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					                                                                                                                                annual report
                                                                                                                                                      THE
METAX ENGINEERING
CORPORATION LIMITED
                                                                                                                                2006

                                                                                                                                                      NEXT LAP
28	Third	Lok	Yang	Road		   t	   +65	6265	9422           Co.	Reg	No.	197500111H
Singapore	628016           f	   +65	6265	6630           GST	Reg	No.	M2-0020981-8
                           w	   http://www.metax.com	
                           e	   mail@metax.com




                                                                                   M ETAX EN GIN EERIN G CORPORATION LIM ITED
                                                                                   ANNUAL REPORT 2006




                                                                                                                                METAX ENGINEERING
                                                                                                                                CORPORATION LIMITED
We aim to protect the environment
for the benefit of our shared future

We aspire to become a leader in
the water and wastewater treatment
and hydro-engineering industries,
first locally and growing steadily
to become a regional and global player


                                                                                                       CORPOR ATE       BOARD Of DIRECTORS
                                                                                                                        Danny	Walla	
                                                                                                                                                  JOINT COMPANy SECRETARIES
                                                                                                                                                  Ng	Guat	Hua	
                                                                                                       INfOR M AT ION   Non-Executive	Chairman	   Lim	Mei	Lan
                                                                                                                        Tan	Tze	Wen                	
                                                                                                                        Managing	Director
                                                                                                                                                  REGISTERED OffICE
                                                                                                                        Tan	Hun	Tee
                                                                                                                                                  28	Third	Lok	Yang	Road
                                                                                                                        Executive	Director
                                                                                                                                                  Singapore	628016
                                                                                                                        Ng	Guat	Hua               Tel:	+65	6265	9422
                                                                                                                        Executive	Director        Fax:	+65	6265	6630
                                                                                                                        Ganapathy	Neelakantan     Website:	www.metax.com
                                                                                                                        Executive	Director        Email:	mail@metax.com

                                                                                                                        Chen	Yeow	Sin
                                                                                                                        Independent	Director      ShARE REGISTRAR AND ShARE
                                                                                                                        Basmadjian	Krikor         TRANSfER OffICE
                                                                                                                        Independent	Director      B.A.C.S.	Private	Limited
                                                                                                                                                  63	Cantonment	Road
                                                                                                                        Lee	Thiam	Seng
                                                                                                                                                  Singapore	089758
                                                                                                                        Independent	Director


                                                                                                                                                  AuDITORS AND
                                                                                                                        AuDIT COMMITTEE
                                                                                                                        Chen	Yeow	Sin             REPORTING ACCOuNTANTS
                                                                                                                        Chairman                  Moores	Rowland
                                                                                                                                                  Certified	Public	Accountants
                                                                                                                        Basmadjian	Krikor         133	Cecil	Street	#15-02
                                                                                                                        Member
                                                                                                                                                  Keck	Seng	Tower
                                                                                                                        Lee	Thiam	Seng            Singapore	069535
                                                                                                                        Member
                                                                                                                                                  Date	of	appointment:		
                                                                                                                                                  10	May	2004
                                                                                                                        REMuNERATION COMMITTEE
                                                                                                                                                  Partner-in-charge:		
                                                                                                                        Basmadjian	Krikor
                                                                                                                        Chairman	                 Angie	Tan	Mong	Geok
                                                                                                                                                  (a	member	of	the	Institute	of	Certified	
                                                                                                                        Lee	Thiam	Seng            Public	Accountants	of	Singapore)
                                                                                                                        Member

                                                                                                                        Danny	Walla	
                                                                                                                                                  PRINCIPAL BANkERS
                                                                                                                        Member
                                                                                                                                                  DBS	Bank	Ltd
                                                                                                                                                  6	Shenton	Way
                                                                                                                        NOMINATING COMMITTEE      DBS	Building	Tower	One
                                                                                                                        Lee	Thiam	Seng            Singapore	068809
                                                                                                                        Chairman
                                                                                                                                                  Oversea-Chinese		
                                                                                                                        Basmadjian	Krikor         Banking	Corporation	Limited
                                                                                                                        Member
CONTENTS                                                                                                                                          65	Chulia	Street
                                                                                                                        Ganapathy	Neelakantan     OCBC	Centre
Corporate	Profile	01	/	Our	Latest	Projects	02	/	Letter	to	Shareholders	04	/	Review	of	Operation	06		                    Member                    Singapore	049513
Board	of	Directors	08	/	Executive	Officers	10	/	Our	Projects	Track	Record	11
                                                                                                             METAX ENGINEERING        0
                                                                                                            CORPORATION LIMITED




CORPOR ATE   Metax Engineering Corporation Limited
PROF ILE     (“Metax Engineering”) was incorporated in
             Singapore on 20 January 1975 and was listed on
             the SGX-ST Dealing and Automated Quotation
             System (“SGX Sesdaq”) in February 2006.


             We are an environmental engineering company that           Headquartered in Singapore, our principal market is in
             provides engineering, procurement and construction         Asia and we have completed both public and private
             (“EPC”) services for water and wastewater treatment and    sector projects in Singapore, Indonesia, Malaysia,
             hydro-engineering projects in Singapore and the region.    Thailand, the Philippines and India. Our clientele includes
                                                                        government institutions and private corporations in
             Our vision is to protect the environment for the benefit   Singapore such as Public Utilities Board and Sembcorp
             of our shared future and our mission is to become a        Engineers & Constructors Pte Ltd. Regionally, our projects
             leader in the water and wastewater treatment and           are funded by World Bank, Asian Development Bank and
             hydro-engineering industries, first locally and growing    other international financial institutions.
             steadily to become a regional and global player.
                                                                        Metax Engineering has achieved the ISO 9001:2000
             Metax Engineering offers a comprehensive suite of          certification in recognition of our ability to deliver
             services and solutions for the environmental               quality services and products to our customers. We
             engineering industry:                                      have also been awarded the BCA L6 grading by the
                                                                        Singapore Building and Construction Authority for
             Water and Wastewater Treatment Solutions:
                                                                        Mechanical and Electrical Engineering which allows us
             Providing the process, engineering, equipment design,
                                                                        to tender for contracts of unlimited value.
             procurement, fabrication, installation, testing and
             commissioning of mechanical and electrical equipment       Westcomb Capital Pte Ltd was the manager for Metax
             used in water and wastewater treatment plants.             Engineering’s initial public offering on the SGX Sesdaq.
             We also provide the instrumentation and control
             systems used in these plants.                              For more information, please visit our website at
                                                                        http://www.metax.com
             Hydro-Engineering Services:
             Offering equipment design and engineering,
             procurement, fabrication, installation, testing and
             commissioning of equipment mainly used to control the
             flow of water such as gates, valves and pump systems.
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      OuR L ATEST
      PROjEC T S




                                        1   2




                                        3   4
                                                1. Project management team with
                                                   Metax Engieneering’s representative
                                                2 Excavation work in progress
                                                3 Pre-ground breaking ceremony
                                                  meeting with the Chairman of
                                                  the Eastern Common Effluent
                                                  Treatment Plant
                                                4 Traditional ground breaking
                                                  ceremony at Mangalam




      Eastern Common Effluent
      Treatment Plant, India
                                                                    METAX ENGINEERING    0
                                                                   CORPORATION LIMITED




OuR L ATEST
PROjEC T S

(COnT ’d)




                                          Mangalam Common
                                          Effluent Treatment
                                          Plant, India




1&2 Base Concreting and side wall Rebar
    for the final treated RO Permeate,
    which is recovered and recycled
3   Base Floor Raft Concreting
    in progress
4   Sludge Handling Section for
    Sludge Thickener Tank




                                          1                    2




                                          3                    4
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                                        Dear Shareholders

                                        We are pleased to present our Annual Report
                                        for the financial year ended 30 June 2006
                                        (“FY2006”), our first as a public listed company
                                        since we made our debut on the SGX Sesdaq
                                        in February 2006.


      LE T TER TO                       OuR PERFORmAnCE

      SHAREHOLdER S                     On 28 August 2006, we announced our financial results for FY2006. Our revenue increased by S$1.7 million or 5.3%
                                        to S$33.6 million in FY2006, from S$31.9 million in the financial year ended 30 June 2005 (“FY2005”). The increase
                                        in revenue was mainly due to an increase in revenue from our Water and Wastewater Treatment projects. However,
                                        our net profit declined by S$0.3 million or 13% to S$1.5 million in FY2006 from S$1.8 million in FY2005. This is
                                        mainly attributable to the higher proportion of revenue garnered from Water and Wastewater Treatment projects
                                        which yield lower profit margins than Hydro-Engineering projects.

                                        We maintained a healthy balance sheet in FY2006. Our net tangible assets increased by 184.4% to S$8.8 million in
                                        FY2006 from S$3.1 million in FY2005, largely due to the initial public offer (“IPO”) proceeds and the net profit for
                                        FY2006. Our current assets increased by approximately 93.2% to S$24.1 million in FY2006 from S$12.5 million in
                                        FY2005, as a result of an increase in fixed deposits from the IPO proceeds and the increase in work-in-progress.

                                        The Group’s cash position also remained strong at S$1.6 million and our order book currently stands at
                                        S$40.3 million.



                                        OuR STREngTHS

                                        We are a homegrown environmental engineering group with a 30-year track record in this field.

                                        Through the years, we have garnered invaluable knowledge of the markets and our business network now extends to
                                        countries such as Indonesia, Malaysia, Thailand, the Philippines and India, placing us in good stead to take
                                        advantage of regional opportunities.

                                        In addition, having a competitive cost structure, a capable in-house design team, an experienced management team
                                        and the option of tapping on the expertise of our technology partners, give us a competitive edge to secure future
                                        contracts.
                                                                                                                    METAX ENGINEERING        0
                                                                                                                   CORPORATION LIMITED




LE T TER TO     A mILESTOnE YEAR                                                existing sewerage systems, and the Marina Barrage, a
                                                                                project by the Public Utilities Board, which will create a
SHAREHOLdER S   FY2006 was a momentous year for us, where we                    new body of freshwater, act as a tidal barrier for flood
                successfully fulfilled our aim of taking our Comapany           control and serve as a recreational resource for water-
(COnT ’d)       public.                                                         based activities.

                We revealed during our IPO that as part of our growth            Regionally, the implementation of stricter
                strategy, we will undertake more private industrial             environmental regulations in countries such as
                projects and expand into new markets. With the IPO net          India and Indonesia will drive demand for water
                proceeds of approximately S$4.2 million, we are now             and wastewater treatment projects and hydro-
                able to execute our growth strategy of expanding our            engineering projects. With increasing demand in the
                operations regionally. We have earmarked part of our            region for water, driven by economic development
                IPO proceeds for marketing activities to raise our profile      and the heightened awareness of the pressing need
                among potential customers overseas and have also set            for environmental conservation, we expect growth
                aside a significant proportion of our listing proceeds for      in Asia to be strong.
                acquisitions and forming strategic alliances, which we
                see as a key platform in our expansion strategy.                Metax Engineering’s track record and wide regional
                                                                                network will put us in good stead to benefit from
                Since our debut on the SGX Sesdaq, we have also made our        environmental engineering projects in both Singapore
                first foray into the India market, clinching two contracts      and the region.
                totalling S$16.1 million to build membrane plants at the
                Mangalam and Eastern common effluent treatment
                facilities in Tirupur, Tamil Nadu, India. They also include a
                contract to operate and maintain these plants for a period      OuR APPRECIATIOn TO ALL
                of five years thereafter, thereby generating a new stream
                                                                                The Board has recommended a final dividend of 1 cent
                of recurring income for our Group.
                                                                                per share, in line with the Group’s plans to distribute
                We see this as a major step towards achieving our goal          50% of net profits attributable to shareholders for
                of becoming a major regional player in the                      FY2006.
                environmental engineering business.
                                                                                The proposed final dividend, if approved at the
                                                                                Company’s Annual General Meeting to be held on
                                                                                16 October 2006, will be paid on 10 November 2006.
                LOOkIng FORWARd
                                                                                On behalf of the Board, we acknowledge the support of
                We see many opportunities for Metax Engineering to              our staff, business partners and you, our shareholders,
                grow its business both in Singapore and in Asia.                in helping us to attain our listed company status. As we
                                                                                embark on the next stage of our journey, we will work
                The Singapore government is planning to invest S$1.5            harder to bring Metax Engineering to greater heights.
                billion in developing water infrastructure over the next
                two years which includes the upgrading of water and
                wastewater treatment infrastructure and the expansion
                of water supplies. Some of the projects include the Deep        Tan Tze Wen
                Tunnel Sewerage System, a 20-year project to replace            Managing Director
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                                          For FY2006, Metax Engineering registered a
                                          5.3% increase in revenue from S$31.9 million to
                                          S$33.6 million as the Group secured more water
                                          and wastewater treatment projects.



      REV IEW OF                          PERFORmAnCE
                                          Metax Engineering has two core businesses: Water and Wastewater Treatment Solutions and
      O PER AT I O n                      Hydro-Engineering Services.

                                          For FY2006, Metax Engineering registered a 5.3% increase in revenue from S$31.9 million to S$33.6 million
                                          as the Group secured more water and wastewater treatment projects.

                                          The majority of our revenue is still derived from our operations in Singapore.

                                          Net profit declined by 13% from S$1.76 million to S$1.53 million, mainly due to the higher proportion of
                                          revenue derived from Water and Wastewater Treatment projects which generally commands lower margins than
                                          Hydro-Engineering projects.


                                          Water and Wastewater Treatment Solutions
                                          We supply, design and install the equipment as well as the control and instrumentation systems,
                                          all of which are used in the plants to treat water and wastewater.

                                          Revenue from these projects rose by 28% to S$27.5 million for FY2006, an increase of S$6.0 million from FY2005.
                                          More revenue was recognised from such projects as more milestones of the projects were completed.

                                          As we stepped up our marketing activities since the listing of our Company at the end of February 2006,
                                          we successfully made our entry into the India market, securing two new projects from the Mangalam-Eastern Water
                                          Recycling Company Limited to build and operate two high-tech, zero-discharge wastewater treatment plants for the
                                          textile industry in Tirupur, Tamil Nadu, one of India’s top garment export centres with an estimated export turnover
                                          of more than US$1.5 billion annually.

                                          The consultant of the projects is Tamil Nadu Water Investment Company Limited, a joint venture company between
                                          the Tamil Nadu Government and the Infrastructure Leasing and Financial Services, an Indian finance company, in
                                          which the Singapore Government has an interest. The projects commenced in the second quarter of 2006 and the
                                          plants are expected to be fully operational by March 2007.

                                          Another boost to our revenue came from a contract to supply and supervise the installation of a granular media
                                          filtration system for the pre-treatment of water. This is work for a new client, Power Seraya, which is expanding
                                          its plant on Jurong Island, Singapore.

                                          Profit before tax decreased from S$0.3 million to S$0.1 million as these water treatment projects traditionally
                                          generate lower profit margins.




      1 Installation of Thickening
        Centrifuges at the Changi Water
        Reclamation Plant, Singapore
      2 Dewatering Centrifuges
        at the Changi Water
        Reclamation Plant,
        Singapore




                                          1                                                            2
                                                                                                                                          METAX ENGINEERING       0
                                                                                                                                         CORPORATION LIMITED




RE V IEW OF                             Hydro-Engineering Services                                    Barring unforeseen circumstances, the business
                                                                                                      outlook for the Group is expected to remain positive
OPER AT IOn                             Hydro-Engineering Services involve the design and
                                        supply of equipment used to control the flow of water         with growth opportunities in India and Indonesia,
                                        such as gates, valves and pump systems.                       following the implementation of stricter environmental
(COnT ’d)                                                                                             regulations in these countries.
                                        These projects contributed approximately S$6.2 million
                                        in revenue for FY2006, a 41.2% decrease from S$10.5           In India, the Tamil Nadu Pollution Control Board
                                        million in FY2005 previously. This is due to many             has mandated that textile dyeing companies must
                                        projects being either in their start-up phase or nearing      implement zero liquid discharge facilities for containing
                                        their completion phase.                                       environmental pollution. In Tirupur, where the Group
                                                                                                      recently secured two new projects, there are more than
                                        However, profit before tax fell by only 22.6 per cent to      800 companies engaged in dyeing and bleaching
                                        S$1.7 million for FY2006 as these projects yield higher       operations of yarn and fabric and we believe we will be
                                        margins.                                                      able to benefit from the growing demand for water and
                                                                                                      wastewater treatment projects and hydro-engineering
                                                                                                      services there.
                                        PROSPECTS
                                                                                                      In Indonesia, the State Minister for the Environment
                                        We are an established player with a strong 30-year
                                                                                                      has mandated that all industrial plants are to conduct
                                        track record in Singapore and Asia, which puts us in
                                                                                                      environmental impact assessments and to incorporate
                                        good stead to venture beyond our current markets.
                                                                                                      waste management systems. The Indonesia National
                                        An enhanced profile derived from our listing status will      Pollution Control Agency has also implemented various
                                        further help the Group to secure more private sector          water pollution control programmes such as the
                                        industrial water treatment projects in Singapore and in       Program for Pollution Control Evaluation and Rating,
                                        the region. In the last few months, Metax Engineering         which encourage companies to treat wastewater before
                                        has succeeded in securing various contract from               discharging them into the rivers and the sea.
                                        new clients.
                                                                                                      Locally, there is also strong industry support from
                                        As of 30 June 2006, the Group’s order book stands at a        the Singapore government and National Research
                                        healthy S$40.3 million. Some of the larger contracts that     Foundation where the Singapore government intends
                                        have contributed to the order book figure since our listing   to invest over S$1.5 billion over the next two years to
                                        in February include the two contracts in India and the        further develop water infrastructure, upgrade water
                                        Power Seraya plant project on Jurong Island in Singapore.     and wastewater treatment infrastructure and expand
                                                                                                      water supplies.




3 Artist impression of one of
  seven Marina Barrage Drainage
  Pump Sets, Singapore
4 Pump Model (one-tenth scale)
  Hydro Testing at Delft Hydraulics
  in the Netherlands for the Marina
  Barrage Project in Singapore
5 Installation of 2M x 10M
  Rectangular Butterfly Gates for the
  Bioreactors at the Changi Water
  Reclamation Plant, Singapore
                                        3                                          4                                      5
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      BOARd OF                          dAnnY WALLA
                                        Non-Executive Chairman
                                                                                                      TAn TzE WEn
                                                                                                      Managing Director
      dIREC TOR S
                                        Danny Walla was appointed as the Non-Executive                Tan Tze Wen founded our Company in 1975 and has
                                        Chairman of our Company on 4 January 2006. He has             been our Director since 29 April 1975. He is currently
                                        more than 30 years of experience in the automotive and        our Managing Director. He is responsible for the
                                        parts industry. He was a director of P.T. Federal Motor       overall management, strategic planning and business
                                        (then known as P.T. Astra Honda Motor) from 1978 to           development of our Group. He also oversees the
                                        1990, where he was responsible for overseeing the             overall administration, finance and operations of our
                                        manufacturing and investment functions of the company.        Group. Tan Tze Wen has been instrumental to our
                                        Thereafter, he was a director of P.T. Astra International     growth. Under his leadership, our Company has
                                        Tbk from 1990 to 2005, where he was in-charge of the          grown from a business undertaking mainly small
                                        Motorcycle and Component Automotive Division of the           pump station projects to an environmental engineering
                                        company. As part of his responsibilities whilst working       company awarded with multi-million dollar contracts.
                                        at P.T. Astra International Tbk, he served as President       Tan Tze Wen has more than 20 years of experience in
                                        Director (from 1997 to 1999) and President Commissioner       the water treatment and wastewater treatment
                                        (from 2001 to 2005) of PT Astra Otoparts Tbk, a public        business. He obtained a Master of Science degree in
                                        listed company on the Jakarta Stock Exchange. He was          Mechanical Engineering from the Delft University of
                                        also a Commissioner of P.T. Astra Honda Motor from 2002       Technology, the Netherlands in 1971.
                                        to 2005 and the President Director of P.T. Astra Agro
                                        Lestari Tbk from 1999 to 2001. Danny Walla is currently
                                        the President Commissioner of the Indonesian Trading
                                                                                                      ALBERT TAn Hun TEE
                                        Company (PT PPI, a state-owned corporation), responsible
                                                                                                      Executive Director
                                        for supervising the activities of the board of directors as
                                        well as providing suggestions and opinions for the            Tan Hun Tee is our Executive Director, responsible for
                                        running of the company’s operations. He is also an advisor    overseeing the implementation of our projects as well
                                        to P.T. Toyota Tsusho Indonesia. He obtained a technical      as for our tendering, sales, costing and marketing
                                        degree specialising in Machine and Construction from          functions. He joined our Company in 1981 as a project
                                        Bandung Institute of Technology in 1971.                      engineer in charge of pump station projects. In 1982,

      1 Mr Danny Walla
        Non-Executive Chairman
      2 Mr Tan Tze Wen
        Managing Director
      3 From Left to Right:
        Mr Ganapathy Neelakantan
        Executive Director,
        Mr Albert Tan Hun Tee
        Executive Director,
        Mdm Ng Guat Hua
        Executive Director
                                        1                                                             2




                                                                                                      3
                                                                                                                                       METAX ENGINEERING        0
                                                                                                                                      CORPORATION LIMITED




he was promoted to project manager and was           and administrative functions of our Group and is     CHEn YEOW SIn
appointed as an Executive Director of our            responsible for project cost control, analysing      Independent Director
Company on 19 May 1992. Tan Hun Tee obtained         accounts for management review and preparing
his Bachelor of Science (Economics) degree from      the forecast and budget for each financial year.     Chen Yeow Sin was appointed as an Independent
the University of London, United Kingdom in          She is a member of The World Red Swastika            Director of our Company on 4 January 2006. He
2001. Prior to that, he also obtained a Diploma      Society and a director of the Red Swastika School    has about 20 years of experience in audit and
in Management Studies from the Singapore             Management Committee. She obtained her               financial advisory services. From 1992 to 1996,
Institute of Management in 1991, a Diploma           GCE ‘O’ level qualifications in or around 1975.      he was an audit manager at Deloitte and Touche,
in Marketing Management from Ngee Ann                                                                     responsible for financial audit, due diligence
Polytechnic in 1988 and a Technical Diploma                                                               reviews and initial public offerings. Subsequently,
in Mechanical Engineering from Singapore                                                                  he was the South East Asian internal audit
                                                     gAnAPATHY nEELAk AnTAn                               manager at Unocal Corporation from 1997 to
Polytechnic in 1974. Tan Hun Tee is a registered
                                                     Executive Director                                   1999, where he was responsible for risk
member of the Engineering Council in the United
Kingdom and is also a member of the American                                                              management, internal audit, business process
                                                     Ganapathy Neelakantan is our Project Director.
Society of Mechanical Engineers, the Institute of                                                         evaluations and conflict of interest investigations
                                                     He has over 30 years of experience in process
Electrical and Electronic Engineers USA and the                                                           for the South East Asian subsidiaries. In 2000,
                                                     and environmental engineering related projects
Singapore Institute of Management.                                                                        he joined LTC and Associates as an audit partner
                                                     in Singapore and in the region. He joined our
                                                                                                          and has been serving in that capacity ever since.
                                                     Company in 1990 as project manager, handling
                                                                                                          Chen Yeow Sin obtained a Bachelor of Science
                                                     water treatment and waste water treatment
                                                                                                          degree from the University of London and is a
ng guAT HuA                                          projects in Singapore, Indonesia, Thailand,
                                                                                                          Certified Public Accountant. He is also a fellow
Executive Director                                   Philippines and India. He was appointed as an
                                                                                                          of the Institute of Chartered Accountants in
                                                     Executive Director of our Company on 6 July 1993.
                                                                                                          England and Wales and a fellow of the Certified
Ng Guat Hua is our Administrative Director.          Mr Neelakantan is currently responsible for water
                                                                                                          Public Accountants of Australia.
Ng Guat Hua joined our Company in 1981 and           and wastewater projects in Singapore, Indonesia,
currently has more than 20 years of experience in    Malaysia, Philippines and Thailand. He obtained
finance and administration. She was appointed as     a Bachelor of Technology degree in Chemical
Executive Director of our Company on 19 May 1992.    Engineering from the University of Madras in 1970.   BASmAdjIAn kRIkOR
Ng Guat Hua currently oversees the overall finance                                                        Independent Director

                                                                                                          Basmadjian Krikor was appointed as an
                                                                                                          Independent Director of our Company on
4 From left to Right:
  Mr Lee Thiam Seng                                                                                       4 January 2006. He has about 28 years of
  Independent Director,                                                                                   experience in the banking sector, having worked
  Mr Chen Yeow Sin                                                                                        at Bank of America from 1974 to 2002. During
  Independent Director,
  Mr Basmadjian Krikor                                                                                    his career at Bank of America, he held several
  Independent Director                                                                                    senior positions including Vice President and
                                                                                                          Country Operations Manager for various
                                                                                                          countries such as Indonesia, Thailand and
                                                                                                          Indo-China from 1989 to 1998 as well as Senior
                                                                                                          Vice President and Country Operations Manager
                                                                                                          in Japan and Korea from 1998 to 2001. Between
                                                                                                          2001 and 2002, he served as director of BA
                                                                                                          Forex, a subsidiary of Bank of America in the
                                                                                                          Philippines. Since 2002, Basmadjian Krikor has
                                                                                                          been the trustee and honorary treasurer of the
                                                                                                          Armenian Church in Singapore. He obtained
                                                                                                          his Bachelor of Arts degree in Business
                                                                                                          Administration from Cyprus College USA in 1974.
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      BOARd OF                          LEE THIAm SEng
                                        Independent Director
      d IREC TOR S
                                        Lee Thiam Seng was appointed as an Independent             EONS Technologies Pte Ltd, a company involved in
      (COnT ’d)                         Director of our Company on 4 January 2006. Lee Thiam       the business of wastewater treatment and recycling,
                                        Seng is currently the Executive Chairman, Managing         and pollution control systems. As a consultant, he was
                                        Director and acting Chief Executive Officer of ecoWise     responsible for advising on business strategies and
                                        Holdings Limited, responsible for formulating the          providing technical knowledge and expertise to the
                                        strategic directions and business strategies, and          company. In 2002, Lee Thiam Seng served as a technical
                                        management of resources recovery, use of sustainable       consultant in relation to the operations of Jiangsu
                                        resources and environmental solutions. Prior to joining    Penyao Group Co., Ltd in Jiangsu, the People’s Republic
                                        ecoWise Holdings Limited, he was engaged to provide        of China, a company involved in the business of waste
                                        business advisory services to the company and its          management and treatment, and environmental
                                        subsidiaries from 2000 to 2002. From 1988 to 2002,         engineering. Lee Thiam Seng obtained a Technician
                                        he was a licensed financial advisor with American          Diploma (Merit) in Electrical Engineering from the
                                        International Assurance Company Ltd and AIG                Singapore Polytechnic in 1981. He is also a Chartered
                                        International (Singapore) Pte Limited where he             Financial Consultant, accredited by The American
                                        supervised a team of financial services consultants.       College, USA.
                                        Concurrently, from 1999 to 2002, he was a consultant for




      E XECuT I VE                      TAn SIAn gWAn
                                        Operations Manager
      OFF ICER S
                                        Tan Sian Gwan is our Operations Manager, responsible       to the company’s Sydney headquarters in Australia and
                                        for implementation of projects, in particular, water       their London Headquarters in the United Kingdom. Her
                                        treatment process projects and sales of hydraulic gates.   jobs have also included liaising with the foreign holding
                                        He joined our Company as a project engineer in 2001.       companies and their subsidiaries as well as with the
                                        Since then, he has been involved in various projects       external auditors, bankers and government agencies.
                                        including the installation of pumps, pipes and valves at   Lim Mei Lan is a fellow of the Association of Chartered
                                        Sungei Sembawang Abstraction Station, centrifuges for      Certified Accountants (ACCA) and is a non-practising
                                        Changi Water Reclamation Plant EP7 and penstocks for       member of the Institute of Certified Public Accountants
                                        Jurong Sewerage Treatment Works. Prior to joining us,      of Singapore (ICPAS).
                                        Tan Sian Gwan was involved in research work for his
                                        thesis relating to modeling of water transport and
                                        treatment at a water company, WRK III Netherlands.         TAn SIAn YuE
                                        He obtained a Master of Science degree in Civil            Contracts Manager
                                        Engineering from the Delft University of Technology,
                                        the Netherlands in 2001.                                   Tan Sian Yue is our Contracts Manager, responsible
                                                                                                   for the management of projects and contracts. Prior
                                                                                                   to joining our Company in 2002, he was the co-founder
                                                                                                   and president of Ratloop Inc., a software development
                                        LIm mEI LAn
                                                                                                   company in the USA, where he led a small team in
                                        Finance Manager
                                                                                                   software development work, programming, design
                                        Lim Mei Lan is our Finance Manager, responsible            and artwork, sales, business development, and
                                        for the Company’s financial and accounting functions.      correspondence with publishers and other clients.
                                        Prior to joining our company in May 2006, she was          In 1997, Tan Sian Yue worked as a project coordinator
                                        responsible for the preparation of group accounts of       as well as freelance programmer in the development
                                        Technic Asia Pacific Pte Ltd, whose holding Company        of software. Tan Sian Yue obtained a Bachelor of
                                        is Technic Inc (in New York), a company listed in U.S.A.   Science (Economics) (Honours) degree in Accounting
                                        Before that, she worked as an accountant at Courtaulds     and Financial Management and a Master of Laws
                                        Coatings Singapore, where she also carried out the         degree in International and Commercial Law from The
                                        treasury functions for the group, reporting directly       University of Buckingham, United Kingdom in 2002.
                                                                                      METAX ENGINEERING     
                                                                                     CORPORATION LIMITED




OuR PROjEC T S
TR ACk RECORd


Water and Wastewater
Treatment Solutions




                       Primary and secondary Sludge Thickener
                       for the Indo-Bharat Rayon Wastewater
                       Treatment Plant, Indonesia



                                                                    1 Two Upflow Anaerobic Sludge Blanket
                                                                      (UASB) treatment tanks for the NTU
                                                                      Project in Singapore
                                                                    2 Battery of Surface Aerators for the
                                                                      Indo-Bharat Rayon Wastewater
                                                                      Treatment Plant, Indonesia
                                                                    3 Equalisation Tank Air Diffusers for
                                                                      Bogor Wastewater Treatment Plant,
                                                                      Indonesia
                                                                    4 Polishing Pond for the Bandung
                                                                      Sewerage Treatment Works,
                                                                      Indonesia
                                                                    5 Rock Alum Saturator Tanks at the
                                                                      Bedok Waterworks, Singapore




                                                                2   3




                       1                                        4   5
   M E TA X E N G I N E E R I N G
     CO R PO R AT I O N L I M I T E D




      OuR PROjEC T S
      TR ACk RECORd

      (COn T ’d)

      Hydro-Engineering
      Services
                                                 5   6




                                                 7   8
      5 Archimedian Screw Pump for Flood
        Control for Second Bandung Urban
        Development Project, Indonesia
      6 Barrage Gate for the Bedok Water
        Scheme, Singapore
      7 Booster Pumping Station for
        Second Medan Urban Development
        Project, Indonesia
      8 Butterfly Valves and Pumps for
        the Bukit Panjang Service Reservoir
        Booster Station, Singapore
                                                 9
      9 Cast Iron Sluice Gates for the Sungei
        Seletar Water Scheme, Singapore
      10 Main Pumps for Pejompangan
         Pipeline and Pumping Station Project,
         Indonesia (Pump capacity 2.1 m3/s at
         18 meters Water Column)




                                                     10
METAX ENGINEERING
CORPORATION LIMITED

No. 28 Third Lok Yang Road   t +65 6265 9422          Co. Reg No. 197500111H
Singapore 628016             f +65 6266 2971          GST Reg No. M2-0020981-8
                               +65 6265 6630
                             w http://www.metax.com
                             e mail@metax.com
corporate
governance
report and
                      THE
financial
report 2006
                      NEXT LAP




METAX ENGINEERING
CORPORATION LIMITED
CONTENTS


Corporate Governance Report            01
Report of the Directors                12
Statement by the Directors             14
Report of the Auditors                 15
Balance Sheets                         16
Income Statements                      17
Statement of Changes in Equity         18
Consolidated Statement of Cash Flows   19
Notes to the Financial Statements      20
Statistics of Shareholding             42
Notice of Annual General Meeting       44
Notice of Books Closure                46
Proxy Form                             47
                                                                                                                              METAX ENGINEERING           01
                                                                                                                             CORPORATION LIMITED




CORPORATE GOVERNANCE REPORT

The Company is committed to maintaining high standards of corporate governance to ensure that effective self-regulatory corporate practices exist
to protect the interests of its shareholders. As such, the Company has adopted a framework of corporate governance policies and practices in line
with the recommendations of the Singapore Code of Corporate Governance (the “Code”).

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



1. BOARD MATTERS
The Board’s Conduct of its Affairs

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

The Board conducts meetings on a half yearly basis. In addition, ad-hoc meetings are convened when circumstances require them. Telephonic
attendance and conference via audio communication at Board meetings are allowed under Article 120 (2) of the Company’s Articles of Association.
The number of meetings held and the attendance of the Directors at meetings of the Board since our listing to date is as follows:-

                                                                                                       Board Committees
      Board/Committees                                 Board                      Audit                Remuneration                 Nominating

      No. of meetings held                                1                          1                          1                         1

      Name of Directors                                                              Number of Meetings Attended

      Danny Walla                                         1                          -                          1                         -
      Tan Tze Wen                                         1                          -                          -                         -
      Tan Hun Tee (1)                                     1                          -                          1                         -
      Ganapathy Neelakantan                               1                          -                          -                         1
      Ng Guat Hua                                         1                          -                          -                         -
      Chen Yeow Sin                                       1                          1                          -                         -
      Basmadjian Krikor                                   1                          1                          1                         1
      Lee Thiam Seng                                      1                          1                          1                         1

(1)
      Tan Hun Tee resigned as member of the RC on 25 August 2006.

Every Director is expected, in the course of carrying out his duties, to act in good faith and to contribute effectively to the decision making process
of the Board and to keep in mind at all times, the interests of the Company.

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

               i.     to review the financial performance of the Group;
               ii.    to approve major investment and funding decisions;
               iii.   to oversee the processes for evaluating the adequacy of internal controls, risk management, financial reporting and compliance;
               iv.    to evaluate the performance and determine the compensation of key management personnel; and
               v.     to assume responsibility for corporate governance.

Certain matters specifically reserved for decision by the Board are those relating to material acquisitions and disposal of assets, new investments,
commitments to term loans and lines of credit from banks and financial institutions and all corporate restructuring matters.
02    M E TA X E N G I N E E R I N G
      CO R PO R AT I O N L I M I T E D




     CORPORATE GOVERNANCE REPORT (cont’d)


     1. BOARD MATTERS (CONT’D)
     To assist in the execution of its responsibilities and to comply with the requirements, the Board has established an Audit Committee (“AC”), a
     Nominating Committee (“NC”) and a Remuneration Committee (“RC”). These Board Committees function within clearly defined terms of reference
     and operating procedures, which are reviewed on a regular basis. The details of the Directors’ participation in the Board Committees are set out
     below:-

                                                                                                Board Committees
       Director                                                                         Audit                Remuneration                  Nominating
       Danny Walla                                                                                               Member
       Ganapathy Neelakantan                                                                                                                 Member
       Chen Yeow Sin                                                                  Chairman
       Basmadjian Krikor                                                               Member                     Chairman                   Member
       Lee Thiam Seng                                                                  Member                      Member                   Chairman

     All our Directors, save for Mr. Danny Walla and Mr. Lee Thiam Seng, have attended courses to familiarise themselves with the roles and responsibilities
     of a director of a public listed company in Singapore. Mr. Danny Walla was a director of a public listed company in Indonesia and Mr. Lee Thiam Seng
     is currently a director of a public listed company in Singapore. Newly appointed Directors are provided a briefing on their duties and obligations and
     are also given an orientation on the Group’s businesses to facilitate a better understanding of the Group’s operations.

     The Company adopts a policy whereby Directors are encouraged to request for further explanations, briefings or informal discussions on the
     Company’s operations or governance practices with the Management. Sessions are also conducted with the Directors to update them on new
     legislation and regulations which are relevant to the Group.

     Board Composition and Balance

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

     The Board currently consists of eight Directors, of whom three are considered to be independent by the Board. Thus, there is a strong independent
     element on the Board, with independent Directors constituting more than one-third of the Board.

     The independence of each Director is reviewed by the NC on an annual basis, using the Code’s definition of what constitutes independence in a
     director as a guide in such a review. Based on the recommendations of the NC, the Board is satisfied that it has substantial independent elements to
     ensure that objective judgment may be exercised on corporate affairs.

     Taking into account the Group’s scope and nature of operations, the Board is of the opinion that its current size is ideal for effective decision-making.
     In addition, the NC is of the view that the Board comprises persons who as a group possess accounting and finance, business or management
     expertise, industry knowledge and strategic planning experience required for the Board to be effective. These skills enable the Directors to
     constructively challenge and assist in developing strategies for the Group as well as review the performance of the Management and monitor the
     reporting of performance.

     The NC is of the view that no individual or small group of individuals dominates the Board’s decision-making process.
                                                                                                                              METAX ENGINEERING           03
                                                                                                                             CORPORATION LIMITED




CORPORATE GOVERNANCE REPORT (cont’d)


1. BOARD MATTERS (CONT’D)
Chairman and Managing Director

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.

Mr. Danny Walla is the Non-Executive Chairman and Mr. Tan Tze Wen is the Managing Director of the Group.

There is a clear division of responsibilities between the Non-Executive Chairman and the Managing Director to ensure that there is a balance of
power and authority, increased accountability and greater capacity of the Board for independent decision-making.

The Managing Director is the most senior executive in the Company and is primarily responsible for the overall management, strategic planning and
business development of the Group, while the Non-Executive Chairman bears responsibility for the workings of the Board.

In an effort to promote high standards of corporate governance, the Non-Executive Chairman ensures that board meetings are held when necessary,
sets the Board agenda in consultation with the Managing Director and reviews most board papers before they are submitted to the Board. The Non-
Executive Chairman also ensures that all Board members are provided with complete, adequate and timely information, in order to facilitate
effective contribution from the non-executive Directors and to encourage constructive relations between the Board and the Management as well as
between the executive Directors and non-executive Directors. In addition, the Non-Executive Chairman exercises control over the timeliness of
information flow to the Company’s shareholders.

The Managing Director executes decisions taken by the Board and is responsible for the day-to-day operations of the company. In setting the
business direction of the Company, the Managing Director convenes meetings with the other Executive Directors and Executive Officers as and
when necessary to review the Group’s operational performance and evaluate new projects and investment opportunities.

The Board is of the opinion that there is a clear division of responsibilities at the top of the company, such that no one individual represents a
considerable concentration of power.

Board Membership

Principle 4: There should be a formal and transparent process for the appointment of new directors to the Board.

The Board’s size, structure and composition is reviewed annually by the NC, which was established on 17 February 2006. The NC comprises three
Directors as follows, of whom the majority are independent Directors:

  Name                                Position
  Lee Thiam Seng                      Independent Director, Nominating Committee Chairman
  Basmadjian Krikor                   Independent Director
  Ganapathy Neelakantan               Executive Director

The Chairman of the NC, Mr. Lee Thiam Seng, is not related to any Director or substantial shareholder of the Company.

The main role of the NC is to ensure that the process of Board appointments and re-appointments are transparent, and to assess the effectiveness of
the Board as a whole as well as the contribution of individual Directors on an annual basis.
04    M E TA X E N G I N E E R I N G
      CO R PO R AT I O N L I M I T E D




     CORPORATE GOVERNANCE REPORT (cont’d)


     1. BOARD MATTERS (CONT’D)
     The main terms of reference of the NC are as follows:-

          i.         to make recommendations to our Board on all appointments of Directors;
          ii.        to re-nominate the Directors, having regard to each Director’s contribution and performance;
          iii.       to determine on an annual basis whether an Independent Director is independent; and
          iv.        to decide, where a Director has multiple board representations, whether such Director is able to and has been adequately carrying out
                     his duties as a Director;

     Each member of our NC shall abstain from voting on any resolutions in respect of the assessment of his performance or re-nomination as Director.

     Under the Company’s Articles of Association, one-third (or the number nearest one-third) of the Directors are required to retire from office at each
     annual general meeting. Further, all the Directors are required to retire from office at least once in every three years. However, a retiring Director is
     eligible for re-election at the meeting at which he retires.

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

       Director                                        Position                         Date of Initial Appointment           Date of Last Re-election
       Danny Walla                              Non-Executive Chairman                        4 January 2006                      Not Applicable
       Tan Tze Wen                                Managing Director                            29 April 1975                       31 May 2005
       Tan Hun Tee                                 Executive Director                           19 May 1992                     31 December 2005
       Ganapathy Neelakantan                       Executive Director                            6 July 1993                              -
       Ng Guat Hua                                 Executive Director                           19 May 1992                     31 December 2005
       Chen Yeow Sin                             Independent Director                         4 January 2006                      Not Applicable
       Basmadjian Krikor                         Independent Director                         4 January 2006                      Not Applicable
       Lee Thiam Seng                            Independent Director                         4 January 2006                      Not Applicable

     Information required in respect of the academic and professional qualification, directorship or chairmanship both present and those held over the
     preceding three years in other listed companies is set out in the “Board of Directors” section of this Annual Report. In addition, the shareholdings in
     the Company held by the Directors is set out in the “Directors’ Report” section of this Annual Report.

     The process for the selection and appointment of new directors to the board involves sourcing within the company for potential candidates as well
     as a search from external sources, through recommendations, or via searches offered by third party agencies. The short-listed candidates would be
     offered for independent review and nomination by the NC who will then short-list a single candidate for approval by the Board. Depending on the
     requirements of the directorship, the choice for the candidate should be based on relevant experience, credentials and remuneration package. The
     NC will furthermore disclose whether the Company conducted an independent search for directors as part of the nomination process.

     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.

     Based on the recommendations by the NC, the Board has established processes and objective performance criteria for evaluating the effectiveness
     of the Board. These performance criteria allow the Company to evaluate the Company’s share price performance over a set time period vis-à-vis the
     Singapore Straits Times Index and to make comparisons with its industry peers, and are linked to long-term enhancement of shareholders’ value.
     The selected performance criteria will not be changed from year to year unless they are deemed necessary and the Board is able to justify the
     changes.
                                                                                                                              METAX ENGINEERING           05
                                                                                                                             CORPORATION LIMITED




CORPORATE GOVERNANCE REPORT (cont’d)


1. BOARD MATTERS (CONT’D)
In evaluating the effectiveness of the individual Directors, the Company aims to assess whether each Director has contributed effectively and has
demonstrated commitment to fulfilling the responsibilities undertaken. Upon review of the results of the evaluation of the performance of the
Board as a whole and the performance of each individual Director, the NC shall take appropriate actions and make relevant proposals to the
Board.

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.

The members of the Board are provided with complete and adequate information on a timely basis in the form and quality necessary for the
discharge of their duties and responsibilities. Prior to each Board meeting, the members of the Board are each provided with the relevant documents
and information relating to matters that will be discussed at Board meetings. This is to enable them to obtain a comprehensive understanding of
the issues to be deliberated upon, in order to arrive at an informed decision. All independent Directors have access to the senior executives in the
Group.

All the Directors have separate and independent access to the Company Secretary. The Company Secretary attends all board meetings and assists
the Board in ensuring that all Board procedures are followed and that the Company complies with the statutory requirements of the Companies Act
and the SGX-ST. If requested by the Non-Executive Chairman, the Company Secretary will ensure that information is disseminated in a timely
manner within the Board and the Board Committees, between senior executives and the non-executive Directors.

Should the Directors, whether as a group or individually, need independent professional advice, a professional advisor who is approved by the
Company will be appointed to render such advice. Any cost of obtaining such professional advice will be borne by the Company.



2. REMUNERATION MATTERS
Procedures for Developing Remuneration Policies

Principle 7: There should be a formal and transparent procedure for developing policy on executive remuneration and for fixing the remuneration
packages of individual directors. No Director should be involved in deciding his own remuneration.

The RC was established on 17 February 2006. The RC comprises of three Directors as follows, of whom the majority are independent Directors:

  Name                                Position
  Basmadjian Krikor                   Independent Director, Remuneration Committee Chairman
  Lee Thiam Seng                      Independent Director
  Danny Walla                         Non-Executive Chairman

The principle functions of the RC are:-

    i.      to recommend to our Board a framework of remuneration for our Directors and senior management, and determine specific remuneration
            packages for each Executive Director; and
    ii.     to evaluate and cover all aspects of remuneration, including but not limited to Directors’ fees, salaries, allowances, bonuses, options and
            benefits-in-kind.

Each member of the RC shall abstain from voting on any resolutions in respect of his remuneration package.
06    M E TA X E N G I N E E R I N G
      CO R PO R AT I O N L I M I T E D




     CORPORATE GOVERNANCE REPORT (cont’d)


     2. REMUNERATION MATTERS (CONT’D)
     The recommendations of the RC are submitted, for endorsement by the entire Board of Directors, on an annual basis. Where necessary, the RC seeks
     expert advice from within the Company on the remuneration to be accorded to the Directors.

     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 significant proportion of executive directors’ remuneration should be structured so as
     to link rewards to corporate and individual performance.

     In determining remuneration packages, the RC ensures that the Directors are adequately but not excessively remunerated vis-à-vis the Company’s
     industry peers and comparable companies. In reviewing the remuneration packages, the RC takes into account the Company’s relative performance
     and the performance of individual Directors.

     All the non-executive Directors are paid a Directors’ fee, which is determined in accordance with the responsibilities undertaken by them as well as
     the time and effort spent in discharging such responsibilities. These fees are subject to approval by the shareholders at each annual general meeting.
     Except as disclosed, the independent and non-executive Directors do not receive any remuneration from the Company.

     All executive Directors are paid a basic salary. A performance related bonus will also be awarded if so merited under the incentive bonus scheme
     (as set out below). Adjustments to the remuneration packages of all executive Directors are subject to review and approval by the Board.

     Our Executive Directors and Executive Officers will be paid an incentive bonus based on the net audited consolidated profit before income tax and
     after minority interests of our Company for the relevant financial year (“Group Profits”). The amount of incentive bonus payable to our Executive
     Directors and Executive Officers will be determined as follows:–



       Where the Group Profits for the financial year is                      Amount of incentive bonus payable for that financial year

       Exceeding $3.0 million and up to $5.0 million                        5.0% of the amount of Group Profits exceeding $3.0 million

       Exceeding $5.0 million and up to $8.0 million                        5.0% of $2.0 million plus 8.0% of the amount of Group Profits
                                                                            exceeding $5.0 million

       Exceeding $8.0 million                                               5.0% of $2.0 million plus 8.0% of $3.0 million plus
                                                                            12.0% of the amount of Group Profits exceeding $8.0 million



     The incentive bonus will be divided and paid to our Executive Directors and Executive Officers in equal shares.

     Our RC has reviewed and approved the service agreement of Mr. Tan Tze Wen, whose service agreement with the Company is valid for an initial
     period of three years commencing 1 July 2005. Thereafter, this service agreement is automatically renewable on a year-to-year basis on such terms
     and conditions as the parties shall agree. There are no excessively long or onerous removal clauses in the service agreement of Mr. Tan Tze Wen. In
     the initial three years, the service agreement may be terminated by the Company by giving six months’ notice in writing, or in lieu of notice, payment
     of an amount equivalent to six months’ salary based on Mr. Tan Tze Wen’s last drawn salary.

     No options were granted to Directors, Executive Officers or employees during FY2006 under the Metax Share Option Scheme.
                                                                                                                          METAX ENGINEERING          07
                                                                                                                         CORPORATION LIMITED




CORPORATE GOVERNANCE REPORT (cont’d)


2. REMUNERATION MATTERS (CONT’D)
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 breakdown of remuneration of each Director for FY2006 is set out below:

Remuneration Band and                              Base /                 Directors’ Fees           Variable Income /                 Total
Name of Director                                Fixed Salary                                             Bonus

$250,000 to $499,999

Tan Tze Wen                                        100%                          -                           -                       100%

Below $250,000

Danny Walla                                          -                        100%                           -                       100%
Tan Hun Tee                                        100%                         -                            -                       100%
Ng Guat Hua                                        100%                         -                            -                       100%
Ganapathy Neelakantan                              100%                         -                            -                       100%
Chen Yeow Sin                                        -                        100%                           -                       100%
Basmadjian Krikor                                    -                        100%                           -                       100%
Lee Thiam Seng                                       -                        100%                           -                       100%

The breakdown of remuneration of the top five senior managers (who are not Directors) of the Company for FY2006 is set out below:

Remuneration Band and                              Base /                                           Variable Income /                 Total
Name of Senior Manager                          Fixed Salary                                             Bonus

Below $250,000

Tan Sian Gwan                                      100%                                                      -                       100%
Tan Sian Yue                                       100%                                                      -                       100%
Lim Mei Lan                                        100%                                                      -                       100%
Ng Kee Teck (1)                                    100%                                                      -                       100%
Tan Lee Ping (1)                                   100%                                                      -                       100%

  Mr. Ng Kee Teck left the employment of our Company on 1 September 2006 and Ms. Tan Lee Ping left the employment of our Company on 31 May
(1)

2006.

Mr. Tan Sian Gwan and Mr. Tan Sian Yue are the sons of Mr. Tan Tze Wen, our Managing Director. There are no employees who are related to a
Director, whose remuneration exceeds $150,000 per annum.

No options or incentive bonuses have been granted to the Directors or the senior managers during FY2006.
08    M E TA X E N G I N E E R I N G
      CO R PO R AT I O N L I M I T E D




     CORPORATE GOVERNANCE REPORT (cont’d)


     3. ACCOUNTABILITY AND AUDIT
     Accountability

     Principle 10: The Board should present a balanced and understandable assessment of the Company’s performance, position and prospects.

     Prompt fulfillment of statutory reporting requirements is a means to maintain the shareholders’ confidence and trust in the Board’s capability and
     integrity. The Board provides the shareholders with a detailed and balanced explanation and analysis of the Company’s performance, position and
     prospects on a half-yearly basis. This responsibility extends to reports to regulators.

     The Management provides the Board with appropriately detailed management accounts of the Group’s performance, position and prospects on a
     half yearly basis. Furthermore, the Management has been providing its shareholders with quarterly updates on the use of proceeds from the IPO in
     order to comply with the regulatory requirements.

     When so requested by the Board, the Management makes readily available the financial reports up to the last completed month. However, such
     monthly financial reports may not always be reflective of the true and fair view of the financial position of the Group.

     Audit Committee

     Principle 11: The Board should establish an AC with written terms of reference which clearly set out its authority and duties.

     The AC was established on 17 February 2006. The AC comprises three Directors as follows, all of whom are independent Directors:

       Name                                   Position
       Chen Yeow Sin                          Independent Director, Audit Committee Chairman
       Basmadjian Krikor                      Independent Director
       Lee Thiam Seng                         Independent Director

     The profiles of each member of the AC has been set out in the “Board of Directors” section of this Annual Report. The Board is of the view that the
     AC has the requisite accounting or related financial management expertise and experience to fully discharge its responsibilities.

     The AC assists the Board in discharging their responsibility to safeguard the Group’s assets, maintain adequate accounting records and develop and
     maintain effective systems of internal control, with the overall objective of ensuring that the Management creates and maintains effective internal
     controls for the Group. The AC also provides an effective channel of communication between the Board, the Management and the external auditors
     on matters relating to audit.

     The principle terms of reference of the AC are:-

          i.         to review the audit plans of the external auditors and where applicable, the internal auditors, including the results of the auditors’
                     review and evaluation of the system of internal accounting controls;
          ii.        to review and ensure the integrity of the financial statements and the external auditors’ reports on financial statements, and discuss any
                     significant adjustments, major risk areas, changes in accounting policies, compliance with Singapore financial reporting standards,
                     concerns and issues arising from their audits including any matters which the auditors may wish to discuss in the absence of Management,
                     where necessary, before submission to the Board for approval;
          iii.       to review and discuss with auditors any suspected fraud, irregularity or infringement of any relevant laws, rules or regulations, which
                     has or is likely to have a material impact on our Group’s operating results or financial position and our Management’s response;
          iv.        to review the co-operation given by the Management to the external auditors;
          v.         to nominate external auditors for appointment and re-appointment and to approve the remuneration and terms of engagement of the
                     external auditors;
                                                                                                                                 METAX ENGINEERING            09
                                                                                                                                CORPORATION LIMITED




CORPORATE GOVERNANCE REPORT (cont’d)


3. ACCOUNTABILITY AND AUDIT (CONT’D)
    vi.     to review and approve internal control procedures and arrangements for all interested person transactions, and if during these periodic
            reviews, the AC believes that the procedures are not sufficient, revisions will be made to address the shortcomings;
    vii.    to review any potential conflict of interests;
    viii.   to undertake such other reviews and projects as may be requested by the Board and report to the Board its findings from time to time on
            matters arising and requiring the attention of the AC; and
    ix.     to undertake generally such other functions and duties as may be required by law or the Listing Manual, and by such amendments made
            thereto from time to time.

Apart from the above functions, the AC is authorised to investigate any matters within its terms of reference, and has full access to the co-operation
of the Management. All staff holding managerial positions have been provided direct access to members of the AC, so that they may raise concerns
about possible improprieties in matters of financial reporting or any other matters. If necessary, the AC also commissions and reviews any findings
of internal investigations into matters where there is suspicion of fraud or irregularity, or failure of internal controls or infringement of any Singapore
law, rule or regulation, which has or is likely to have a material impact on the Group’s operating results and/or financial position. The AC has the
discretion to invite any Director or Executive Officer to its meetings, as well as to request for any reasonable resources to enable it to discharge its
responsibilities. In the event that a member of the AC is interested in any matter being considered by the AC, he will abstain from reviewing that
particular transaction or voting on that particular resolution.

The AC meets at least twice a year to review the announcements of the half-year and full-year results before being approved by the Board for release
to the SGX-ST. On a yearly basis and when required, the AC meets with the external auditors without the presence of Management, to discuss the
results of their examinations and their evaluations of the systems of internal accounting controls.

The AC is satisfied that the volume, nature and extent of non-audit services provided by the external auditors to the Company would not prejudice
the independence and objectivity of the external auditors. The AC annually reviews the scope and results of the audit, its cost effectiveness and the
independence and objectivity of the external auditors.

Internal Controls

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

The Group maintains internal controls and systems that are designed to provide reasonable assurance as to the integrity and reliability of its
financial statements and to adequately verify and safeguard the Group’s assets.

To this effect, in consultation with the European Quality Assurance (“EQA”), the Company carries out internal checks on all its records and
documentation on a half yearly basis, to ensure, among other things, that the quality of documentation, control of documents and records and the
system for management of responsibilities consistently meet the standards as set by ISO 9001: Quality Control System. In addition, the AC reviews
the effectiveness of the internal and operational controls and risk management on an annual basis.

Our Company’s external auditors carried out, in the course of their audit, a review of the effectiveness of the Company’s internal controls, including
financial , operational and compliance controls. Based on their review and by its own observations, the Board is satisfied that the present internal
controls and risk management processes are satisfactory, taking into account the nature and size of the Group’s operations and business.
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     CORPORATE GOVERNANCE REPORT (cont’d)


     3. ACCOUNTABILITY AND AUDIT (CONT’D)
     Internal Audit

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

     Due to the relatively small size and operations of the Group, the Company is of the view that the engagement of internal auditors would incur
     unnecessary expenses. As such, the internal audit function shall either be carried out in-house by a qualified staff member, or be outsourced to third
     party independent consultants. In both cases they would report directly to the Chairman of the AC on audit matters and to the Executive Directors
     on administrative matters. The internal audit function will be in place by the end of FY2007.

     The AC annually ensures that the internal audit function is adequately resourced and has appropriate standing within the Company. It also ensures
     that the reports of the internal audit meets the standards set by the Standards of Professional Practice of Internal Auditing, set by the Institute of
     Internal Auditors.



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

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

     The company holds briefings for the media and analysts on its half-year and its full-year results.

     Information is communicated to shareholders on a timely basis through:-

             i) annual reports that are prepared and issued to all shareholders within the mandatory period;
             ii) SGXNET and the press; and
             iii) the Company’s website at www.metax.com where shareholders can access information on the Group, including archived announcements
                  and press releases and can request to receive e-mail alerts on the Group’s latest news.

     The Board welcomes the views of shareholders on matters affecting the Company, whether at shareholders’ meetings or on an ad-hoc basis. At
     annual general meetings, shareholders are given the opportunity to air their views and ask Directors or the Management questions regarding the
     Company. Shareholders are encouraged to attend the annual general meetings to ensure a high level of accountability and to stay informed of the
     Group’s strategies and goals.

     Shareholders are informed of shareholders’ meetings through notices published in the newspapers and reports or circulars sent to all shareholders.
     Each item of special business included in the notices of shareholders’ meetings is accompanied, where appropriate, by an explanation for the
     proposed resolution. Separate resolutions are proposed for substantially separate issues at shareholders’ meetings. The members of the AC, NC and
     RC will be present at annual general meetings to answer questions relating to the work of these Board Committees. The external auditors will also
     be present to assist the Directors in addressing any relevant queries by shareholders. The annual general meeting is the principal forum for dialogue
     with shareholders.

     At all other times, the investor relations team, headed by our Managing Director, can be contacted via ir@metax.com. This e-mail address was
     specifically set up to increase the amount of investor participation and promote investor feedback.

     The Articles of Association of the Company allows a member of the Company to appoint not more than two proxies to attend and vote in place of the
     member. The Company does not intend to implement absentia voting methods e.g. by mail, e-mail or fax until security, integrity and other pertinent
     issues are satisfactorily resolved.
                                                                                                                             METAX ENGINEERING           11
                                                                                                                            CORPORATION LIMITED




CORPORATE GOVERNANCE REPORT (cont’d)


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



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

The AC reviewed the following interested person transactions for the financial year ended 30th June 2006 in accordance with its existing
procedures:



Name of Interested Person                                                                  Aggregate Value of all Interested Person
                                                                                         Transactions during the financial year ended
                                                                                    30 June 2006 (excluding transaction less than $100,000)
                                                                                                           $’000
Sale of motor vehicle
Tan Tze Wen (1)                                                                                               127



Notes:
         (1) Mr Tan Tze Wen is the Managing Director of the Company.

The Board confirms that interested person transactions entered into were done so on an arm’s length basis, on normal commercial terms and are not
prejudicial to the shareholders.

No Interested person transactions were entered into subsequent to the Company’s listing.



Mr. Tan Tze Wen, and his wife, Mrs. Phoa Hian Swie, provided joint and several personal guarantees of up to $17.5 million to Oversea-Chinese
Banking Corporation Limited, in order to secure banking facilities for the Company. In addition, they also provided joint and several personal
guarantees and security of up to $6.2 million to DBS Bank Ltd, in order to secure banking facilities for the Company. As no fee was paid to Tan Tze
Wen and Phoa Hian Swie for the provision of the guarantees and security, the transactions were not entered into on an arm’s length basis.

Tan Tze Wen and Phoa Hian Swie will continue to provide the relevant guarantees and security until such time when the Company is able to secure
alternative facilities from other financial institutions.



7. RISK MANAGEMENT AND PROCESSES
Information relating to risk management policies and processes are set out in the Notes to the Financial Statements in the Annual Report.
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     REPORT OF THE DIRECTORS

     We are pleased to submit this annual report to the members of the Company, together with the audited financial statements for the year ended
     30th June 2006.


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

     Danny Walla (Appointed on 4 January 2006)
     Tan Tze Wen
     Tan Hun Tee
     Ng Guat Hua
     Ganapathy Neelakantan
     Chen Yeow Sin (Appointed on 4 January 2006)
     Basmadjian Krikor (Appointed on 4 January 2006)
     Lee Thiam Seng (Appointed on 4 January 2006)


     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 the 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 subsidiary) are as follows:-

         Held in the name of the Director                                                Deemed interests
     Name of the director and                                           At beginning                                At beginning
     Corporation in which interests held                             of the year/date of       At end            of the year/date of        At end
                                                                       appointment (1)       of the year            appointment           of the year
     The Company                                                                   Ordinary shares                             Ordinary shares
     Danny Walla                                                                   -           500,000                      -                       -
     Tan Tze Wen                                                          39,033,300                 -                      -              38,136,000
     Tan Hun Tee                                                             916,667         3,813,000                      -                       -
     Ng Guat Hua                                                             666,667         3,813,000                      -                       -
     Ganapathy Neelakantan                                                   500,000         2,288,000                      -                       -

     Notes:
               (1) Shares held at the beginning of the year are stated at a 6 cents per share value for the purposes of comparision. The actual number of 1
                   dollar shares held by the directors at the beginning of the year were 2,341,000, 55,000, 40,000 and 30,000 for Mr. Tan Tze Wen, Mr.
                   Tan Hun Tee, Mdm. Ng Guat Hua and Mr. Ganapathy Neelakantan respectively.

     By virtue of Section 7 of the Companies Act, Tan Tze Wen is deemed to have an interest in the subsidiary of the Company at the relevant dates.

     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.

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

     Except as disclosed in this report, 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.

     Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object is to enable the directors
     to acquire benefits through the acquisition of shares in or debentures of the Company or any other body corporate.
                                                                                                                             METAX ENGINEERING           13
                                                                                                                            CORPORATION LIMITED




REPORT OF THE DIRECTORS (cont’d)


SHARE OPTIONS
The Metax Employee Share Option (the “Scheme”) was adopted by the shareholders of the Company on 20 January 2006.

There were no options granted during the financial year and since the commencement of the scheme to subscribe for unissued shares of the Company
of its subsidiary.

No shares have been issued during the financial year by virtue of the exercise of options to take up unissued shares of the Company or its
subsidiary.

No option has been granted since the inception of the Scheme and up to the end of the financial year. Hence certain details of the Scheme are not
disclosed.


AUDIT COMMITTEE
The members of the Audit Committee during the year and at the date of this report are:-
Chen Yeow Sin               Audit Committee Chairman, Independent Director
Basmadjian Krikor           Independent Director
Lee Thiam Seng              Independent Director

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

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

The Audit Committee also reviewed the following:

  (i) assistance provided by the Company’s officers to the external auditors
  (ii) interested person transactions (as defined in Chapter 9 of the Listing Manual of the Singapore Exchange)

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

The Audit Committee is satisfied with the independence and objectivity of the external auditors and has recommended to the Board of Directors that
the auditors, 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




Tan Tze Wen                                                                          Ng Guat Hua
Director                                                                             Director

Singapore
Dated: 4 September 2006
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     STATEMENT BY THE DIRECTORS

     In our opinion:-

     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
        30th June 2006 and of the results, changes in equity and cash flows of the Group and the changes in equity of the Company for the year
        ended on that date; and

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



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



     On behalf of the Board of Directors




     Tan Tze Wen                                                                        Ng Guat Hua
     Director                                                                           Director

     Singapore
     Dated: 4 September 2006
                                                                                                                           METAX ENGINEERING           15
                                                                                                                          CORPORATION LIMITED




REPORT OF THE AUDITORS

We have audited the financial statements of METAX ENGINEERING CORPORATION LTD for the year ended 30th June 2006. 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, the balance sheet and the statement of changes in equity of the Company are properly
    drawn up in accordance with the provisions of the Companies Act, Chapter 50 (the “Act”) and Singapore Financial Reporting Standards to give
    a true and fair view of the state of affairs of the Group and of the Company as at 30th June 2006 and of the results, changes in equity and cash
    flow of the Group and of the changes in equity of the Company for the year ended on that date; and

(b) the accounting and other records required by the Act to be kept by the Company have been properly kept in accordance with the provisions
     of the Act.




MOORES ROWLAND
CERTIFIED PUBLIC ACCOUNTANTS

Singapore
Dated: 4 September 2006
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     BALANCE SHEETS
     As At 30th June 2006

                                                                            GROUP                                            COMPANY
                                              Note              2006                     2005                       2006                  2005

     ASSETS:-
     Non-Current Assets
     Property, plant and equipment               3            2,687,814                2,987,304               2,504,036                2,786,203
     Investment in subsidiary                    4                    -                        -                 231,241                  231,241

                                                              2,687,814                2,987,304               2,735,277                3,017,444

     CURRENT ASSETS
     Contract work-in-progress                  6            20,679,344                8,603,599              20,679,344                8,603,599
     Trade and other receivables                7             1,085,060                3,143,974               1,072,264                3,104,808
     Fixed deposits                             10            2,020,429                        -               2,020,429                        -
     Cash and bank balances                     10              340,368                  736,973                 303,316                  736,231
                                                             24,125,201               12,484,546              24,075,353               12,444,638

     Total assets                                            26,813,015               15,471,850              26,810,630               15,462,082



     EQUITY ATTRIBUTABLE TO EQUITY HOLDERS:-
     Share capital                        11                   7,257,417               2,500,000               7,257,417               2,500,000
     Reserves                            12                   1,546,835                  596,043               1,551,836                 594,292

     Total equity                                             8,804,252                3,096,043               8,809,253                3,094,292



     NON-CURRENT LIABILITY
     Obligations under finance leases            13               20,641                   83,640                    20,641                83,640

     CURRENT LIABILITIES
     Excess of progress billings over
     work-in-progress                            6              449,837                    1,506                 449,837                    1,506
     Trade and other payables                   14           15,535,290                8,682,943              15,527,904                8,676,614
     Amount owing to a related party            15                    -                   20,602                       -                   20,602
     Amount owing to a director                 16                    -                    5,396                       -                    3,708
     Amount owing to financial institutions      17            1,585,489                1,560,734               1,585,489                1,560,734
     Obligations under finance leases            13               11,333                   67,986                  11,333                   67,986
     Dividends payable                                                -                1,380,000                       -                1,380,000
     Provision for tax                                          406,173                  573,000                 406,173                  573,000
                                                             17,988,122               12,292,167              17,980,736               12,284,150

     Total liabilities                                       18,008,763               12,375,807              18,001,377               12,367,790

     Total equity and liabilities                            26,813,015               15,471,850              26,810,630               15,462,082




     The annexed notes form an integral part of and should be read in conjunction with these financial statements.
                                                                                                                           METAX ENGINEERING       17
                                                                                                                          CORPORATION LIMITED




INCOME STATEMENTS
For The Year Ended 30th June 2006

                                                                                                                            GROUP
                                                                                     Note                      2006                     2005
                                                                                                                S$                       S$

REVENUE                                                                                     18           33,615,213                  31,922,152

Cost of sales                                                                                           (29,747,968)                (27,660,483)



Gross profit                                                                                               3,867,245                  4,261,669

Other income                                                                                19                 327,930                 124,678

Selling and distribution expenses                                                                              (45,824)                 (76,768)

Administrative expenses                                                                                  (2,205,306)                 (2,002,585)

Other operating expenses                                                                                              -                 (11,359)

Finance costs                                                                               20                 (29,267)                 (35,934)

Profit from ordinary activities
   before tax                                                                               21            1,914,778                   2,259,701

Taxation                                                                                    24             (387,000)                  (504,000)

Net profit for the year                                                                                    1,527,778                   1,755,701

Earning per share (cents)
 - Basic                                                                                    25                    2.56                     3.43




The annexed notes form an integral part of and should be read in conjunction with these financial statements.
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     STATEMENTS OF CHANGES IN EQUITY
     For The Year Ended 30th June 2006

     GROUP
                                                                 Share                    Translation               Retained
                                                                 Capital                    Reserve                  Profits                      Total
                                                                   S$                         S$                       S$                         S$

     Balance as at 30th June 2004                               2,500,000                  272,493                 1,453,443                  4,225,936
     Net profit for the year                                             -                        -                  1,755,701                  1,755,701
     Dividends (Note 27)                                                -                        -                (2,880,000)                (2,880,000)
     Currency realignment                                               -                   (5,594)                         -                     (5,594)

     Balance as at 30th June 2005                               2,500,000                  266,899                    329,144                 3,096,043
     Bonus issue                                                  575,000                         -                 (575,000)                          -
     Issue of shares                                            5,000,000                         -                         -                 5,000,000
     Share issue expenses*                                       (817,583)                        -                         -                  (817,583)
     Net profit for the year                                             -                         -                 1,527,778                 1,527,778
     Currency realignment                                               -                    (1,986)                        -                     (1,986)

     Balance as at 30th June 2006                                7,257,417                 264,913                  1,281,922                 8,804,252




     COMPANY
                                                                                            Share                   Retained
                                                                                            Capital                  Profits                      Total
                                                                                              S$                       S$                         S$

     Balance as at 30th June 2004                                                        2,500,000                 1,802,687                 4,302,687
     Net profit for the year                                                                      -                 1,671,605                 1,671,605
     Dividend (Note 27)                                                                          -                (2,880,000)               (2,880,000)

     Balance as at 30th June 2005                                                        2,500,000                   594,292                 3,094,292
     Bonus issue                                                                           575,000                  (575,000)                        -
     Issue of shares                                                                     5,000,000                         -                 5,000,000
     Share issue expenses*                                                                (817,583)                        -                  (817,583)
     Net profit for the year                                                                      -                 1,532,544                 1,532,544

     Balance as at 30th June 2006                                                         7,257,417                 1,551,836                8,809,253


     * Included in share issue expenses are non-audit fees of S$100,000 paid to the auditors of the Company in relation to its intial public offering.




     The annexed notes form an integral part of and should be read in conjunction with these financial statements.
                                                                                                                           METAX ENGINEERING      19
                                                                                                                          CORPORATION LIMITED




CONSOLIDATED STATEMENT OF CASH FLOWS
For The Year Ended 30th June 2006

                                                                                                               2006                    2005
                                                                                                                S$                      S$

Cash flows from operating activities:-
Profit before taxation                                                                                     1,914,778                 2,259,701
 Adjustments for:-
Depreciation of property, plant and equipment                                                                  116,661                191,101
Exchange realignment                                                                                             1,146                  2,207
(Gain)/Loss on disposal of property, plant and equipment                                                       (36,904)                11,359
Interest income                                                                                                (25,256)                (5,404)
Interest expense                                                                                                29,267                 35,934
Operating profit before working capital changes                                                            1,999,692                 2,494,898

Changes in working capital:-
Contract work-in-progress/Excess of progress billings over work-in-progress                              (11,627,414)               (2,725,537)
Trade and other receivables                                                                                2,058,914                  (717,551)
Amount owing to related party                                                                                (20,602)                  (45,054)
Trade and other payables                                                                                   6,852,347                 2,644,912
Amount owing to a director                                                                                    (5,396)                    1,673
Cash flows from operations                                                                                   (742,459)                1,653,341
Income taxes paid                                                                                           (553,827)                   (8,000)
Net cash (outflow)/inflow from operating activities                                                        (1,296,286)                1,645,341


Cash flows from investing activities
Interest received                                                                                               25,256                  5,404
Purchase of property, plant and equipment                                                                       (3,399)              (112,903)
Proceeds from disposal of property, plant and equipment                                                        220,000                225,000
Net cash inflow from investing activities                                                                       241,857                117,501


Cash flows from financing activities
Interest paid                                                                                                (29,267)                  (35,934)
Dividends paid                                                                                           (1,380,000)               (1,500,000)
New issue of shares                                                                                        4,182,417                         -
Payment of finance lease liabilities                                                                         (119,652)                 (116,507)
Proceeds from financial institutions                                                                          809,337                 5,917,224
Repayment of amount owing to financial institutions                                                        (1,545,213)              (6,764,375)
Net cash inflow/(outflow) from financing activities                                                          1,917,622                 (2,499,592)


Net increase/(decrease) in cash and cash equivalents                                                           863,193               (763,750)
Cash and cash equivalents at beginning of year                                                                 736,973              1,473,723
Cash and cash equivalents at end of year (Note 10)                                                        1,600,166                   736,973




The annexed notes form an integral part of and should be read in conjunction with these financial statements.
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     NOTES TO THE FINANCIAL STATEMENTS
     30th June 2006

     These notes form an integral part of the financial statements.

     1.       DOMICILE AND ACTIVITIES

              Metax Engineering Corporation Ltd (the “Company”) is incorporated in the Republic of Singapore and has its registered office and principal
              place of business at 28, Third Lok Yang Road, Singapore 628016.

              The principal activities of the Company are construction and project management. The principal activities of the subsidiary is listed in Note
              4 to the financial statements.



     2.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

                     In 2006, the Group adopted the following new/revised FRSs which are relevant to its operations:
                     FRS 1 (revised)         Presentation of Financial Statements
                     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 32 (revised)        Financial Instruments: Disclosure and Presentation
                     FRS 33 (revised)        Earnings Per Share
                     FRS 39                  Financial Instruments: Recognition and Measurement

                     The adoption of the new/revised FRSs in 2006 does not have a material impact on the Group’s financial statements.

                     The financial statements are presented in Singapore dollars. They are prepared on the historical cost basis.

                     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.

                     Judgements made by management in the applications of FRSs that have a significant effect on the financial statements and in arriving
                     at estimates with a significant risk of material adjustment in the following year are discussed in Note 32.
                                                                                                                            METAX ENGINEERING            21
                                                                                                                           CORPORATION LIMITED




NOTES TO THE FINANCIAL STATEMENTS (cont’d)


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

     (b) Functional currency
         The functional currency of the Company is the Singapore dollar as sales and expenses are denominated primarily in Singapore dollars
         and receipts from operations are usually retained in Singapore dollars. The directors are of the opinion that the Singapore dollar reflects
         the economic substance of the underlying events and circumstances relevant to the Company.


     (c) Basis of 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.

         The consolidated financial statements incorporate the financial statements of the Company and its subsidiary. The result of the subsidiary’s
         operations acquired or disposed during the financial year are included in or excluded from the consolidated financial statements from the
         respective dates that control commences or ceases. All significant intra-group transactions, balances and unrealised gains/losses are
         eliminated on consolidation and the consolidated financial statements reflect external transactions and balances only.

         On disposal of a subsidiary, any attributable amounts of goodwill is included in the determination of the profit or loss on disposal of the
         subsidiary.

         Assets and liabilitres and results of overseas subsidiary are translated into Singapore dollars on the basis set out in Note 2(h) below

     (d) Revenue recognition
         Provided it is probable that the economic benefits will flow to the Group and the Company and the revenue and costs, if applicable, can
         be measured reliably, revenue is recognised in the income statement as follows:-

         (i) Contract revenue
             Revenue 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.

         (ii) Sale of goods/services
              Revenue is recognised when goods/services are delivered at the customers’ premises which is taken to be the point in time when the
              customer has accepted the goods/services and the related risks and rewards of ownership.

     (e) Property, plant and equipment
         Items of property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. 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:-
         Leasehold properties                remaining terms of the lease
         Machinery                           5 - 10 years
         Renovation                          5 years
         Motor vehicles                      4 - 5 years
         Office equipment                     3 - 10 years
         Computers                           3 years
         Furniture and fittings               2 - 10 years

         Fully depreciated assets are retained in the financial statements until they are no longer in use.
         Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets.
22   M E TA X E N G I N E E R I N G
     CO R PO R AT I O N L I M I T E D




     NOTES TO THE FINANCIAL STATEMENTS (cont’d)


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

             (f) 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, sub-contract costs, overheads and other directly related expenses. Progress billings include all
                    progress payments received and receivable. Progress billings not yet paid by the customer are included in balance sheet under “trade
                    receivable”. The proportion of profits earned to date is arrived at having regards to the nature and stage of completion of each contract.
                    The stage of completion is determined by reference to cost incurred to date over total estimated cost to completion of each contract.

                    Provisions are made to cover any contingency and remedial work that may be necessary. Full provision is made for anticipated losses to
                    completion where applicable, in the year in which such losses can be reliably estimated.

             (g) Deferred taxation
                    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.

             (h) Foreign currency transaction
                    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 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.

                    Assets and liabilities of foreign subsidiary are translated into Singapore dollars at rates of exchange closely approximate to those ruling
                    at the balance sheet date. Exchange differences arising from such currency translation are included in the Translation Reserve Accounts.

             (i) 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 allowances are made for accounts considered to be
                    doubtful.

             (j) 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.
                                                                                                                            METAX ENGINEERING           23
                                                                                                                           CORPORATION LIMITED




NOTES TO THE FINANCIAL STATEMENTS (cont’d)


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

     (k) 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.

         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.

         When a decline in the fair value of an available-for-sale financial asset has been recognised directly in equity and there is objective
         evidence that the value of the asset is impaired, the cumulative loss that had been recognised directly in equity is recognised in the
         income statements even though the financial asset has not been derecognised. The amount of the cumulative loss that is recognised in
         the income statements is the difference between the acquisition cost and current fair value, less any impairment loss on that financial
         asset previously recognised in the income statements.

         Calculation of recoverable amount
         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 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.

     (l) Trade and other payables
         Trade and other payables are stated at cost.

     (m) Employee benefits
         Contributions to defined contribution plans are recognised as an expense in the income statement as incurred.

     (n) 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 this Note.
24    M E TA X E N G I N E E R I N G
      CO R PO R AT I O N L I M I T E D




     NOTES TO THE FINANCIAL STATEMENTS (cont’d)


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

              (o) 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.

              (p) Provisions
                     Provisions are recognised when the Group and the Company 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.

              (q) Related parties
                     For the purposes of this 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.

              (r) Interest bearing loans and borrowings
                     Interest bearing loans and borrowings are stated at cost. 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.

              (s) Leases
                     Finance leases, which effectively transfer to the Group substantially all the risk and benefits incidental to ownership of the lease item
                     are capitalised at the present value of the minimum lease payments at the inception of the lease term and disclosed as property, plant
                     and equipment.

                     Leases where the lessor effectively retains substantially all the risk and benefits of ownership of the leased assets are classified as operating
                     leases. Operating lease payments are recognised as an expense in the income statement on a straight-line basis over the lease term.

              (t) Future changes in FRS
                     The Company has not applied those FRS or INT-FRS that have been issued but are only effective for annual financial periods beginning on
                     or after 1 July 2006.

                     The Company expects that the adoption of the new FRS and INT-FRS will have no material impact on the financial statements in the period
                     of initial application.
                                                                                                                            METAX ENGINEERING          25
                                                                                                                           CORPORATION LIMITED




NOTES TO THE FINANCIAL STATEMENTS (cont’d)


3.   PROPERTY, PLANT AND EQUIPMENT

                               Leasehold                                       Motor         Office                       Furniture
     Group                     properties      Machinery Renovation           vehicles     equipment      Computers      & fittings          Total
     2006                         S$              S$        S$                  S$             S$            S$             S$               S$
     Cost
     As at 01.07.2005          3,329,000         66,251       253,691         468,379        29,902        18,606         49,068        4,214,897
     Additions                         -              -             -               -           257         3,142              -            3,399
     Disposals                         -              -             -        (368,261)            -             -              -         (368,261)
     Currency realignment         (4,237)             -             -            (225)         (116)            -            (20)          (4,598)
     As at 30.06.2006          3,324,763         66,251       253,691          99,893        30,043        21,748         49,048        3,845,437

     Accumulated Depreciation
     As at 01.07.2005         661,534            33,369       235,590        226,629         17,378         11,179        41,914         1,227,593
     Charge for the year       82,494             3,653         4,525         17,429          2,183          5,497          880            116,661
     Written back
      upon disposals                 -                -             -        (185,162)            -              -             -          (185,162)
     Currency realignment       (1,129)               -             -            (225)          (95)             -           (20)           (1,469)
     As at 30.06.2006         742,899            37,022       240,115          58,671        19,466         16,676        42,774         1,157,623

     Net Book Value
     As at 30.06.2006          2,581,864         29,229        13,576          41,222        10,577          5,072         6,274         2,687,814



     (i) As at 30 June 2006, the Group had property, plant and equipment under finance leases with net book value of S$34,314.
     (ii) A leasehold property with net book value of S$2,399,131 was pledged to a financial institution to secure banking facilities as disclosed in
          Note 17.
26    M E TA X E N G I N E E R I N G
      CO R PO R AT I O N L I M I T E D




     NOTES TO THE FINANCIAL STATEMENTS (cont’d)


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

                                         Leasehold                                     Motor          Office                       Furniture
              Group                      properties     Machinery Renovation          vehicles      equipment      Computers      & fittings          Total
              2005                          S$             S$        S$                 S$              S$            S$             S$               S$
              Cost
              As at 01.07.2004           3,588,890        29,720       231,066         582,845        22,356        13,130         43,935        4,511,942
              Additions                          -        36,531        22,625          31,843         7,812         8,912          5,180          112,903
              Disposals                   (250,000)            -             -        (145,784)            -             -               -        (395,784)
              Written off                        -             -             -               -             -        (3,436)              -          (3,436)
              Currency realignment          (9,890)            -             -            (525)         (266)            -             (47)        (10,728)
              As at 30.06.2005           3,329,000        66,251       253,691         468,379        29,902        18,606         49,068        4,214,897



              Accumulated Depreciation
              As at 01.07.2004         677,785            29,716       231,065        194,387         15,409          8,948        41,081         1,198,391
              Charge for the year       83,116             3,653         4,525         91,081          2,179          5,667           880           191,101
              Written back
               upon disposals          (97,222)                 -             -        (58,314)             -              -             -         (155,536)
              Written back
               upon write off                -                 -             -              -              -         (3,436)            -            (3,436)
              Currency realignment      (2,145)                -             -           (525)          (210)             -           (47)           (2,927)
              As at 30.06.2005         661,534            33,369       235,590        226,629         17,378         11,179        41,914         1,227,593



              Impairment
              As at 01.07.2004               3,889              -             -               -             -              -             -            3,889
              Written back
               upon disposals               (3,889)             -             -               -             -              -             -           (3,889)
              As at 30.06.2005                   -              -             -               -             -              -             -                -



              Net Book Value
              As at 30.06.2005           2,667,466        32,882        18,101         241,750        12,524          7,427         7,154        2,987,304



              (i) As at 30 June 2005, the Group had property, plant and equipment under finance leases with net book value of S$231,383.
              (ii) A leasehold property with net book value of S$2,467,678 was pledged to a financial institution to secure banking facilities as disclosed in
                   Note 17.
                                                                                                                            METAX ENGINEERING          27
                                                                                                                           CORPORATION LIMITED




NOTES TO THE FINANCIAL STATEMENTS (cont’d)


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

                               Leasehold
                                 and &                                         Motor         Office                       Furniture
     Company                  Lproperties      Machinery Renovation           vehicles     equipment      Computers      & fittings          Total
     2006                         S$              S$        S$                  S$             S$            S$             S$               S$
     Cost
     As at 01.07.2005          3,084,600         66,251       253,691         455,404        23,309        18,606         47,895        3,949,756
     Additions                         -              -             -               -             -         3,142              -            3,142
     Disposal                          -              -             -        (368,261)            -             -              -         (368,261)
     As at 30.06.2006          3,084,600         66,251       253,691          87,143        23,309        21,748         47,895        3,584,637



     Accumulated Depreciation
     As at 01.07.2005         616,922            33,369       235,590        213,654         12,098         11,178        40,742         1,163,553
     Charge for the year       68,547             3,653         4,525         17,429          1,681          5,498          880            102,213
     Written back
      upon disposals                -                 -             -        (185,165)            -              -             -         (185,165)
     As at 30.06.2006         685,469            37,022       240,115          45,918        13,779         16,676        41,622        1,080,601



     Net Book Value
     As at 30.06.2006           2,399,131        29,229        13,576          41,225         9,530          5,072         6,273        2,504,036

     (i) As at 30 June 2006, the Company had property, plant and equipment under finance leases with net book value of S$34,314.
     (ii) A leasehold property with net book value of S$2,399,131 was pledged to a financial institution to secure banking facilities as disclosed in
          Note 17.
28    M E TA X E N G I N E E R I N G
      CO R PO R AT I O N L I M I T E D




     NOTES TO THE FINANCIAL STATEMENTS (cont’d)


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

                                         Leasehold
                                           Land &                   Motor              Office                        Furniture
              Company                    properties     Machinery Renovation          vehicles      equipment      Computers      & fittings          Total
              2005                           S$            S$        S$                 S$              S$             S$            S$               S$
              Cost
              As at 01.07.2004           3,334,600        29,720       231,066         569,345        15,497        13,130         42,715        4,236,073
              Additions                          -        36,531        22,625          31,843         7,812         8,912          5,180          112,903
              Disposal                    (250,000)            -             -        (145,784)            -             -              -         (395,784)
              Written off                        -             -             -               -             -        (3,436)             -           (3,436)
              As at 30.06.2005           3,084,600        66,251       253,691         455,404        23,309        18,606         47,895        3,949,756



              Accumulated Depreciation
              As at 01.07.2004             645,597        29,716       231,065        180,887         10,416          8,947        39,862         1,146,490
              Charge for the year           68,547         3,653         4,525         91,081          1,682          5,667           880           176,035
              Written back
               upon disposals              (97,222)             -             -        (58,314)             -              -             -         (155,536)
              Written back
               upon write off                    -             -             -              -              -         (3,436)            -            (3,436)
              As at 30.06.2005             616,922        33,369       235,590        213,654         12,098         11,178        40,742         1,163,553



              Impairment
              As at 01.07.2004               3,889              -             -               -             -              -             -            3,889
              Written back
               upon disposal                (3,889)             -             -               -             -              -             -           (3,889)
              As at 30.06.2005                   -              -             -               -             -              -             -                -



              Net Book Value
              As at 30.06.2005           2,467,678        32,882        18,101         241,750        11,211          7,428          7,153       2,786,203



              (i) As at 30 June 2005, the Company had property, plant and equipment under finance leases with net book value of S$231,383.
              (ii) A leasehold property with net book value of S$2,467,678 was pledged to a financial institution to secure banking facilities as disclosed in
                   Note 17.
                                                                                                                        METAX ENGINEERING      29
                                                                                                                       CORPORATION LIMITED




NOTES TO THE FINANCIAL STATEMENTS (cont’d)


4.   INTEREST IN SUBSIDIARY
                                                                                                                        Company
                                                                                                              2006                    2005
                                                                                                               S$                      S$

     (a) Unquoted shares, at cost                                                                            940,093                940,093
         Less: Impairment loss
                Balance at 1st July                                                                          708,852                640,000
                Addition                                                                                        -                     68,852
                Balance at 30th June                                                                         708,852                708,852
                                                                                                             231,241                231,241
         Amount owing by subsidiary                                                                          133,229                 111,148
         Less: Allowance for doubtful debts
               Balance at 1st July                                                                           111,148                       -
               Addition during the year                                                                            -                 111,148
               Balance at 30th June                                                                          111,148                 111,148
                                                                                                              22,081                       -

     The amount owing by subsidiary is unsecured, interest-free and with no fixed terms of repayment.

                                                                                                                        Company
                                                                                                              2006                    2005
                                                                                                               S$                      S$

     Trade                                                                                                    38,560                  40,861
     Non-trade                                                                                                94,669                  70,287
                                                                                                             133,229                 111,148

     (b) Details of subsidiary as at 30th June 2006 is:-

                                 Principal                      Country                      Percentage
     Name of company             activities                of incorporation                 of equity held           Cost of investment
                                                                                         2006        2005          2006             2005
                                                                                          %            %            S$               S$
     P.T. Metax             Construction and                  Indonesia                  100#         100#        940,093          940,093
     Persada              project management

     The subsidiary company was audited by Hertanto, Djoko, Ikah Sutrisno, a registered Public Accountant in Indonesia.

     # certain shares were held by a director of the Company in trust for the Company.
30    M E TA X E N G I N E E R I N G
      CO R PO R AT I O N L I M I T E D




     NOTES TO THE FINANCIAL STATEMENTS (cont’d)


     5.       DEFERRED TAX ASSETS

              The following deferred tax assets in respect of the subsidiary are not recognised in the consolidated balance sheets as it is not probable that
              future taxable profit will be available against which the Group can utilised the benefits as follows:

              Unrecognised deferred tax assets
                                                                                                                                   Group
                                                                                                                        2006                       2005
                                                                                                                         S$                         S$
              Tax losses
              Balance at 1st July                                                                                      79,195                     73,562
              Additions                                                                                                 1,651                       8,775
              Currency realignment                                                                                     (1,383)                     (3,142)
              Balance at 30th June                                                                                     79,463                     79,195



     6.       CONTRACT WORK-IN-PROGRESS/EXCESS OF PROGRESS BILLINGS OVER WORK-IN-PROGRESS

                                                                                                                               Group and Company
                                                                                                                        2006                       2005
                                                                                                                         S$                         S$

              Contract work-in-progress
              Cost incurred to date                                                                                77,401,960                 56,951,547
              Add: Attributable profits recognised progressively                                                     8,933,296                  6,080,948
                                                                                                                   86,335,256                 63,032,495
              Less:       Progress billings received and receivable                                               (65,655,912)               (54,428,896)
                                                                                                                   20,679,344                  8,603,599

              Excess of progress billings over work-in-progress
              Progress billings received and receivable                                                               596,803                     35,882
              Less: Cost incurred to date                                                                            (140,031)                   (30,324)
              Less: Attributable profits recognised progressively                                                       (6,935)                    (4,052)
                                                                                                                      449,837                      1,506



     7.       TRADE AND OTHER RECEIVABLES

                                                                                  Group                                             Company
                                                    Note               2006                    2005                     2006                       2005
                                                                        S$                      S$                       S$                         S$

              Amount owing by subsidiary              4                       -                     -                   22,081                          -
              Trade receivables                       8               1,014,784             2,970,777                1,014,784                  2,970,777
              Other receivables, deposits
                and prepayments                       9                  70,276                173,197                  35,399                    134,031
                                                                      1,085,060              3,143,974               1,072,264                  3,104,808
                                                                                                        METAX ENGINEERING     31
                                                                                                       CORPORATION LIMITED




NOTES TO THE FINANCIAL STATEMENTS (cont’d)


8.   TRADE RECEIVABLES
                                                           Group                                       Company
                                               2006                  2005                   2006                   2005
                                                S$                    S$                     S$                     S$

     Trade receivables                       1,275,523             3,411,687              1,275,523              3,411,687
     Less: Allowance for doubtful debts       (260,739)             (440,910)              (260,739)              (440,910)
                                             1,014,784             2,970,777              1,014,784              2,970,777



9.   OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

                                                           Group                                       Company
                                               2006                  2005                   2006                   2005
                                                S$                    S$                     S$                     S$

     Other receivables                          60,825               39,063                 26,298                      26
     Deposits                                    5,550                8,715                  5,550                   8,715
     Advances to suppliers                           -              121,468                      -                 121,468
     Due from staff                                238                    -                      -                       -
     Prepayments                                 3,663                3,951                  3,551                   3,822
                                                70,276              173,197                 35,399                 134,031



10. CASH AND CASH EQUIVALENTS

                                                           Group                                       Company
                                               2006                  2005                   2006                   2005
                                                S$                    S$                     S$                     S$

     Cash and bank balances                    340,368              736,973                 303,316                736,231
     Fixed deposits                          2,020,429                    -               2,020,429                      -
     Bank Overdrafts                          (760,631)                   -                (760,631)                     -
                                             1,600,166              736,973               1,563,114                736,231



11. SHARE CAPITAL
                                                                                Company

                                                           2006                                        2005
                                            No of shares              S$              No of shares                  S$

     Issued and fully paid
     Balance at the beginning of the year    2,500,000             2,500,000              2,500,000              2,500,000
     - 2,500,000 ordinary shares
     Bonus issue                               575,000               575,000                      -                      -
                                             3,075,000             3,075,000              2,500,000              2,500,000
32   M E TA X E N G I N E E R I N G
     CO R PO R AT I O N L I M I T E D




     NOTES TO THE FINANCIAL STATEMENTS (cont’d)


     11. SHARE CAPITAL (CONT’D)
                                                                                                        Company

                                                                              2006                                                2005
                                                              No of shares                   S$                  No of shares                   S$

             Re-organisation of ordinary shares                51,250,000                 3,075,000                           -                       -
             Issue of shares pursuant to the
               Initial Public Offering (“IPO”)                25,000,000                  5,000,000                       -                          -
             Share issue expenses                                      -                    (817,583)                     -                          -
             Balance at end of the year                       76,250,000                   7,257,417              2,500,000                  2,500,000

             On 30th January 2006, in accordance with the Companies (Amendment) Act 2005, the concepts of “par value” and “authorised capital” were
             abolished and at that date, the shares of the Company ceased to have a par value.



     12. RESERVES
                                                                              GROUP                                               COMPANY
                                                                  2006                      2005                    2006                       2005
                                                                   S$                        S$                      S$                         S$

             Revenue reserve                                    1,281,922                  329,144                1,551,836                   594,292
             Translation reserve                                  264,913                  266,899                        -                         -
                                                                1,546,835                  596,043                1,551,836                   594,292

             The translation reserve comprises foreign exchange differences arising from the translation of the financial statements of foreign operations
             whose functional currency is difference from the functional currency of the Company.



     13. OBLIGATIONS UNDER FINANCE LEASES

             As at 30th June, the Group and the Company had obligations under finance leases that are repayable as follows:-

                                                                Principal     Interest    Payments                Principal       Interest   Payments
                                                                  2006         2006         2006                    2005           2005        2005
                                                                   S$            S$          S$                      S$              S$         S$

             Within 1 year                                        11,333       1,699        13,032                   67,986         6,915      74,901
             After 1 year but within 5 years                      20,641       2,930        23,571                   83,640        11,136      94,776
                                                                  31,974       4,629        36,603                  151,626        18,051     169,677
             Amount due within 1 year                            (11,333)     (1,699)      (13,032)                 (67,986)       (6,915)    (74,901)
                                                                  20,641       2,930        23,571                   83,640        11,136      94,776

             The above leases’ interest rates are within range of 2.2% to 3% per annum.
                                                                                                                         METAX ENGINEERING     33
                                                                                                                        CORPORATION LIMITED




NOTES TO THE FINANCIAL STATEMENTS (cont’d)


14. TRADE AND OTHER PAYABLES

                                                                        Group                                            Company
                                                           2006                      2005                    2006                    2005
                                                            S$                        S$                      S$                      S$

      Trade payables                                     15,092,103               8,342,415               15,092,103               8,342,415
      Other payables                                         23,219                  20,324                   23,219                  20,324
      Advances from subcontractor                            73,120                 208,241                   73,120                 208,241
      Accrued expenses                                      346,848                 109,945                  339,462                 105,634
      Rental received in advance                                  -                   2,018                        -                       -
                                                         15,535,290               8,682,943               15,527,904               8,676,614



15. AMOUNT OWING TO A RELATED PARTY

      The amount owing to a related party is trade in nature, unsecured, interest free and with no fixed terms of repayment.



16. AMOUNT OWING TO A DIRECTOR

      The amount owing to a director is non-trade in nature, unsecured, interest-free and with no fixed terms of repayment.



17.   AMOUNTS OWING TO FINANCIAL INSTITUTIONS

                                                                                                                    Group and Company
                                                                                                             2006                    2005
                                                                                                              S$                      S$

      Bills payables                                                                                        524,858                1,260,734
      Bank loan:
      - bank loan                                                                                            300,000                 300,000
      - bank overdrafts                                                                                      760,631                       -
                                                                                                           1,060,631                 300,000
                                                                                                           1,585,489               1,560,734

      (a) Bank loan and bills payables are secured by:

           - A first legal mortgage on a leasehold property of the Company (see Note 3).
           - The personal guarantees of certain directors and a mortgage of a property owned by them.
           - A deed of assignment of the banker’s guarantee issued by third party.
           - A deed of assignment of all proceeds under a contract.

      (b) Bills payables bear interest at 1% to 2% per annum above the prevailing bank prime rates.

      (c) Bank loan bears interest at a range between 5.18 – 5.69% (2005: 4.38%) per annum.
34   M E TA X E N G I N E E R I N G
     CO R PO R AT I O N L I M I T E D




     NOTES TO THE FINANCIAL STATEMENTS (cont’d)


     18. REVENUE

             Revenue mainly represents revenue recognised on contract works under the percentage of completion method and services rendered.



     19. OTHER INCOME

                                                                                                                          Group
                                                                                                              2006                     2005
                                                                                                               S$                       S$

             Exchange gain                                                                                     10,002                        -
             Interest on fixed deposits                                                                         25,256                   5,404
             Gain on disposal of property, plant and equipment                                                 36,904                        -
             Rental income                                                                                     75,465                 111,505
             Bad debts written back                                                                           180,171                        -
             Other income                                                                                         132                    7,769
                                                                                                              327,930                 124,678




     20. FINANCE COSTS

                                                                                                                          Group
                                                                                                              2006                     2005
                                                                                                               S$                       S$

             Interest paid and payable to:
             - Financial institutions in respect of bank
                overdraft and loans                                                                            27,133                   28,126
             - Hire purchase creditors                                                                          2,134                    7,808
                                                                                                               29,267                   35,934
                                                                                METAX ENGINEERING    35
                                                                               CORPORATION LIMITED




NOTES TO THE FINANCIAL STATEMENTS (cont’d)


21. PROFIT BEFORE TAX

                                                                               Group
                                                        Note        2006                   2005
                                                                     S$                     S$

    Profit before tax is arrived at after charging:-

    Depreciation of property, plant and equipment              3    116,661                191,101
    Directors’ fees                                                  42,500                      -
    Directors’ remuneration paid to:                       22
     - directors of the company                                      636,542               592,868
     - directors of the subsidiary                                    41,150                 8,043
    Staff costs                                            23      1,024,320               870,085
    Loss on foreign exchange                                               -                 8,576
    Operating lease expense                                           30,959                36,779
    Non-audit fees paid to auditors                                    4,280                     -
    Loss on disposal of property, plant and equipment                      -                11,359

    and crediting:-

    Gain on foreign exchange                                         10,002                      -
    Bad debts written back                                          180,171                      -
    Gain on disposal of property, plant and equipment                36,904                      -
    Operating lease income                                           75,465                111,505



22. DIRECTORS’ REMUNERATION

                                                                               Group
                                                                    2006                   2005
                                                                     S$                     S$

    Salaries and bonuses:
    - directors of the company                                      616,600                566,030
    - directors of the subsidiary                                    41,150                  8,043
    CPF and related costs                                            19,942                 26,838
                                                                    677,692                600,911
36   M E TA X E N G I N E E R I N G
     CO R PO R AT I O N L I M I T E D




     NOTES TO THE FINANCIAL STATEMENTS


     23. STAFF COSTS

             (a)                                                                                                             Group
                                                                                                                 2006                      2005
                                                                                                                  S$                        S$

             Salaries and bonuses                                                                                936,417                  776,436
             CPF and related costs                                                                                80,638                   66,808
             Other related staff cost                                                                              7,265                   26,841
                                                                                                               1,024,320                  870,085

             (b) Key management compensation
                                                                                                                             Group
                                                                                                                 2006                      2005
                                                                                                                  S$                        S$

             Short-term employee benefits                                                                         943,957                  627,823




     24. TAXATION

                                                                                                                             Group
                                                                                                                 2006                      2005
                                                                                                                  S$                        S$

             Tax expenses attributable to profit is made up of:-

             Current tax
             Current year                                                                                        387,000                  504,000

             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 before taxation due to the following factors:-

                                                                                                                             Group
                                                                                                                 2006                      2005
                                                                                                                  S$                        S$

             Profit before taxation                                                                             1,914,778                 2,259,701

             Tax at applicable tax rate of 20%                                                                   382,956                  451,940
             Tax effect of:
             - non-deductible expenses                                                                            12,265                   45,010
             Tax exemptions                                                                                      (10,500)                 (10,500)
             Deferred tax asset not recognised                                                                      1,651                   8,775
             Effects of different tax rate in other country                                                         1,651                   8,775
             Others                                                                                                (1,023)                      -
             Tax expense                                                                                         387,000                  504,000
                                                                                                                            METAX ENGINEERING        37
                                                                                                                           CORPORATION LIMITED




NOTES TO THE FINANCIAL STATEMENTS (cont’d)


25. EARNING PER SHARE
                                                                                                                           Group
                                                                                                              2006                         2005
                                                                                                               S$                           S$
    Basic earnings per share is based on:
    Net profit attributable to ordinary shareholders                                                         1,527,778                    1,755,701

                                                                                                                           Group
                                                                                                               2006                      2005
                                                                                                           No. of Shares             No. of Shares
                                                                                                              (’000)                    (’000)

    Weighted average number of shares outstanding during the year                                             50,160                      41,667
    Bonus Issue                                                                                                9,583                       9,583
                                                                                                              59,743                      51,250

    As there are no dilutive potential ordinary shares as at the end of the financial year, no diluted earnings per share is presented.



26. OPERATING LEASE COMMITMENTS

    (i) At balance sheet date, the Group and the Company were committed to making the following payments in respect of operating lease with
        a term of more than 1 year.

                                                                        Group                                              Company
                                                           2006                       2005                      2006                       2005
                                                            S$                         S$                        S$                         S$

        Amount due within 1 year                           30,639                    36,779                    30,639                       36,779
        Amount due within 2 - 5 years                     108,476                   135,276                   108,476                      135,276
        Amount due after 5 years                          840,689                 1,054,049                   840,689                    1,054,049
                                                          979,804                 1,226,104                   979,804                    1,226,104

        The operating lease commitments consist of variable components which are subject to revision based on the market rent.



    (ii) The operating lease income in respect of rental with a term of more than 1 year is as follows:-

                                                                        Group                                              Company
                                                           2006                       2005                      2006                       2005
                                                            S$                         S$                        S$                         S$

        Amount due within 1 year                           98,600                     27,407                   81,600                      26,686
        Amount due within 2 - 5 years                      59,217                          -                   57,800                           -
                                                          157,817                     27,407                  139,400                      26,686
38    M E TA X E N G I N E E R I N G
      CO R PO R AT I O N L I M I T E D




     NOTES TO THE FINANCIAL STATEMENTS (cont’d)


     27.      DIVIDENDS
              Dividends paid or payable during the financial year are as follows:-
                                                                                                                                 Group and Company
                                                                                                                          2006                    2005
                                                                                                                           S$                      S$

              Interim dividend of 3 cents per ordinary share less income tax at 20%                                              -                   60,000
              Interim one tier tax exempt dividend of 112.8 cents per ordinary share                                             -                2,820,000
                                                                                                                                 -                2,880,000


     28. CONTINGENT LIABILITY
                                                                                                                                 Group and Company
                                                                                                                          2006                    2005
                                                                                                                           S$                      S$

              Guarantees and performance bonds                                                                          2,781,316                    298,711

              After 30th June 2006, the directors proposed a final one tier tax execept dividend of 1 cent amounting to a net dividend of S$762,500. The
              dividends have not been provided for.


     29. SIGNIFICANT RELATED PARTY TRANSACTIONS
              The following transactions took place between the Company and the Group and its related parties on terms agreed between the parties
              during the financial year:-

                                                                                    Group                                             Company
                                                                       2006                      2005                     2006                       2005
                                                                        S$                        S$                       S$                         S$

              Sale of plant and equipment to a director                127,000                    90,000                  127,000                    90,000

              Fees paid for services rendered by related party                -                   37,352                         -                    37,352


              Transactions with key management personnel

                                                                                    Group                                             Company
                                                                       2006                      2005                     2006                       2005
                                                                        S$                        S$                       S$                         S$

              Sale of plant and equipment to
              key mangement personnel                                   93,000                          -                  93,000                           -


     30. SEGMENT INFORMATION
              (a) Business segments
                     The Group is organised into 2 main operating divisions, namely:
                     - Water and wastewater treatment
                     - Hydro-engineering

                     Segment results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a
                     reasonable basis.
                                                                                                                   METAX ENGINEERING           39
                                                                                                                  CORPORATION LIMITED




NOTES TO THE FINANCIAL STATEMENTS (cont’d)


30. SEGMENT INFORMATION (CONT’D)
    (a) Business segments (cont’d)

                                                          Water and                        Hydro-
                                                     wastewater treatment                engineering                       Total
                                                       2006         2005              2006         2005             2006            2005
                                                        S$           S$                S$           S$               S$              S$

        Revenue                                   27,457,543     21,452,846         6,157,670   10,469,306       33,615,213    31,922,152

        Results:
        Segment results                              139,974        319,101         1,681,264     2,173,142       1,821,238     2,492,243
        Unallocated corporate expenses                                                                             (205,123)     (321,286)
        Unallocated other income                                                                                    327,930       124,678
        Finance costs                                                                                               (29,267)      (35,934)
        Taxation                                                                                                   (387,000)    (504,000)
        Net (loss)/profit for the year                                                                             1,527,778        1,755,701

        Assets:
        Segment assets                            14,033,105      6,949,702         7,766,323    4,545,021       21,799,428    11,494,723
        Unallocated assets                                                                                        5,013,587     3,977,127
        Total assets                                                                                             26,813,015    15,471,850

        Liabilities:
        Segment liabilities                       13,874,796      7,653,516         2,539,491    2,266,421       16,414,287     9,919,937
        Unallocated liabilities                                                                                   1,594,476     2,455,870
        Total liabilities                                                                                        18,008,763 12,375,807

        Other information:
        Unallocated capital expenditure                                                                               3,399         112,903

        Unallocated depreciation                                                                                    116,661         191,101



    (b) Geographical segments

        Revenue segmentation is based on the location of services rendered or goods delivered. Assets and additions to plant and equipment
        are based on the location of those assets.

                                                            Revenue                      Total Assets            Total Capital Expenditure
                                                       2006         2005              2006         2005             2006            2005
                                                        S$           S$                S$           S$               S$              S$

        Singapore                                 33,148,372     31,221,224        26,270,182   15,005,795            3,142         112,903
        Others*                                      466,841        700,928           542,833      466,055              257               -
                                                  33,615,213     31,922,152        26,813,015   15,471,850            3,399         112,903

        *Others mainly comprise of Malaysia, Philipines, Indonesia and Thailand.
40   M E TA X E N G I N E E R I N G
     CO R PO R AT I O N L I M I T E D




     NOTES TO THE FINANCIAL STATEMENTS (cont’d)


     31. FINANCIAL INSTRUMENTS

             The main risks arising from the Group’s financial instruments are interest rate risk, liquidity risk, credit and foreign currency risks. The Board
             reviews and agrees policies for managing each of these risks and they are summarised below:-

             Interest rate risk
             The Group’s exposure to changes in interest rates relates primarily to interest-earning financial assets and interest-bearing financial
             liabilities. The Group obtains financing through bills payable, bank borrowings and finance leases. Information relating to the Group’s
             interest rate exposure is disclosed in the notes to the financial statements (Note 13 and 17).

             Liquidity risk
             Liquidity risk refers to the risk in which the Group is unable to meet its short-term obligations. Liquidity risk is minimal and is managed by
             matching the payments and receipts cycles. The Group’s operations are financed mainly through equity, bank borrowings, retained profits
             and issue of new shares.

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

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

             At the balance sheet date, there is no significant concentration of credit risk. The maximum exposure to credit risk is represented by the
             carrying amount of each financial asset, including derivative financial instruments, in the balance sheets.

             The Group’s revenue are concentrated with a few key customers.

             Foreign currency risk
             The Group incurs foreign currency risk on revenue and costs that are denominated in a currency other than Singapore dollars for the Company
             and in respect of subsidiary operating in foreign country on the revenue and costs that are denominated in a currency other than Indonesian
             Rupiah. The currency giving rise to this risk is primarily US dollars and Euro.

             Foreign currency forward contracts are used to manage exposure to foreign exchange risk arising from operational activities. The
             measurement and recognition of such contracts are in accordance with Financial Reporting Standard No. 39 – Financial instruments –
             Recognition and measurement. The foreign currency forward contracts outstanding as at 30 June are as follows:-

                                                                                                2006                                     2005
                                                                                        US$              EUR                   US$                  EUR

             Foreign currency forward contract                                            -               -                  103,000              400,000



             Fair values
             The carrying amounts of the financial assets and liabilities approximate their fair values as at balance sheet dates due to their relatively
             short-term maturity.
                                                                                                                        METAX ENGINEERING           41
                                                                                                                       CORPORATION LIMITED




NOTES TO THE FINANCIAL STATEMENTS (cont’d)


32. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

    Critical judgements in applying the Group’s accounting policies
    In the process of applying the Group’s accounting policies, which are described in Note 2, management has made the following judgements
    that have the most significant effect on the amounts recognised in the financial statements (apart from those involving estimations, which
    are dealt with below).

    Contracts work-in-progress
    Management uses judgement to estimate the extent of progress towards completion to determine the amount of contracts work-in-progress
    to be capitalised, advances to contracts/suppliers and the accruals of contracts costs. While the estimates are based on the billings made by
    the contractors/suppliers, confirmations from in-house engineers, the costs incurred to date and the expected costs to completion, there is
    no independent assessment by external parties on the stage of completion to consider in preparing such estimation. The amount of contracts
    work-in-progress to be capitalised, advances to contractors/suppliers and the accruals of contracts costs as to date and the amounts which
    the Group will ultimately realise could differ from the estimates.

    Revenue recognition
    Note 2(d)(i) to the financial statements describes that revenue from contract works is recognised based on the percentage of completion
    method, measured by reference to the value of contracts work carried out during the year and the expected costs to completion.

    In determining the percentage of completion, management uses judgement to estimate the extent of progress towards completion. While
    the estimates are based on actual contracts costs incurred to date and the expected costs to completion and confirmations from in-house
    engineers, there is no independent assessment by external parties on the stage of completion to consider in preparing such estimation. The
    amount of revenue recognised to date and the amounts which the Group will ultimately realise could differ from estimates.



33. LAND AND BUILDINGS

    The Group’s property is as follows:-

    Address                          Description                      Tenure
    28 Third Lok Yang Road           Office                            Leasehold for 48 years 8 months and 26 days from
    Singapore 628076                                                  20th October 1983, with an option to renew for another 10 years

    Komplex Sunter Garden            Office and staff                  Leasehold estate termination on 19th August 2017,
    Blok B-7 Kaveling 6-D            accommodation                    subject to renewal or extension
    Jakarta Utara
    Indonesia



34. IMMEDIATE AND ULTIMATE HOLDING COMPANY

    The immediate and ultimate holding company is Bonaqua Investment Holdings Pte. Ltd., a company incorporated in Singapore.
42    M E TA X E N G I N E E R I N G
      CO R PO R AT I O N L I M I T E D




     STATISTICS OF SHAREHOLDING

     Issued and fully paid up capital    :   S$7,075,000.00
     Number of shares issued             :   76,250,000 Ordinary Shares
     Class of shares                     :   Ordinary shares
     Voting rights                       :   One vote per share



     Distribution of Shareholdings as at 1 September 2006

     Size of shareholdings                                 No. of shareholders       %    No. of Shares       %

         1      - 999                                                       -         -             -          -
     1,000      - 10,000                                                  250     59.66     1,181,000       1.55
     10,001     - 1,000,000                                               158     37.71    12,407,000      16.27
     1,000,001 and above                                                   11      2.63    62,662,000      82.18
     Total                                                                419    100.00    76,250,000     100.00



     Twenty largest Shareholders as at 1 September 2006
     No.         Name of shareholders                                                     No. of Shares       %

     1           Bonaqua Investment Holdings Pte. Ltd                                       38,136,000     50.01
     2           Lie Tjeng Lien @ Rosalina Ali                                               5,305,000      6.96
     3           Ng Guat Hua                                                                 3,813,000      5.00
     4           Tan Hun Tee                                                                 3,813,000      5.00
     5           Ganapathy Neelakantan                                                       2,288,000      3.00
     6           Tan Sian Gwan                                                               2,201,000      2.89
     7           Tan Sian Yue                                                                2,201,000      2.89
     8           HSBC (Singapore) Nominees Pte Ltd                                           1,500,000      1.97
     9           Pauline Lucasta Halim                                                       1,200,000      1.57
     10          Tjan Sek Hoe                                                                1,200,000      1.57
     11          Tan Siew Cheng                                                              1,005,000      1.32
     12          Henry Pang                                                                    600,000      0.79
     13          Jeremy Lee Sheng Poh                                                          500,000      0.66
     14          Westcomb Securities Pte Ltd                                                   500,000      0.66
     15          VCOD (S’pore) Pte Ltd                                                         330,000      0.43
     16          Lim Joo Huak                                                                  300,000      0.39
     17          Pullman Capital Pte Ltd                                                       250,000      0.33
     18          Phillip Securities Pte Ltd                                                    230,000      0.30
     19          DBS Nominees Pte Ltd                                                          220,000      0.29
     20          Goh Koon Tho                                                                  210,000      0.28

                 Total:                                                                    65,802,000      86.31
                                                                                                                          METAX ENGINEERING         43
                                                                                                                         CORPORATION LIMITED




STATISTICS OF SHAREHOLDING (cont’d)


Substantial Shareholders
(As recorded in the Register of Substantial Shareholders as at 1 September 2006)

No.      Name of shareholders                                          Direct Interest                                  Deemed Interest

                                                       No. of Shares                    %               No. of Shares                   %
1        Tan Tze Wen (1)                                           -                     -          38,136,000                      50.01
2        Bonaqua Investment Holdings Pte. Ltd           38,136,000                   50.01                    -                         -
3        Lie Tjeng Lien @ Rosalina Ali                    5,305,000                   6.96                    -                         -
4        Ng Guat Hua                                      3,813,000                   5.00                    -                         -
5        Tan Hun Tee                                      3,813,000                   5.00                    -                         -

Note:
        (1) Mr Tan Tze Wen’s deemed interests refer to the 38,136,000 shares held by Bonaqua Investment Holdings Pte. Ltd. by virtue of Section 7
            of the Companies Act, Cap. 50.



Free Float

Based on the information available to the Company as at 1 September 2006, approximately 23.6 % of the issued ordinary shares of the Company is
held by the public and, therefore, Rule 723 of the Listing Manual issued by the Singapore Exchange Securities Trading Limited is complied with.
44    M E TA X E N G I N E E R I N G
      CO R PO R AT I O N L I M I T E D




     NOTICE OF ANNUAL GENERAL MEETING

     NOTICE IS HEREBY GIVEN that the Annual General Meeting of METAX ENGINEERING CORPORATION LIMITED will be held at 28 Third Lok Yang
     Road, Singapore 628016 on Monday, 16 October 2006 at 11.00 am for the following purposes:-



     AS ORDINARY BUSINESS:-

     1.       To receive and adopt the Directors’ Report and the Audited Accounts for year ended 30 June 2006 together with the Auditors’ Report
              thereon. (Resolution 1)

     2.       To declare a first and final one-tier tax exempt dividend of 1 cent per ordinary share for the year ended 30 June 2006. (Resolution 2)

     3.       To re-elect the following Directors retiring pursuant to Articles 107 and 117 of the Company’s Articles of Association:-

                 Mr Ganapathy Neelakantan             (Retiring under Article 107)        (Resolution 3)
                 Mr Danny Walla                       (Retiring under Article 117)        (Resolution 4)
                 Mr Chen Yeow Sin                     (Retiring under Article 117)        (Resolution 5)
                 Mr Basmadjian Krikor                 (Retiring under Article 117)        (Resolution 6)
                 Mr Lee Thiam Seng                    (Retiring under Article 117)        (Resolution 7)

              Mr Chen Yeow Sin, Mr Basmadjian Krikor and Mr Lee Thiam Seng will, upon re-election as Directors of the Company, remain as members of
              the Audit Committee. The Board considers Mr Chen Yeow Sin, Mr Basmadjian Krikor and Mr Lee Thiam Seng to be independent for the
              purpose of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited.

     4.       To approve the payment of Directors’ fees of S$42,500.00 for the year ended 30 June 2006. (Resolution 8)

     5.       To re-appoint Messrs Moores Rowland as Auditors of the Company and to authorise the Directors to fix their remuneration. (Resolution 9)

     6.       To transact any other ordinary business that may be properly transacted at an Annual General Meeting.

     AS SPECIAL BUSINESS:-

     7.       To consider and, if thought fit, to pass the following resolution as an Ordinary Resolution:-

              That pursuant to Section 161 of the Companies Act, Cap. 50 and the Listing Manual of the Singapore Exchange Securities Trading Limited,
              authority be and is hereby given to the Directors of the Company to allot and issue shares or convertible securities from time to time (whether
              by way of rights, bonus or otherwise) and upon such terms and conditions and for such purposes and to such person as the Directors may in
              their absolute discretion deem fit, provided that the aggregate number of shares and convertible securities issued pursuant to such authority
              shall not exceed 50% of the issued share capital of the Company for the time being, of which the aggregate number of shares and convertible
              securities issued other than on a pro-rata basis to the existing shareholders of the Company shall not exceed 20% of the issued share capital
              of the Company for the time being (the percentage of issued share capital being based on the issued share capital at the time such authority
              is given after adjusting for new shares arising from the conversion of convertible securities or employee share options on issue at the time
              such authority is given and any subsequent consolidation or subdivision of shares) and, unless revoked or varied by the Company in general
              meeting, such authority shall continue in force until the conclusion of the next Annual General Meeting of the Company or on the date by
              which the next Annual General Meeting is required by law to be held, whichever is earlier. [see explanatory note] (Resolution 10)
                                                                                                                                           METAX ENGINEERING              45
                                                                                                                                          CORPORATION LIMITED




NOTICE OF ANNUAL GENERAL MEETING (cont’d)


BY ORDER OF THE BOARD




Lim Mei Lan
Company Secretary
Singapore
29 September 2006



EXPLANATORY NOTE:


The Ordinary Resolution proposed in item 7 above, if passed, will empower the Directors of the Company from the date of the above Meeting until the next Annual
General Meeting to allot and issue shares and convertible securities in the Company up to an amount not exceeding in total fifty per cent (50%) of the issued share
capital of the Company for the time being for such purposes as they consider would be in the interest of the Company, provided that the aggregate number of shares to
be issued other than on a pro-rata basis to existing shareholders pursuant to this Resolution shall not exceed twenty per cent (20%) of the issued share capital of the
Company for the time being. The percentage of issued capital is based on the Company’s issued capital at the time the proposed Ordinary Resolution is passed after
adjusting for (a) new shares arising from the conversion of convertible securities or employee share options on issue at the time the proposed Ordinary Resolution is
passed and (b) any subsequent consolidation or subdivision of shares. This authority will, unless previously revoked or varied at a general meeting, expire at the next
Annual General Meeting of the Company.



NOTE:
         (i) A member of the Company entitled to attend and vote at the above Meeting may appoint not more than two proxies to attend and vote instead of him.
         (ii) Where a member appoints two proxies, he shall specify the proportion of his shareholding to be represented by each proxy in the instrument appointing
             the proxies. A proxy need not be a member of the Company.
         (iii) If the member is a corporation, the instrument appointing the proxy must be under seal or the hand of an officer or attorney duly authorised.
         (iv) The instrument appointing a proxy must be deposited at the Registered Office of the Company at 28 Third Lok Yang Road, Singapore 628016 not less than
             48 hours before the time appointed for holding the above Meeting.
46    M E TA X E N G I N E E R I N G
      CO R PO R AT I O N L I M I T E D




     NOTICE OF BOOKS CLOSURE

     NOTICE IS HEREBY GIVEN that the Share Transfer Books and Register of Members of Metax Engineering Corporation Limited (the “Company”) will
     be closed on 26 October 2006 for the preparation of dividend warrants.

     Duly completed registrable transfers received by the Company’s Share Registrar, B.A.C.S. Private Limited at 63 Cantonment Road, Singapore 089758
     up to 5.00 p.m. on 25 October 2006 will be registered to determine shareholders’ entitlements to such dividend.

     Members whose Securities Accounts with The Central Depository (Pte) Limited are credited with shares as at 5.00 p.m. on 25 October 2006 will be
     entitled to the proposed dividend.

     Payment of the dividend, if approved by shareholders at the Annual General Meeting to be held on 16 October 2006, will be made on 10 November
     2006.

     BY ORDER OF THE BOARD




     Lim Mei Lan
     Company Secretary
     Singapore
     29 September 2006
                                                                                                                                          METAX ENGINEERING             47
                                                                                                                                         CORPORATION LIMITED




PROXY FROM                                                                       IMPORTANT
ANNUAL GENERAL MEETING                                                           1. For investors who have used their CPF monies to buy shares in the capital of
                                                                                   Metax Engineering Corporation Limited, this Annual Report is forwarded to
METAX ENGINEERING CORPORATION LIMITED
                                                                                   them at the request of their CPF Approved Nominees and is sent FOR
(Company Registration No. 197500111H)
                                                                                    INFORMATION ONLY.
(Incorporated in the Republic of Singapore)
                                                                                 2. This Proxy Form is not valid for use by such CPF investors and shall be
                                                                                    ineffective for all intents and purposes if used or purported to be used by them.



I/We,                                                                                                                                                    (Name)

of                                                                                                                                                     (Address)
being a member/members of METAX ENGINEERING CORPORATION LIMITED (the “Company”) hereby appoint:

               Name                                    Address                         NRIC/Passport No.                    Proportion of Shareholdings (%)




and/or (delete as appropriate)

               Name                                    Address                         NRIC/Passport No.                    Proportion of Shareholdings (%)




and my/our proxy/proxies to vote for me/us on my/our behalf, at the Annual General Meeting (“AGM”) of the Company, to be held on Monday, 16 October
2006 at 11.00 am , and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions to be proposed at the AGM as
indicated hereunder. If no specific directions as to voting is given, the proxy/proxies will vote or abstain from voting at his/her/their discretion, as he/she/
they will on any other matter arising at the AGM.


     No.       Resolutions relating to:                                                                                   For*                   Against*
     1         Directors’ Report and Audited Accounts for the year ended 30 June 2006.
     2         Payment of proposed first and final one-tier tax exempt dividend.
     3         Re-election of Mr Ganapathy Neelakantan as a Director.
     4         Re-election of Mr Danny Walla as a Director.
     5         Re-election of Mr Chen Yeow Sin as a Director.
     6         Re-election of Mr Basmadjian Krikor as a Director.
     7         Re-election of Mr Lee Thiam Seng as a Director.
     8         Approval of Directors’ fees amounting to S$42,500.00 for the year ended 30 June 2006.
     9         Re-appointment of Messrs Moores Rowland as Auditors.
     10        Authority to allot and issue new shares.


     *         Please indicate your vote “For” or “Against” with a tick (√) within the box provided.

Dated this               day of                   , 2006.




                                                                                                               Total number of shares in:             No. of shares
                                                                                                               (a) CDP Register
Signature(s) of Member(s) or Common Seal                                                                       (b) Register of Members
48    M E TA X E N G I N E E R I N G
      CO R PO R AT I O N L I M I T E D




     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 proportion of the shareholding to be represented by each proxy shall be specified in this
                    proxy form. If no proportion is specified, the Company shall be entitled to treat the first named proxy as representing the entire shareholding
                    and any second named proxy as an alternate to the first named or at the Company’s option to treat this proxy form as invalid.

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

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

             5.     This proxy form must be deposited at the Company’s registered office at 28 Third Lok Yang Road, Singapore 628016 not less than 48 hours before
                    the time set for the Meeting.

             6.     This proxy form must be under the hand of the appointor or of his attorney duly authorised in writing. Where this proxy form 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 this proxy form 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 duly stamped and deposited with this proxy form, failing which this proxy form shall 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.

				
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