1. The Exchange reprimands Dayen Environmental Limited ("Dayen" or the "Company") for the breaches of:-
(i) Listing Rule 1010 - late and inadequate announcement of the disposal of its subsidiary, Dayen Water Engineering (Shenyang) Co. Ltd ("DWES") and failure to fully disclose the details required under Listing Rule 1010 in its announcement;
(ii) Listing Rule 703 - failure to promptly disclose material updates on two sewage treatment projects and announce significant use of funds from placement proceeds;
(iii) Conditions for the approval in-principle ("AIP") of the listing and quotation of additional shares relating to two placement exercises; and
(iv) Listing Rule 707(1) - failure to hold its Annual General Meeting ("AGM") within four months of the close of its financial year ("FY2008")
2. The Exchange takes a serious view of the Company's failure to comply with Listing Rule requirements on several occasions as listed in paragraph 1. The Exchange frowns upon these breaches. The lack of transparency, the repeated failures to disclose and inadequate disclosures when such announcements were eventually made, as well as the circumstances surrounding the breaches lead to questions on the rationale behind the transactions and agreements and the use of proceeds from fund raising exercises for failed projects. This is troubling when taken together with the numerous resignations of the Company's directors in the past twelve months. The Board of Directors (the "Board") must satisfy itself that the interests of the Company and its minority shareholders are not compromised. The Exchange directs the Board to appoint an independent auditor in consultation with the Exchange, to investigate the circumstances surrounding significant transactions and agreements in the last two years including the breaches listed in paragraph 1. The findings and recommendations of the independent auditor must be publicly disclosed.
3. The Board must assure the Exchange that it is taking steps to prevent recurrence of Listing Rule breaches in the future and publicly disclose such steps. The Exchange recognises that the Company has appointed Collins Stewart Pte. Limited as its continuing sponsor to take effect from 20 April 2009 and announced the appointment on 20 March 2009. The Sponsor will be able to assist the Company to meet its continuing listing obligations and the Board to satisfy itself of the continuing adequacy of internal controls, systems and procedures.
Breach of Listing Rule 1010 and Listing Rule 703
4. On 6 November 2007, Dayen announced that it had signed a 30-year contract with the Xinmin City Government to build, operate and transfer a Sewage Treatment Plant ("BOT Project").
5. On 12 November 2007, six days after the announcement of the BOT Project, the Company announced a second 30-year concession from the Xinmin City Government ("2nd project").
6. On 22 December 2007, Dayen entered into a 50:50 joint venture with Aton Water Pte. Ltd ("AW") to carry out the BOT Project which gave up a 50% interest of the BOT Project. This was not announced. On 26 March 2008, Dayen signed an agreement with AW to dispose of the balance 50% of the BOT Project to AW at cost (the "Disposal"). The Disposal was completed on 8 April 2008. This was also not announced even though the Disposal is a discloseable transaction under Listing Rule 1010.
7. Subsequent to the Disposal, AW failed to pay the balance US$450,000 of the consideration. This led to the signing of a subsequent agreement on 30 January 2009 setting out the payment terms of this outstanding amount. The Disposal was finally announced only on 31 January 2009, ten months after the disposal, breaching Listing Rule 703.
8. The Company did not disclose all the information required under Listing Rule 1010 in its 31 January 2009 announcement. Pursuant to queries from the Exchange, a total of three public clarifications had to be made by the Company before the full information required under Listing Rule 1010 was disclosed.
9. Dayen has breached Listing Rule 1010 for late announcement of a discloseable transaction and failure to announce all information required. It has also breached Listing Rule 703 by failing to announce the joint venture arrangement in December 2007 and the disposal of the BOT project in March 2008 which are material updates.
10. The Exchange also notes that the Company has not provided any updates on the 2nd Project since its announcement on 12 November 2007, thus breaching Listing Rule 703.
Breach of Placement Approval In-Principle ("AIP") Conditions and Listing Rule 703
11. Dayen carried out two placements on 25 January 2008 and 13 May 2008, raising a total of S$14.7 million. Under the AIP conditions imposed by the Exchange for the listing and quotation of the placement shares, the Company was required to (a) make periodic announcements on the utilization of the proceeds as and when the funds were materially disbursed; and (b) provide a status report on the use of proceeds in the annual report.
12. The Company had fully utilized all the proceeds in FY2008. However, it neither accounted to its shareholders periodically as and when the proceeds were used nor disclosed a status report on the use of proceeds in its FY2008 Annual Report. The Company announced the information on 11 February 2009 only when queried by the Exchange. Dayen has thus breached the Placement AIP conditions. When such information was finally disclosed, it was noted that the Company had utilized $9.13 million to purchase shares of Indonesia listed company PT ATPK Resources TBk ("ATPK"), $1.50 million for a failed coal mining rights agreement with ATPK and $4.07 million for working capital. As the Company had announced on 25 June 2008 that ATPK was unable to carry out its obligations under its contractual agreement with the Company, information that the Company had used a significant portion of its placement proceeds for the ATPK investment/mining rights agreement was material. The Company has breached Listing Rule 703 by not making the necessary announcement promptly.
Breach of Listing Rule 707(1)
13. Dayen is required to hold its AGM by 31 January 2009, within four months of its financial year end. The Company delayed its AGM but did not disclose nor explain the delay until it was required to do so by the Exchange. Dayen attributed the delay to one of its Directors, Mr Alan Yau, being undecided about standing for re-election at the AGM. The Exchange is of the view that this is not a good reason. The Company has clearly breached its obligation to hold its AGM in a timely manner in breach of Listing Rule 707(1) and the Companies Act.
Other Observations
14. The Exchange notes that in the last twelve months, seven directors had resigned. Given that the Board has only five members, the number of resignations is troubling. Significant changes to the board could impact on the affairs of companies.
15. The Board must proceed to appoint an independent auditor, in consultation with the Exchange, to investigate into the circumstances surrounding the transactions and agreements in the last two years and report its findings and recommendations. In addition, the Board must assure the Exchange that it is taking steps to prevent recurrence of breaches in the future and publicly disclose such steps.