                                                                          S$’000            S$’000

      Corporate Guarantees                                                                    11,773          17,050



31.   CAPITAL COMMITMENTS

      Capital expenditure contracted for but not provided in the financial statements:-

                                                                                                    GROUP
                                                                                            2005             2004
                                                                                           S$’000           S$’000

      Property, plant and equipment                                                           14,665          20,130



32.   FINANCIAL INSTRUMENTS

      Financial risk management objectives and policies

      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 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. Management has a credit
      policy in place and the exposure to credit risk is monitored on an ongoing basis. The Group ensure that
      sales of products and services are made to customers with an appropriate credit history.

      The Group cash and fixed deposits are placed with banks and financial institutions which are
      regulated.

      At balance sheet date, there is no significant concentration of credit risk. The maximum exposure to
      credit risk is represented by the carrying amount of each financial asset in the balance sheet.
                                    Notes to the Financial Statements (cont’d)
72                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    32.   FINANCIAL INSTRUMENTS (CONT’D)

                                          Interest rate risk

                                          The Group’s exposure to changes in interest rate 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.

                                          The Group’s interest rate risk mainly arises from the bank borrowings. The Group’s policy is to obtain
                                          the most favourable interest rates available without increasing its interest rate exposure. The Group has
                                          also maintained at least 80% of its borrowing in fixed rate instruments.

                                          Information relating to the Group’s interest rate exposure is also disclosed in the notes on the Group’s
                                          borrowings, including finance lease arrangement.

                                          Foreign currency risk

                                          The Group incurs foreign currency risk on sales, purchases, borrowing and loan to subsidiaries that
                                          are denominated in a currency other than Singapore dollar. The currencies giving rise to this risk are
                                          primarily US dollar and Chinese Yuan.

                                          The Group does not have any formal hedging policy against foreign exchange fluctuations. However,
                                          the Group continuously monitor the exchange rate of the major currencies and ensure net exposure
                                          is kept to an acceptable level by buying or selling foreign currencies at spot rate, where necessary, to
                                          address short term inbalance.

                                          Effective interest rates and repricing/maturing analysis

                                                                                 Effective
                                                                                 Interest                   Within         1 to 5         After
                                          GROUP                                    Rate        Total        1 year          years        5 years
                                                                                              S$’000        S$’000         S$’000        S$’000
                                          2005
                                          Cash and cash equivalents               3.87%            1,032        1,032             -             -
                                          Unsecured short-term loans              6.51%           (1,569)      (1,569)            -             -
                                          Unsecured long-term loans               5.18%         (41,298)       (5,782)      (28,083)       (7,433)
                                          Finance lease liabilities               5.99%             (277)         (77)         (200)            -
                                          Trust receipt                           5.30%           (1,098)      (1,098)            -             -
                                          Bank overdrafts                         5.00%           (1,880)      (1,880)            -             -
                                                                                                (45,090)       (9,374)      (28,283)       (7,433)
                                          2004
                                          Cash and cash equivalents               1.47%            6,337        6,337             -             -
                                          Secured short-term loans                5.08%           (2,169)      (2,169)            -             -
                                          Unsecured long-term loans               5.23%         (27,476)            -       (24,960)       (2,516)
                                          Finance lease liabilities               6.30%             (374)         (83)         (291)            -
                                          Bank overdrafts                         5.60%             (360)        (360)            -             -
                                                                                                (24,042)        3,725       (25,251)       (2,516)
Notes to the Financial Statements (cont’d)
31 DECEMBER 2005                                                                                                   73




                                                                                                                   China EnerSave annual report 2005
32.   FINANCIAL INSTRUMENTS (CONT’D)

      Estimating the fair values

      Securities

      Fair value is based on quoted market prices at the balance sheet date without any deduction for
      transaction costs.

      Interest-bearing loans and borrowings

      The carrying amounts of current borrowings approximates their fair values. The carrying amounts and
      fair values of non-current borrowings are as follow:


      GROUP
                                                           Carrying amounts                 Fair values
                                                           2005        2004             2005          2004
                                                          S$’000      S$’000           S$’000        S$’000

      Bank borrowings                                         35,516        27,476        34,704        26,913
      Finance lease liabilities                                  200           291           211           300
                                                              35,716        27,767        34,915        27,213

      The fair values are determined from a discounted cash flow analysis, using a discount rate based upon the
      borrowing rates which the directors expect would be available to the Group at the balance sheet date.


33.   DIVIDENDS

      The directors have proposed a first and final dividend of 0.01 cents (one tier) per ordinary shares in
      respect of the financial year ended 31 December 2005.

34.   ACCOUNTING ESTIMATES AND JUDGEMENT

      Management discussed with the Audit Committee the development, selection and disclosure of the
      Group and Company’s critical accounting policies and estimates, and the application of these policies
      and estimates.

      Judgement in applying the entity’s accounting policies

      Impairment of investments in financial assets

      The Group follows the guidance of FRS 39 (revised) on determining when an investment is other-than-
      temporary impaired. This determination requires significant judgement, the Group evaluates, among
      other factors, the duration and extent to which the fair value of an investment is less than its cost; the
      financial health and near-term business outlook for the investee, including factors such as industry and
      sector performance, changes in technology and operational and financing cash flow.
                                    Notes to the Financial Statements (cont’d)
74                                  31 DECEMBER 2005
China EnerSave annual report 2005




                                    35.   COMPARATIVE FIGURES

                                          Comparatives in the financial statements have been changed from the previous year due to the changes
                                          in accounting policies as described in Note 27 and to be consistent with current year’s presentation.


                                    36.   SUBSEQUENT EVENTS

                                          Pursuant to the Extraordinary General Meeting held on 23 December 2005, approval has been given
                                          to the Directors to create and issue, from time to time, to Value Asset Management Limited (“Value
                                          Capital”) unsecured non-interest bearing notes due 2011 with an aggregate principal amount of up to
                                          S$30,000,000 in six equal tranches of a principal amount of S$5,000,000 per tranche (each a “Tranche”)
                                          and each tranche comprising five equal sub-tranches of S$1,000,000 per sub-tranche (collectively the
                                          “Notes”) and such Notes shall be convertible at the option of the holder into ordinary shares of S$0.10
                                          each in the share capital of the Company, either at 130% of the average of the traded weighted average
                                          prices per share for the 20 business days immediately preceding the closing date of the latest first sub-
                                          tranche notes, or 90% of the average of any five consecutive closing prices per share as selected by the
                                          relevant noteholder during the 20 business days immediately preceding the relevant conversion date.

                                          As at 10 February 2006, Value Capital has subscribed for the first and second sub-tranches of Tranche 1
                                          Note amounting in aggregate to S$2,000,000. It has converted to date S$2,000,000 to new shares in
                                          the capital of the Company. To date, the aggregate number of new shares allotted to Value Capital is
                                          16,703,172 ordinary shares.
Corporate Governance
                                                                                                                  75




                                                                                                                  China EnerSave annual report 2005
China EnerSave Limited (“the Company”) is committed to high standard of corporate governance to ensure
effective self-regulation practices are in place to enhance corporate performance and accountability.

This report outlines the Company’s main corporate governance practices with references to the principles of the
Code of Corporate Governance (“the Code”) which form part of the Continuing Obligation of the Singapore
Exchange Securities Trading Limited (“SGX-ST”)’s Listing Manual.


THE CODE
The Code is divided into four main sections, namely:
(A) Board Matters
(B) Remuneration Matters
(C) Accountability and Audit
(D) Communication with Shareholders


(A)    BOARD MATTERS

       BOARD’S CONDUCT OF ITS AFFAIRS

       Principle 1: Every company should be headed by an effective Board to lead and control the
       company.

       The Board of Directors (“the Board”) constitutes with majority of non-executive Directors, all having
       the right core competencies and diversity of experience to enable them to lead and contribute to the
       Company effectively.

       The principal functions of the Board are:

       1. reviewing corporate strategy, business plans, key operational initiatives, major investment
          commitments and funding initiatives, and major acquisitions and disposals;

       2. reviewed business results and overseeing the business conduct and affairs of the Company and of
          EnerSave Group (“the Group”) through the management;

       3. reviewing and approving the financial results, and approving any interim dividend and recommendation
          of final dividend;

       4. identifying major risks, and assessing the internal controls and internal risk management processes;

       5. ensuring regulatory compliance, and approving announcements, releases, circulars and other
          reporting of the Company;

       6. approving the nominations to the Board of directors by Nominating Committee, and endorsing the
          appointments of management team and/or external auditors; and

       7. reviewing and approving the remuneration packages for the Board and key executives.
                                    Corporate Governance (cont’d)
76
China EnerSave annual report 2005




                                      The Board conducts at least two regular scheduled meetings a year. Ad-hoc meetings are convened
                                      when circumstances require. The Articles of the Company permit the Board to hold its meeting via
                                      telephone conference and other electronic or telegraphic means. Between meetings, any decision which
                                      has to be made by the Board on an urgent basis, may be approved by the way of written resolutions of
                                      the Board. The attendance of the Directors at meetings of the Board, as well as the frequency of such
                                      meetings, in respect of the financial year 2005 is as follows:

                                                                                                         Number of Board
                                       Name of director                                                   Meetings held           Attendance
                                       Chou Kong Seng (Chairman)                                                  4                    4
                                       Chiah Kok Khun                                                             4                    4
                                       How Peck Huat                                                              4                    4
                                       Tan Chuan Thye*                                                            4                    1
                                       Koo Ah Seang                                                               4                    4
                                       Tay Wee Kwang                                                              4                    4

                                      *Resigned on 22 June 2005

                                      To assist the Board in carrying out its responsibilities, the Board has delegated specific responsibilities to
                                      4 subcommittees including an Executive Committee, an Audit Committee, Nominating Committee and
                                      Remuneration Committee.

                                      The Executive Committee (ExCo) comprises the following members:

                                      Name of director / executive                   Appointment
                                      Koo Ah Seang (Chairman)                        Chief Executive Officer
                                      Tay Wee Kwang (Member)                         Executive Director
                                      Tan Fong Nee (Member)                          Financial Controller

                                      The ExCo is entrusted with the conduct of the Group’s business and affairs, in line with the overall
                                      strategy set by the Board. The ExCo meets regularly and on such other occasions where necessary.

                                      Newly appointed Directors are briefed by Management on the business activities of the Group and its
                                      strategic directions. In addition, Directors also have the opportunity to visit the Group’s operational
                                      facilities to gain a better understanding of the Group’s business operations.


                                      BOARD COMPOSITION AND BALANCE

                                      Principle 2: There should be a strong and independent element on the Board, which is able
                                      to exercise objective judgement on corporate affairs independently, in particular, from
                                      Management. No individual or small group of individuals should be allowed to dominate the
                                      Board’s decision making.

                                      As at the date of this report, the Board comprises five directors of which three are independent directors.
                                      They are Mr Chou Kong Seng, Mr How Peck Huat and Mr Chiah Kok Khun.
Corporate Governance (cont’d)
                                                                                                              77




                                                                                                              China EnerSave annual report 2005
  The Board considers the current board size as adequate for its present operations. As independent and
  non-executive directors make up almost two-thirds of the Board and the current Board of directors are
  capable in providing the necessary expertise to meet the company’s needs and that no individual or
  smaller group of individuals dominate the Board’s decision-making process.

  The profile of each Director and other relevant information as at the date of this report are set out on
  Pages 5 of this Annual Report.


  CHAIRMAN AND CHIEF EXECUTIVE OFFICER

  Principle 3: There should be a clear division of responsibilities at the top of the company – the
  working of the Board and the executive responsibility of the company’s business – which will
  ensure a balance of power and authority, such that no one individual represents a considerable
  concentration of power.

  There is a clear separation between the roles and responsibilities of the Chairman and the Chief
  Executive Office (“CEO”) of the Group. The Chairman, Mr Chou Kong Seng, is a non-executive director
  responsible for the Board and is free to act independently in the best interests of the Group. The CEO,
  Mr. Koo Ah Seang is an executive director, who is responsible for the business directions and operational
  decisions of the Group. The Chairman and CEO are not related.

  The Chairman ensures that Board meetings are held as and when it is necessary. He also prepares the
  Board meeting agenda in consultation with the CEO. The Chairman reviews most Board papers before
  they are presented to the Board and ensures that Board members are provided with complete, adequate
  and timely information. The Chairman assists to ensure procedures are introduced to comply with the
  Code.

  BOARD MEMBERSHIP

  Principle 4: There should be a formal and transparent process for the appointment of new
  directors to the Board. As a principle of good corporate governance, all directors should be
  required to submit themselves for re-nomination and re-election at regular intervals.

  The Nominating Committee comprises the following directors:

  Mr How Peck Huat              (Chairman)
  Mr Chiah Kok Khun             (Member)
  Mr Tay Wee Kwang              (Member)

  Mr How Peck Huat and Mr Chiah Kok Khun are independent directors. More than half of the Nominating
  Committee comprises independent directors. Mr How Peck Huat was appointed as the Chairman of the
  Nominating Committee on 24 June 2005 to replace Mr Tan Chuan Thye who resigned on 22 June 2005.

  The Nominating Committee’s written terms of reference describe its responsibilities, and these include:

  1. to identify candidates and make recommendations for all Board appointments, to make
     recommendations on the re-nomination or continuation in office of any Director;
                                    Corporate Governance (cont’d)
78
China EnerSave annual report 2005




                                      2. to regularly review the Board structure, size and composition and make recommendations to the
                                         Board with regards to any adjustments that are deemed necessary;

                                      3. to determine annually whether or not a Director is independent;

                                      4. to decide whether or not a Director is able to and been adequately carrying out his/her duties as
                                         a Director of the Company, particularly when he/she has multiple board representations; and to
                                         propose internal guidelines in relation to multiple board representations;

                                      5. to decide how the Board’s performance may be evaluated and propose objective performance
                                         criteria; and

                                      6. to recommend procedures for assessing the effectiveness of the Board as a whole and for assessing
                                         the contribution by each individual Director to the effectiveness of the Board.

                                      The directors submit themselves for the re-nomination and re-election at regular intervals of at least
                                      once every three years. Pursuant to the articles of the Company, one-third of the Board directors are to
                                      retire from office by rotation and be subject to re-election at the Company’s Annual General Meeting
                                      (“the AGM”).

                                      The number of meetings held and attendance at the meetings as at the date of this report were as below:

                                                                                                                     Number of
                                       Name of director               Appointment                                   meetings held     Attendance
                                       How Peck Huat (Chairman) *     Non-executive and Independent Director              1                 -
                                       Tan Chuan Thye (Chairman)**    Non-executive and Independent Director              1                 1
                                       Chiah Kok Khun (Member)        Non-executive and Independent Director              1                 1
                                       Tay Wee Kwang (Member)         Executive Director                                  1                 1

                                      *Appointed on 24 June 2005
                                      **Resigned on 22 June 2005

                                      The dates of initial appointment and last re-election of each director, together with their directorship in
                                      listed companies are set out as following:

                                                                                 Date of initial     Date of last    Present Directorships in
                                       Name of director Appointment              appointment         re-election     listed companies
                                       Chou Kong Seng Non-executive /            26 December 1997    30 April        China EnerSave Ltd
                                                        Independent Director                         2004            ACMA Ltd
                                                                                                                     Creative Master Bermuda Ltd
                                       How Peck Huat      Non-executive /        5 May 2004          20 April        China EnerSave Ltd
                                                          Independent Director                       2005            Roly International Holdings Ltd
                                       Chiah Kok Khun     Non-executive /        19 June 2002        20 April        China EnerSave Ltd
                                                          Independent Director                       2005
                                       Koo Ah Seang       Chief Executive Officer 18 June 2003        20 April        China EnerSave Ltd
                                                          / Non-independent                          2005            Shining Corporation Ltd
                                                          Director                                                   Penguin Boat International Ltd
                                                                                                                     China Fashion Holdings Ltd
                                       Tay Wee Kwang      Executive / Non-       27 September 1997 29 May            China EnerSave Ltd
                                                          independent Director                     2003              Shining Corporation Ltd
                                                                                                                     (Alternate Director)
                                                                                                                     Hongwei Technologies Ltd
Corporate Governance (cont’d)
                                                                                                                    79




                                                                                                                    China EnerSave annual report 2005
      BOARD PERFORMANCE

      Principle 5: There should be a formal assessment of the effectiveness of the board as a whole
      and the contribution by each director to the effectiveness of the board.

      The Board performance is ultimately reflected in the performance of the Company. The Board should
      ensure compliance with the applicable laws and Board members should act in good faith, with due
      diligence and care in the best interest of the Company and its shareholders.

      The Board, through the delegation of its authority to the Nominating Committee, has used its best
      efforts to ensure that the Directors on the Board possess the experience, knowledge and skills critical
      to the Group’s business, so as to enable the Board to make sound and well-considered decisions. The
      Nominating Committee, in considering the nomination of any Director for the re-election, will evaluate
      the performance of the Director. An assessment on each Director’s performance will be carried out by
      the Nominating Committee for the Company’s financial year 2005 and thereafter on annual basis.

      Informal reviews of a Board’s performance are undertaken on a continuous basis by the Nominating
      Committee with inputs from other Board members and the Chairman and CEO. Renewals or replacement
      of Board members do not necessarily reflect their contribution to date, but may be driven by the need
      to position and shape the Board in line with the medium term needs of the Company and its business.


      ACCESS TO INFORMATION

      Principle 6: In order to fulfill their responsibilities, board members should be provided with
      complete, adequate and timely information prior to board meetings and on an on-going
      basis.

      All Directors have unrestricted access to the Company’s records and information and receive the
      Company’s management accounts. The non-executive and independent Directors have access to senior
      executives in the Company and other employees to seek additional information if required. Contact
      particulars of the Company’s senior management and the company secretaries have been provided to
      the Directors to facilitate such access. Directors can seek independent professional advice if required and
      in accordance with procedure. Such cost will be borne by the Company.

      The company secretaries have the responsibility to ensure that the Board procedures are followed and
      that all applicable rules and regulation are complied with. One or both of the company secretaries are in
      attendance at Board and members’ meetings. The appointment and removal of the company secretary
      should be a matter for the Board as a whole.


(B)   REMUNERATION MATTERS

      PROCEDURES FOR DEVELOPING REMUNERATION POLICIES

      Principle 7: There should be a formal and transparent procedure for fixing the remuneration
      packages of individual director. No director should be involved in deciding his own
      remuneration.
                                    Corporate Governance (cont’d)
80
China EnerSave annual report 2005




                                      The Remuneration Committee comprises the following directors:

                                      Mr Chou Kong Seng              (Chairman)
                                      Mr Chiah Kok Khun              (Member)
                                      Mr How Peck Huat               (Member)

                                      Mr Chou Kong Seng, Mr Chiah Kok Khun and Mr How Peck Huat are independent directors. Mr Chou
                                      Kong Seng was appointed as a Chairman of the Remuneration Committee on 14 March 2006 to replace
                                      Mr Chiah Kok Khun who remains as a member of the Remuneration Committee. Mr Tay Wee Kwang,
                                      executive director who was appointed as the member of the Remuneration Committee on 24 June
                                      2005, had stepped down as a member of the Remuneration Committee on 14 March 2006 to comply
                                      with the Code of Corporate Governance 2005. Mr How Peck Huat was appointed to replace Mr Tay
                                      Wee Kwang on 14 March 2006.

                                      The Remuneration Committee written terms of reference describe its responsiblities, and these include:

                                      1. to review and recommend a framework of remuneration for the Directors and key executives, and
                                         determine specific remuneration packages for each executive Director and the chief executive office,
                                         and the implementation of any appropriate performance-related element to be incorporated in the
                                         remuneration framework and packages;

                                      2. to review and recommend the remuneration packages of all managerial staff in the Company or any
                                         of its principal subsidiaries that are related to any of the Directors, the chief executive officer or any
                                         substantial shareholder of the Company;

                                      3. to recommend whether in any year circumstances are such that the Company in AGM should be
                                         invited to approve the remuneration policy.

                                      Although the recommendations are made in consultation with the Chairman of the Board, the
                                      remuneration packages are ultimately approved by the entire Board. No director is involved in deciding
                                      his own remuneration.

                                      The number of meetings held and attendance at the meetings as at the date of this report were as
                                      below:

                                                                                                                   Number of
                                       Name of director               Appointment                                 meetings held     Attendance
                                       Chiah Kok Khun (Chairman)      Non-executive and Independent Director             2                2
                                       Tan Chuan Thye (Member)**      Non-executive and Independent Director             2                1
                                       Chou Kong Seng (Member)        Non-executive and Independent Director             2                2
                                       Tay Wee Kwang (Member)*        Executive Director                                 2                1

                                      *Appointed on 24 June 2005
                                      **Resigned on 22 June 2005
Corporate Governance (cont’d)
                                                                                                         81




                                                                                                         China EnerSave annual report 2005
  LEVEL AND MIX OF REMUNERATION

  Principle 8: The level of remuneration should be appropriate to attract, retain and motivate the
  directors needed to run the company successfully but companies should avoid paying more
  for this purpose. A proportion of the remuneration, especially that of executive directors,
  should be linked to performance.

  The Company adopts a remuneration policy for employees comprising a fixed component and a variable
  component. The fixed component is in the form of a base salary. The variable component is in the form
  of a variable bonus that is linked to the Company’s and the individual’s performance.

  Directors’ fees are set in accordance with the remuneration framework comprising basic fees and
  committee fees. These are subject to the approval of the Company in AGM. The Chairman and other
  members of the Audit Committee received additional fees in 2005 taking into accounts the nature of
  their responsibilities and additional time spent on the matters of the Company.


  DISCLOSURE ON REMUNERATION

  Principle 9: Each company should provide clear disclosure of its remuneration policy, level and
  mix of remuneration, and the procedure for setting remuneration, in the company’s annual
  report.

  The following table shows the constitution (in percentage terms) of the remuneration of Directors,
  including those appointed and resigned/retired during the financial year of 2005:-

   Remuneration Bands                          Fees & Salary    Bonus     Other benefits     Total
   Name of directors                                %            %             %             %
   $500,000 and above
   Koo Ah Seang                                     77           19             4            100

   $250,000 to below $500,000
   Tay Wee Kwang                                    74           20             6            100

   Below $250,000
   Chou Kong Seng                                  100            -             -            100
   Tan Chuan Thye*                                  -             -             -             -
   How Peck Huat                                   100            -             -            100
   Chiah Kok Khun                                  100            -             -            100

  *Resigned on 22 June 2005
                                    Corporate Governance (cont’d)
82
China EnerSave annual report 2005




                                          The remuneration of the Company’s key executives for financial year 2005 is as follows:

                                          Remuneration Band                           Fees & Salary      Bonus      Other benefits       Total
                                          Name of executives                               %              %              %               %
                                          Below $150,000
                                          Chen Ming Lien                                   84              8              8             100
                                          Tan Fong Nee                                     82             14              4             100
                                          Ho Chee Seng                                    100              -              -             100
                                          Cao Jian                                        87              13              -             100
                                          Pansy Seah                                       91              9              -             100

                                          Mr Ho Chee Seng is the brother-in-law of Mr Koo Ah Seang, the CEO and substantial shareholder of the
                                          Company.


                                    (C)   ACCOUNTABILITY AND AUDIT

                                          ACCOUNTABILITY

                                          Principle 10: The board is accountable to the shareholders while the management is accountable
                                          to the board.

                                          The Board, through its announcements of half-yearly and full year results to shareholders, the directors
                                          aim to present a balanced and understandable assessment of the Company’s position and prospects.

                                          In preparing the financial statements, the directors have:

                                          1. selected suitable accounting policies and applied them consistently;

                                          2. made judgements and estimates that are reasonable and prudent;

                                          3. ensured that all applicable accounting standards have been followed; and

                                          4. prepared financial statements on a going concern basis as the directors have a reasonable expectation,
                                             having made enquires, that the Group and Company have adequate resources to continue in
                                             operational existence for the foreseeable future.
Corporate Governance (cont’d)
                                                                                                                83




                                                                                                                China EnerSave annual report 2005
  AUDIT COMMITTEE

  Principle 11: The board should establish and Audit Committee with written terms of reference,
  which clearly set out its authority and duties.

  The Audit Committee consists of entirely the following independent directors, who bring with them
  invaluable managerial and professional expertise in the financial, legal and business management
  spheres:

  Mr Chiah Kok Khun             (Chairman)
  Mr Chou Kong Seng             (Member)
  Mr How Peck Huat              (Member)

  The Audit Committee meets at least twice a year to perform the following key function:

  1. to review the effectiveness of the material controls and procedures for the identification, assessment
     and reporting of risk;

  2. to review the adequacy of and the procedures for the internal audit function, including the staffing
     of and resources made available for the internal audit function, and make such recommendations as
     it may think fit;

  3. to review the financial management and the freedom allowed to the internal auditors;

  4. to review and make recommendations to the Board on the appointment and re-appointment of the
     external auditors;

  5. to review the scope and results of the audit and non-audit fees, the independence of the external
     auditors and the cost-effectiveness of the audit;

  6. to review the financial statements and results;

  7. to review interested persons transactions.

  The Audit Committee has been given full access and obtained the co-operation of the Company’s
  management. The Audit Committee has explicit authority to investigate any matter within its terms of
  reference, full access to and co-operation by Management and full discretion to invite any director or
  executive officer to attend its meetings, and reasonable resources to enable it to discharge its functions
  properly.

  The Audit Committee has met with the external auditors without the presence of the management. The
  Audit Committee also met with the external auditors to discuss the results of their examinations and
  their evaluations of the systems of internal accounting controls.

  The Audit Committee has undertaken a review of fees paid to external auditors for non-audit services
  and is satisfied with the independence and objectivity of the external auditors. It has recommended to
  the Board the re-appointment of Moores Rowland as the external auditors.

  The Board acknowledges that it is responsible for the overall internal control framework, but recognizes
  that no cost effective internal control system will preclude all errors and irregularities, and can provide
  only reasonable and not absolute assurance against material misstatement or loss.
                                    Corporate Governance (cont’d)
84
China EnerSave annual report 2005




                                      The number of meetings held and attendance at the meetings as at the date of this report were as
                                      below:

                                                                                                                   Number of
                                       Name of director               Appointment                                 meetings held     Attendance
                                       Chiah Kok Khun (Chairman)      Non-executive and Independent Director            2                2
                                       How Peck Huat (Member)*        Non-executive and Independent Director            2                1
                                       Tan Chuan Thye (Member)**      Non-executive and Independent Director            2                -
                                       Chou Kong Seng (Member)        Non-executive and Independent Director            2                2

                                      *Appointed on 24 June 2005
                                      **Resigned on 22 June 2005



                                      INTERNAL CONTROLS

                                      Principle 12: The board should ensure that the management maintains a sound system of
                                      internal controls to safeguard the shareholders’ investments and the company’s assets.


                                      INTERNAL AUDIT

                                      Principle 13: The company should establish an internal audit function that is independent of
                                      the activities it audits.

                                      The Board is cognizant of its responsibility for maintaining a sound system of internal controls
                                      to safeguard the shareholders’ investments and the Group’s assets and business. The Company’s
                                      external auditors carry out, in the course of their statutory audit, a review of the effectiveness of the
                                      Company’s material internal controls, annually to the extent of their scope as laid out in their audit plan.
                                      Material non-compliance and internal control weaknesses noted during their audit, and the auditors’
                                      recommendations, are reported to the Audit Committee members. For the FY 2005, the Board is of
                                      the view that based on the reports from the auditors, the system of internal controls that has been
                                      maintained by the Company’s management throughout the financial year is adequate to meet the needs
                                      of the Company. The Board shall consider expanding its internal audit resources as and when the need
                                      arises.
Corporate Governance (cont’d)
                                                                                                                    85




                                                                                                                    China EnerSave annual report 2005
(D)   COMMUNICATION WITH SHAREHOLDERS

      Principle 14: Companies should engage in regular, effective and fair communication with
      shareholders.


      GREATER SHAREHOLDER PARTICIPATION

      Principle 15: Companies should encourage greater shareholder participation at AGMs, and
      allow shareholders the opportunity to communicate their views on various matters affecting
      the company.

      The Company does not practice selective disclosure. Price sensitive information is always released on
      SGXNET after trading hours. Results and annual reports are announced or issued within the mandatory
      periods and are available on the Company’s website at www.enersavegroup.com from which shareholders
      can access information on the Group.

      Shareholders are encouraged to attend the Annual General Meeting to ensure a greater level of
      shareholder participation and for them to be kept up to date as to the Group’s strategies and goals. All
      shareholders of the Company receive the Annual Report and the Notice of Annual General Meeting, as
      well as circulars and notices pertaining to extraordinary general meeting of the Company. To facilitate
      participation by the shareholders, the Articles of the Company allow the shareholders to attend and
      vote at general meetings of the Company by proxies. Separate resolutions on each distinct issue are
      requisite.

      At the Annual General Meetings, the external auditors as well as the Directors attend to answer queries
      from shareholders. Shareholders are given the opportunity at general meetings of the Company to
      air their views and query the Directors and management on matters relating to the Group and its
      operations.


      DEALINGS IN SECURITIES

      The Company has adopted internal codes pursuant to the SGX-ST Best Practices Guide applicable to all
      its officers in relation to dealings in the Company’s securities. Its officers are not allowed to deal in the
      Company’s shares during the period commencing one month before announcement of the Company’s
      financial results and ending on the date of the announcement of the results. In addition, officers are
      expected to observe insider trading laws at all times even when dealing in securities within the permitted
      trading period.
                                    Statistics of Shareholdings
86                                  AS AT 20 MARCH 2006
China EnerSave annual report 2005




                                    DISTRIBUTION OF SHAREHOLDINGS

                                    Size of Shareholdings               No. of Shareholders       %    No.of Shares       %

                                    1 - 999                                              7      0.23         1,940      0.00
                                    1,000 - 10,000                                   1,314     43.84     7,894,370      3.05
                                    10,001 - 1,000,000                               1,647     54.96   110,114,230     42.55
                                    1,000,001 AND ABOVE                                 29      0.97   140,759,370     54.40

                                    TOTAL                                            2,997    100.00   258,769,910    100.00



                                    TWENTY LARGEST SHAREHOLDERS

                                         Name                                                          No.of Shares       %

                                    1    VENTURES TRUST PTE LTD                                          29,600,000    11.44
                                    2    LIM & TAN SECURITIES PTE LTD                                    19,986,910     7.72
                                    3    HONG LEONG FINANCE NOMINEES PTE LTD                              8,272,000     3.20
                                    4    HL BANK NOMINEES (S) PTE LTD                                     7,400,000     2.86
                                    5    DBS VICKERS SECURITIES (S) PTE LTD                               7,078,000     2.74
                                    6    KOO AH SEANG                                                     6,567,000     2.54
                                    7    DBS NOMINEES PTE LTD                                             6,489,000     2.51
                                    8    PHILLIP SECURITIES PTE LTD                                       6,199,000     2.40
                                    9    KIM ENG SECURITIES PTE. LTD.                                     5,983,650     2.31
                                    10   SBS NOMINEES PTE LTD                                             5,959,000     2.30
                                    11   UNITED OVERSEAS BANK NOMINEES PTE LTD                            5,907,000     2.28
                                    12   OCBC SECURITIES PRIVATE LTD                                      3,422,000     1.32
                                    13   CITIBANK NOMINEES SINGAPORE PTE LTD                              2,909,000     1.12
                                    14   TAY WEE KWANG                                                    2,637,810     1.02
                                    15   JANET LC TAN                                                     2,280,000     0.88
                                    16   PHANG ENG YON                                                    1,897,000     0.73
                                    17   UOB KAY HIAN PTE LTD                                             1,887,000     0.73
                                    18   OCBC NOMINEES SINGAPORE PTE LTD                                  1,642,000     0.63
                                    19   GOH KIA LING KENNETH                                             1,625,000     0.63
                                    20   CIMB-GK SECURITIES PTE. LTD.                                     1,560,000     0.60

                                         TOTAL                                                          129,301,370    49.96
Statistics of Shareholdings (cont’d)
AS AT 20 MARCH 2006                                                                                          87




                                                                                                             China EnerSave annual report 2005
SUBSTANTIAL SHAREHOLDERS AS AT 20 MARCH 2006

Name                                                    Direct Interest       Deemed Interest

Koo Ah Seang (see note 1)                                  13,672,000                  173,000

Ventures Trust Pte Ltd                                     29,600,000                        Nil

Note 1 -   Mr Koo Ah Seang’s direct interest also includes shares held in the names of nominees. Mr Koo Ah
           Seang’s deemed interest is held through spouse.


Based on the Register of Shareholders, and to the best knowledge of the Company, the percentage of
shareholding held in the hands of public is approximately 80.26%. Accordingly, Company complies with Rule
723 of the Listing Manual.
                                    Statistics of Warrantholdings
88                                  AS AT 20 MARCH 2006
China EnerSave annual report 2005




                                    DISTRIBUTION OF WARRANTHOLDINGS

                                    Size of Holdings                   No. of Warrantholders       %    No. of Warrants       %

                                    1 - 999                                              453    17.22           217,080     0.39
                                    1,000 - 10,000                                     1,660    63.12         6,444,551    11.46
                                    10,001 - 1,000,000                                   507    19.28        25,085,162    44.63
                                    1,000,001 AND ABOVE                                   10     0.38        24,466,202    43.52

                                    TOTAL                                              2,630   100.00        56,212,995   100.00



                                    TWENTY LARGEST WARRANTHOLDERS

                                         Name                                                           No. of Warrants       %

                                    1    VENTURES TRUST PTE LTD                                               7,400,000    13.16
                                    2    HONG LEONG FINANCE NOMINEES PTE LTD                                  3,914,750     6.96
                                    3    KOO AH SEANG                                                         2,341,750     4.17
                                    4    HL BANK NOMINEES (S) PTE LTD                                         1,850,000     3.29
                                    5    OCBC SECURITIES PRIVATE LTD                                          1,774,500     3.16
                                    6    PHILLIP SECURITIES PTE LTD                                           1,702,000     3.03
                                    7    UOB KAY HIAN PTE LTD                                                 1,563,500     2.78
                                    8    UNITED OVERSEAS BANK NOMINEES PTE LTD                                1,393,250     2.48
                                    9    ACMA INVESTMENTS PTE LTD                                             1,332,000     2.37
                                    10   TAY WEE KWANG                                                        1,194,452     2.12
                                    11   DBS NOMINEES PTE LTD                                                   815,000     1.45
                                    12   GOI KHENG HENG HENRY                                                   800,000     1.42
                                    13   SBS NOMINEES PTE LTD                                                   739,750     1.32
                                    14   CIMB-GK SECURITIES PTE. LTD.                                           600,000     1.07
                                    15   JANET LC TAN                                                           570,000     1.01
                                    16   KIM ENG SECURITIES PTE. LTD.                                           518,912     0.92
                                    17   TOH KIAU KEE                                                           500,000     0.89
                                    18   PHANG ENG YON                                                          449,250     0.80
                                    19   GOH KIA LING KENNETH                                                   414,750     0.74
                                    20   LIM & TAN SECURITIES PTE LTD                                           403,000     0.72

                                         TOTAL                                                              30,276,864     53.86
Notice of Annual General Meeting
COMPANY REGISTRATION NO. 199706776D                                                                             89




                                                                                                                China EnerSave annual report 2005
NOTICE IS HEREBY GIVEN THAT the Eighth Annual General Meeting of the Company will be held at 200 Pandan
Loop #07-02 Pantech 21, Singapore 128388, on 27 April 2006 at 2.30 p.m. for the purpose of transacting the
following business:


Ordinary Business

1.      To receive, consider and adopt the Audited Accounts for the financial year                Resolution 1
        ended 31 December 2005 and the Directors' Reports and the Auditors' Report
        thereon.

2.      To approve the proposed payment of first and final dividend of 0.10 cent per               Resolution 2
        ordinary share (tax exempt 1-tier) for the year ended 31 December 2005.

3.      To approve Directors' fees of S$99,200 for financial year ended 31 December               Resolution 3
        2005. (2004 : S$94,000)

4.      To re-elect the following directors retiring by rotation pursuant to Article 95(2)
        of the Company's Articles of Association:

        (i) Mr Chou Kong Seng [see explanatory note(a)]                                          Resolution 4
        (ii) Mr Tay Wee Kwang [see explanatory note(a)]                                          Resolution 5

5.      To re-appoint Messrs Moores Rowland as Auditors and to authorise the Directors           Resolution 6
        to fix their remuneration.

6.      To transact any other business of the Company which may properly be transacted
        at an Annual General Meeting.


SPECIAL BUSINESS

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

7.     “THAT authority be and is hereby given to the Directors of the Company to:               Resolution 7

       (a) (1) issue shares in the capital of the Company whether by way of rights,
               bonus or otherwise; and/or

            (2) make or grant offers, agreements or options (collectively, “Instruments”)
                that might or would require shares to be issued, including but not
                limited to the creation and issue of (as well as adjustments to) warrants,
                debentures or other instruments convertible into shares, at any time
                and upon such terms and conditions and for such purposes and to such
                persons as the Directors may in their absolute discretion deem fit; and

       (b) (notwithstanding the authority conferred by this Resolution may have ceased
           to be in force) issue shares in pursuance of any Instrument made or granted
           by the Directors while this Resolution was in force, provided that:
                                    Notice of Annual General Meeting (cont’d)
90                                  COMPANY REGISTRATION NO. 199706776D
China EnerSave annual report 2005




                                              (1) the aggregate number of shares to be issued pursuant to this Resolution
                                                  (including shares to be issued in pursuance of Instruments made or
                                                  granted pursuant to this Resolution) does not exceed 50 per cent of
                                                  the total number of shares issued by the Company (as calculated in
                                                  accordance with subparagraph (2) below) of which the aggregate number
                                                  of shares to be issued other than on a pro rata basis to shareholders of
                                                  the Company (including shares to be issued in pursuance of Instruments
                                                  made or granted pursuant to this Resolution) does not exceed 20 per
                                                  cent of the total number of shares issued by the Company (as calculated
                                                  in accordance with subparagraph (2) below);

                                              (2) (subject to such manner of calculation as may be prescribed by the
                                                  Singapore Exchange Securities Trading Limited (“SGX-ST”)) for the
                                                  purpose of determining the aggregate number of shares that may be
                                                  issued under subparagraph (1) above, the percentage of the number
                                                  of shares to be issued shall be based on the total number of shares
                                                  issued by of the Company at the time of the passing this Resolution,
                                                  after adjusting for:

                                                 (i) new shares arising from the conversion or exercise of any convertible
                                                     securities or share options or vesting of share awards which are
                                                     outstanding or subsisting at the time of passing this Resolution; and

                                                 (ii) any subsequent consolidation or subdivision of shares;

                                              (3) in exercising the authority conferred by this Resolution, the Company
                                                  shall comply with the provisions of the Listing Manual of the SGX-ST
                                                  for the time being in force (unless such compliance has been waived
                                                  by the SGX-ST) and the Articles of Association for the time being of the
                                                  Company; and

                                              (4) (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 (b)]

                                    8.    “That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors of        Resolution 8
                                          the Company be authorised 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 China EnerSave Employee Share Option
                                          Scheme 2004 (“ESOS Scheme”) provided always that the aggregate number
                                          of shares to be issued pursuant to the ESOS Scheme shall not exceed fifteen
                                          percent (15%) of the total number of shares issued by the Company at any
                                          time.”[see explanatory note (c)]
Notice of Annual General Meeting (cont’d)
COMPANY REGISTRATION NO. 199706776D                                                                                91




                                                                                                                   China EnerSave annual report 2005
NOTICE IS HEREBY GIVEN that the Transfer Books and Register of Members of the Company will be closed on
22 June 2006 to 23 June 2006, both dates inclusive, for the preparation of dividend warrants.

Duly completed transfers received by the Company's Registrar, Lim Associates (Pte) Ltd, 10 Collyer Quay #19-08
Ocean Building Singapore 049315, up to the close of business at 5:00 p.m. on 21 June 2006 will be registered
to determine shareholders' entitlement to the proposed dividend. The dividend, if approved, will be paid on
6 July 2006 to shareholders registered in the books of the Company on 21 June 2006.

In respect of shares in securities accounts with the Central Depository (Pte) Limited ("CDP"), the said dividend
will be paid by the Company to CDP which will in turn distribute the dividend entitlements to holders of shares
in accordance with its practice.

By Order of the Board


Tan Ching Chek
Company Secretary
Dated: 4 April 2006


Explanatory Notes

(a)     Mr Chou Kong Seng, a member of the Audit Committee and Chairman of the Remuneration Committee,
        will continue in office as a member of the Audit Committee and Chairman of the Remuneration
        Committee upon his re-election as a Director of the Company and will be considered independent for
        the purposes of Rule 704(8) of the Listing Manual of The Singapore Exchange Securities Trading Limited.
        Mr Tay Wee Kwang, a member of the Nominating Committee, will continue in office as a member of
        the Nominating Committee upon his re-election as a Director of the Company.

(b)     The Ordinary Resolution No 7 if passed, will empower the Directors of the Company to issue shares in
        the capital of the Company up to an amount not exceeding in aggregate fifity percent (50%) of the
        total number of shares issued by the Company at the time of the passing of this resolution, of which the
        aggregate number of shares to be issued other than on a pro-rata basis to shareholders of the Company
        does not exceed twenty percent (20%) of the total number of shares issued by the Company.

(c)     The Ordinary Resolution No 8 if passed, will empower the Directors of the Company to issue shares in
        the capital of the Company pursuant to the exercise of the options under the China Enersave Employee
        Share Option Scheme 2004 provided that the aggregate number of shares to be issued does not exceed
        fifteen percent (15%) of the total number of shares issued by the Company at any time.

Notes to Proxy Form:

(i)     A member entitled to attend and vote at this meeting is entitled to appoint one or two proxies to attend
        and vote in his stead. A proxy need not be a member of the Company.
(ii)    If a proxy is to be appointed, the form must be deposited at the registered office of the Company at 80
        Raffles Place, #21-20, UOB Plaza 2, Singapore 048624 not less than 48 hours before the time set for the
        meeting.
(iii)   The form of proxy must be signed by the appointor or his attorney duly authorised in writing.
(iv)    In the case of joint shareholders, all holders must sign the form of proxy.
This page has been intentionally left blank.
Proxy Form                                                             Important
                                                                       1. For investors who have used their CPF monies to buy China
ANNNUAL GENERAL MEETING                                                   Enersave Limited shares, this Annual Report is sent to them at the
                                                                          request of their CPF Approved Nominees and is sent solely FOR
                                                                          INFORMATION ONLY.
                                                                       2. This Proxy Form is FOR USE ONLY BY MEMBERS whose shares in
                                                                          China Enersave Limited are registered in their names. It is not
                                                                          valid for use by CPF investors and persons whose shares are not
CHINA ENERSAVE LIMITED                                                    registered in their own names, and shall be ineffective for all
Regn No. 199706776D                                                       intents and purposes if used or purported to be used by them.
(Incorporated in Singapore)



I/We ______________________________________________________________________(Name)

of_______________________________________________________________________(Address)

being a member/members of CHINA ENERSAVE LIMITED hereby appoint:-

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




and/or (delete as appropriate)

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




or failing whom, the Chairman of the meeting, as my/our proxy/proxies to vote for me/us on my/our behalf, at the Annual
General Meeting of the Company to be held on 27 April 2006 and at any adjournment thereof in the following manner:

Resolution No                                                                                                         For          Against
1.                Adoption of Reports and Accounts
2.                To approve first and final dividend
3.                To approve Directors' Fees
4.                Re-election of Mr Chou Kong Seng, a director retiring under Article 95(2)
5.                Re-election of Mr Tay Wee Kwang, a director retiring under Article 95(2)
6.                Re-appointment of Auditors and authorisation of directors to fix their remuneration
7.                Authority to issue and allot shares pursuant to Section 161 of the Companies Act, Cap 50
                  To authorise the Directors to issue and allot shares in accordance with the provisions of
8.                the China Enersave Employee Share Option Scheme

If you wish to exercise all your votes For or Against, please tick with ‘¸’. Alternatively, please indicate the number of votes
For or Against each resolution.
If this form of proxy contains no indication as to how the proxy should vote in relation to each resolution, the proxy shall, as
in the case of Any Other Business raised at the meeting, vote as the proxy deems fit.


Dated this ___________ day of ____________________ 2006.



                                                                      Total Number of shares in                  No of Shares
                                                                      (a) CDP Register
                                                                      (b) Register of Members
_______________________________________
Signature(s) of Member(s)/Common Seal
IMPORTANT: PLEASE READ NOTES OVERLEAF
NOTES

1.     A member entitled to attend and vote at the Meeting is entitled to appoint one or two
       proxies to attend and vote in his stead.

2.     Where a member appoints more than one proxy, the appointments shall be invalid unless
       he specifies the proportion of his holding (expressed as a percentage of the whole) to be
       represented by each proxy.

3.     A proxy need not be a member of the Company.

4.     A member should insert the total number of shares held. If the member has shares entered
       against his name in the Depository Register (as defined in Section 130A of the Companies
       Act, Cap. 50 of Singapore), he should insert that number of shares. If the member has
       shares registered in his name in the Register of Members of the Company, he should
       insert that number of shares. If the member has shares entered against his name in the
       Depository Register and registered in his name in the Register of Members, he should insert
       the aggregate number of shares. If no number is inserted, this form of proxy will be deemed
       to relate to all shares held by the member.

5.     The instrument appointing a proxy or proxies must be deposited at the Company’s registered
       office at 80 Raffles Place, #21-20, UOB Plaza 2, Singapore 048624 not less than 48 hours
       before the time set for the Meeting.

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

7.     Where an instrument appointing a proxy is signed on behalf of the appointor 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.

GENERAL

The Company shall be entitled to reject a Proxy Form which is incomplete, improperly completed,
illegible or where the true intentions of the appointor are not ascertainable from the instructions
of the appointor specified on the Proxy Form. In addition, in the case of shares entered in the
Depository Register, the Company may reject a Proxy Form if the member, being the appointor, is
not shown to have shares entered against his name in the Depository Register as at 48 hours before
the time appointed for holding the Meeting, as certified by The Central Depository (Pte) Limited
to the Company.
China EnerSave Limited
80 Raffles Place #21-20   Tel   : 65-6535 4248
UOB Plaza 2              Fax   : 65-6535 0553
Singapore 048624         Email : enquiries@enersavegroup.com
www.enersavegroup.com

Regn No. 199706776D

				
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