TABLE OF CONTENTSinvestors.hyflux.com/misc/ar2012.pdf · 1 Vision & Mission 2 Group Financial Highlights 4 Message from Executive Chairman & Group CEO 8 Board of Directors 11 International

TABLE OF CONTENTS

1 Vision & Mission

2 Group Financial Highlights

4 Message from Executive Chairman & Group CEO

8 Board of Directors

11 International Advisory Panel

12 Key Management

13 Geographical Presence

14 Financial Review

17 Operating Review

24 Corporate Social Responsibility

28 Investor Relations

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DELIVERING INNOVATIVE SOLUTIONSLEADING THE WAY

OUR VISIONTo be the leading company the world seeks for innovative and effective environmental solutions.

OUR MISSIONTo provide efficient and cost-effective solutions to meet our clients’ needs through innovation and technological advancement.

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HYFLUX LTDANNUAL REPORT 2012

GROUP FINANCIAL HIGHLIGHTS

($’000) 2008 2009 2010 2011 2012

Revenue 554,224 524,814 569,737 481,975 682,384

Profit before tax 70,375 82,972 100,473 62,043 76,998

Profit after tax 62,218 74,291 88,885 55,725 64,713

Profit attributable to shareholders 59,036 75,036 88,510 53,027 60,994

Shareholders’ equity 297,547 365,244 502,501 920,591 860,593

Total assets 846,555 1,072,563 1,359,702 2,032,465 2,350,344

Net assets 307,899 393,402 514,507 935,567 877,029

Net asset value per share (cents) (1)(2) 37.80 46.10 58.60 60.60 55.81

Earnings per share (cents) (2)(3) 7.50 9.51 10.52 4.30 4.43

Dividend per share (cents) (2) 2.29 3.33 4.17 2.77 3.20

Return on revenue (%) 10.7 14.3 15.5 11.0 8.9

Return on equity (%) (3) 19.8 20.5 17.6 7.1 8.0

(1) FY2011 and FY2012 net asset value excluded non- controlling interests and were adjusted for Class A Cumulative Perpetual Preference Shares (CPS) of $400 million

(2) FY2008 and FY2009 were restated to include December 2010 issue of one bonus share for every two existing ordinary shares(3) FY2011 and FY2012 were adjusted for CPS

GROUp ReVeNUe by COUNtRy & ReGION($ million)

Asia ex-China

MENA

China

Key FINANCIAL DAtAfor year ended 31 December

FY08

16.513.0

FY09 FY10 FY11 FY12

800

700

300

600

200

500

100

400

0

223.0

330.5

314.7

181.3

75.1

226.9

494.6

343.8

114.4 28.9

150.8 140.7 158.9

*All financial information presented in Singapore dollars, unless otherwise stated.

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GROUP FINANCIAL HIGHLIGHTS

(1) FY2011 and FY2012 net asset value excluded non- controlling interests and were adjusted for CPS(2) FY2008 and FY2009 were restated to include December 2010 issue of one bonus share for every two existing ordinary shares(3) FY2011 and FY2012 were adjusted for CPS

$61.0mpROFIt AttRIbUtAbLe tO ShARehOLDeRS($ million)

55.8 centsNet ASSet VALUe peR ShARe (1) (2)

(cents)

3.20 centsDIVIDeND peR ShARe (2)

(cents)

4.43 centseARNINGS peR ShARe (2) (3)

(cents)

8.0%RetURN ON eqUIty (3)

(%)

FY08 FY08

FY08FY08

FY08

37.8

2.29

46.1

3.33

58.6

4.17

60.6

2.77

55.8

3.20

FY09 FY09

FY09FY09

FY09

FY10 FY10

FY10FY10

FY10

FY11 FY11

FY11FY11

FY11

FY12 FY12

FY12FY12

FY12

0

0

0

0

0.0

10

2

5

10

1.0

0.5

20

4

10

20

2.0

1.5

50

10

25

50

3.5

40

8

20

40

3.0

30

6

15

30

2.5

60

12

60

4.0

70

70

4.5

8090

100

59.0

7.50

19.8

75.0

9.51

20.5

88.5

10.52

17.6

53.0

4.30

7.1

61.0

4.43

8.0

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DeAR StAKehOLDeRS

Hyflux improved on our financial performance in FY2012. Our group revenue for the year ended 31 December 2012 increased by 42% to $682.4 million from $482.0 million, and profit after tax and minority interests (PATMI) rose 15% to $61.0 million from $53.0 million. Our operations in Asia ex-China contributed the bulk of revenue and profit growth. The growth was registered despite the lingering uncertainties in the global economic outlook throughout 2012.

Our Board of Directors has recommended a final dividend of 2.50 cents per ordinary share. This is in addition to an interim dividend of

0.70 cents per ordinary share that was paid out on 31 August 2012. The total dividend for the year represents a 16% rise from the dividend declared the year before.

DeLIVeRING INNOVAtIVe SOLUtIONS, LeADING the wAy

We decided to retain the innovation theme for our FY2012 Annual Report as the next phase of our growth is innovation-based. We believe that continued innovation in technology development, systems and processes, and product offerings and solutions will buttress our leading position in the global water industry.

MESSAGE FROM EXECUTIVE CHAIRMAN & GROUP CEO

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Today, we are seeing rising recurring income streams from our operations and maintenance (O&M) business, asset returns, membrane sales and other services. The almost 100% jump in our O&M order book from a year ago is a reflection of part of this concerted initiative.

GROwING ReCURRING INCOMe StReAMS

Over the years, Hyflux has been working on growing predictable and recurring revenues. Today, we are seeing rising recurring income streams from our operations and maintenance (O&M) business, asset returns, membrane sales and other services. The almost 100% jump in our O&M order book from a year ago is a reflection of part of this concerted initiative.

Our total order book currently stands at $2.9 billion with O&M contributing $1.9 billion. At the end of FY2011, our total order book was $1.9 billion with the O&M portion at $943 million. O&M revenues are contractually supported over the concession periods of 20 to 30 years.

We believe that our recurring income will continue to grow substantially. By 2016, our recurring income will capture the full impact of our current portfolio of water projects and asset returns, membrane sales and other services.

Our recurring income streams will complement our engineering, procurement and construction (EPC) income streams which are mainly project-driven.

Key pROjeCtS pROGReSSING weLL

We are pleased with the progress that has been made at Tuaspring Desalination Plant, one of Asia’s largest seawater reverse osmosis

(SWRO) desalination plants by capacity. The desalination plant is expected to produce potable water for PUB in the third quarter of 2013. Construction works on the power plant facility at the Tuaspring project are progressing as planned. With the desalination portion close to completion, we are now working on non-recourse project financing for the entire project, for which the total project cost is an estimated $1.05 billion.

In March 2012, we announced that Hyflux was a member of the consortium that would be developing a 336,000 m3/day capacity SWRO desalination plant for the Dahej Special Economic Zone (SEZ) in Gujarat, India. I am pleased to report that in January 2013 the consortium comprising Hitachi Ltd and Hyflux has finalised and signed the water purchase agreement (WPA) with Dahej SEZ Limited (DSL) for a term of 30 years, including an estimated three-year construction period. DSL is committed to purchase 100% of the water on a take or pay basis. The WPA will become effective once financial close for the desalination project is achieved. With an estimated total project cost of US$600 million, the Dahej Desalination Plant project will be funded through a combination of equity and non-recourse project financing. The consortium is currently in discussion with financial institutions to provide non-recourse project financing.


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Our 500,000 m3/day capacity desalination project in Magtaa, Algeria, one of the world’s largest SWRO plants, is currently undergoing testing and commissioning.

LARGe MUNICIpAL wAteR pROjeCtS bACK IN the pIpeLINe

Globally, tenders for water infrastructure projects of significant sizes were few and far between over the last few years as plans to build new plants were put on hold due to economic uncertainties and financing issues.

We are getting indications of more projects coming back on-stream this year due to pent-up demand. Municipal governments could ill afford to further delay their investments in water infrastructure projects for both domestic and industrial consumption.

The insatiable thirst for water will drive long-term demand for sustainable sources of water through desalination and water recycling. Increasingly, countries are looking at private funding for public sector water investments, hence generating more Build-Operate-Transfer (BOT) and Public-Private-Partnership (PPP) opportunities. Hyflux is actively pursuing such water infrastructure projects in Asia, the Middle East and other selective markets. I believe we are in the position to expand our BOT and EPC portfolios, while growing our O&M business further.

The trend towards SWRO technology to replace more energy-intensive thermal desalination technologies will add to opportunities especially in the Middle East region.

In China, we will continue to invest in the organic expansion of projects under Galaxy NewSpring, our 50/50 joint venture with Mitsui & Co. We will increase our resources on industrial-based projects as we see more available opportunities in this market segment and in the sales of membrane products and systems. We intend to reinforce our brand as a technology partner of choice to state-owned enterprises for BOT projects.

MARKet DeMAND FOR StANDARD SySteMS

We see heightened interest by industries and communities for membrane systems with standard configurations for water treatment applications, such as seawater and brackish water desalination, surface water treatment and wastewater recycling. Typically, these are industrial and manufacturing plants or small communities facing water shortages or water usage restrictions and are in need of a reliable and high quality water supply in a quick and cost-effective manner. Apart from tailored integrated solutions, we now also offer pre-engineered standard membrane systems that integrate our proprietary Kristal® ultrafiltration and reverse osmosis membrane units and components.

INSpIRING INNOVAtION

On 3 July 2012, Dr Vivian Balakrishnan, Minister for the Environment and Water Resources, inaugurated our new HQ building, Hyflux Innovation Centre (HIC). Developing HIC from the ground allowed us to create a living space that encourages interaction and the exchange of ideas to spark innovation. Our employees, who spend long hours at work, appreciate the

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facilities that provide a seamless link between innovation, creativity, work and play. We have also put in place family-friendly facilities such as a child care centre for the mothers and fathers among our employees.

VOLUNteeRING AND MAKING A DIFFeReNCe

Our Corporate and Social Responsibility (CSR) efforts in 2012 took on the added dimension of staff volunteerism.

A group of our employees volunteered to read and organise activities for the KIDSRead programme under the Asian Women’s Welfare Association’s (AWWA) family service centre nearby. The weekly reading programme is targeted at pre-schoolers from less advantaged families and exposes them to the English language and reading before they enter primary school. We will commit to this project for a second year as it is a meaningful contribution to the neighbourhood.

In September, we participated in the NTUC FairPrice Walk for Rice @ Southeast which was an initiative with the People’s Association. We organised a 4.3 km walk from HIC to the Singapore Flyer. For every 100 m that each of our staff walked, NTUC FairPrice donated a bowl of rice to the needy. In total, we raised 9,675 bowls of rice covering a collective distance of 967.5 km.

We closed the year with a charity car wash, organised in collaboration with Yong-en Care Centre. We managed to raise more than $20,000 to support the activities of Yong-en Care Centre which sees to the needs of seniors and low-income families in the Chinatown area.

We want to continue to make a difference to the community and in the lives of others by devoting time and energy, in addition to sponsorships and philanthropic contributions.

INteRNAtIONAL ADVISORy pANeL

We welcome Mrs Yu-Foo Yee Shoon and Ms Liu Jingsheng to our International Advisory Panel which has been set up to advise on our continued expansion in international markets. A former Minister of State who retired from Singapore politics in 2011, Mrs Yu-Foo is a passionate advocate on labour and community issues. Ms Liu brings with her extensive experience in investment banking at the China International Capital Corporation Limited. We will benefit richly from their counsel in public policy and government relations and intimate knowledge of the international markets.

thANK yOU

Finally, on behalf of our Board of Directors, I would like to thank our shareholders, partners, customers and suppliers for their support all these years.

I would also like to thank our employees for their dedication and hard work through 2012. I am fully assured that I can count on their continued support. OLIVIA LUM Executive Chairman & Group CEO

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BOARD OF DIRECTORS

Olivia LumExecutive Chairman & Group CEO

Ms Lum started corporate life as a chemist with Glaxo Pharmaceutical and left in 1989 to start up Hydrochem (S) Pte Ltd, the precursor to Hyflux Ltd.

Managing the Group for more than 20 years now, Ms Lum is the driving force behind Hyflux’s growth and business expansion, and is responsible for policy and strategy formulation and corporate direction.

A former Nominated Member of Singapore Parliament, Ms Lum currently is a member of the Singapore-Tianjin Economic & Trade Council, the Singapore-Jiangsu Cooperation Council, Singapore-Zhejiang Economic & Trade Council and Singapore Business Federation Council.

Among the many accolades Ms Lum has received for her entrepreneurial achievements are: the Winner of the Regional Growth Award by Nihon Keizai Shimbun at the 11th Nikkei Asia Prize 2006, and the Ernst & Young World Entrepreneur Of The Year 2011.

Ms Lum holds an Honours degree in Chemistry from the National University of Singapore.

teo Kiang KokLead Independent Director

Mr Teo has been a Non-Executive Independent Director of Hyflux Ltd since December 2000. He is also the Chairman of the Nominating Committee and a member of the Remuneration and Risk Management Committees.

Mr Teo was admitted to the Singapore bar in 1983. He was a partner of Shook Lin & Bok LLP (SLB) from 1988 to 2011. Prior to joining SLB, he worked as an associate with Freshfields, an international law firm and as a corporate finance executive with Wardley Limited, an international investment bank. He obtained his Bachelor of Law (Honours) degree from the University of Hull and is a Barrister-at-Law from Lincoln’s Inn.

Mr Teo headed the Corporate Finance and China practices of SLB. In his 29 years of legal practice, he has advised on securities offerings, mergers and acquisitions, joint ventures, strategic investments as well as corporate law and regulatory compliance, particularly the listing and compliance requirements of companies listed on the Singapore Exchange. Mr Teo’s regional practice included foreign investment work in and out of Singapore, the People’s Republic of China, India and the ASEAN countries. He retired as a senior partner of SLB in May 2011 and was a consultant to SLB until May 2012.

Lee joo haiNon-Executive Independent Director

Mr Lee has been a Non-Executive Independent Director of Hyflux Ltd since December 2000. He is also the Chairman of the Audit Committee and a member of the Remuneration and Risk Management Committees.

Mr Lee is a member of both the Institute of Certified Public Accountants of Singapore and the Institute of Chartered Accountants in England and Wales. He was a partner in a public accounting firm in Singapore and has more than 20 years of experience in accounting and auditing.

Mr Lee also sits on the boards of other listed companies, including Lung Kee (Bermuda) Holdings Ltd.

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BOARD OF DIRECTORS

Gay Chee CheongNon-Executive Independent Director

Mr Gay has been a Non-Executive Independent Director of Hyflux Ltd since August 2001. He is also the Chairman of the Remuneration Committee, as well as a member of the Nominating and Audit Committees.

He sits on the Board of Governors of Temasek Polytechnic; Advisory Board of the Lee Kong Chian School of Business at Singapore Management University; Entrepreneurship Committee at the National University of Singapore; Board of Trustees of the United World College of South East Asia Foundation; Board of Heliconia Pte Ltd; and Board of CapitaMall Trust Management Limited.

Mr Gay was the co-founder and CEO of 2G Capital Private Limited, a private investment company investing in equities and private companies in the Asia Pacific economies. The company was awarded Highest Net Profit in 2006 and Net Profit Excellence in 2007 in theannual SME 500 ranking.

Mr Gay graduated from the Royal Military Academy (RMA), Sandhurst and Royal Military College of Science, Shrivenham, United Kingdom. He holds Honours degrees in ElectronicsEngineering from the Royal Military College of Science, Shrivenham and in Economics from the University of London, United Kingdom. He also has a Master of Business Administration from the National University of Singapore.

Christopher MurugasuNon-Executive Independent Director

Mr Murugasu has been a director of Hyflux Ltd since February 2005. He is also a member of the Nominating and Remuneration Committees.

Previously Senior Vice President for Corporate Services at Hyflux Ltd, he was responsible for the Group's human resources, procurement and general administration functions. Prior to joining Hyflux, Mr Murugasu had accumulated over 15 years of experience in the public sectoras well as with a foreign bank.

He holds an Honours degree in Computing Science from Imperial College, United Kingdom, anda Master's degree from the London School of Economics, United Kingdom.

Rajsekar Kuppuswami MittaNon-Executive Independent Director

Mr Mitta has been a Non-Executive Independent Director of Hyflux Ltd since April 2007. He is also Chairman of the Risk Management Committee and member of the Audit Committee.

Mr Mitta is currently the Chairman of Essential Value Associates Pte Ltd, a boutique consulting firm that works with selected Chairmen and CEOs who seek to create lasting change to develop high growth sustainable businesses with quality governance.He was Chairman of Arthur D Little Asia and a Senior Member of Booz Allen Hamilton. He has advised some of the world's best consumer goods and customer-intensive companies, technology-intensive corporations, conglomerates and regional governments. Prior to consulting, Mr Mitta worked in senior marketing roles with Pepsico and Mars Inc.

Mr Mitta is a seasoned negotiator and deal maker with well developed cross cultural sensitivity developed through living and working across multiple countries and consulting with a diverse list of clients. His main areas of professional interest are in strategy development and value extraction through enhancing marketing and sales effectiveness, the competitive repositioning of brands/services and issues relating to managing change within organisations.

Mr Mitta holds a Bachelor's degree in Chemical Engineering and a Master's in Business Administration.

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BOARD OF DIRECTORS

Simon tayNon-Executive Independent Director

Mr Tay has been a Non-Executive Independent Director of Hyflux Ltd since May 2011. He is also a member of the Risk Management Committee.

He is a public intellectual as well as private advisor to major corporations and policymakers. He is concurrently Chairman of the Singapore Institute of International Affairs, the country's oldest think tank and founding member of the ASEAN network of think tanks, and Associate Professor, teaching international law at the National University of Singapore.

Mr Tay is also Senior Consultant at WongPartnership, a leading Asian law firm with practices across the region. He serves on Toyota Corporation's Global Advisory Board and Far East Organization Group. Previously, he has been corporate advisor to Temasek Holdings, the Singapore government's investment firm. He has spoken at leading business conferences including the World Economic Forum, APEC CEO Summits and SIBOS, and briefed leading banks and major corporate boards.

From 1992 to 2008, he served in public positions for Singapore, including as Chairman of the National Environment Agency and reporting to the Minister, and a Nominated Member of Parliament.

Gary KeeNon-Executive Non-Independent Director

Mr Kee has been a Non-Executive Non-Independent Director of Hyflux Ltd since May 2011. He is also a member of the Audit Committee.

Mr Kee was the Chief Executive Officer of the Trustee-Manager and Non-Independent Executive Director of Hyflux Water Trust Management Pte Ltd. Prior to that, he held numerous senior regional management positions in Finance, Operations and StrategicBusiness Development in his 23-year tenure at Hewlett Packard. He last served as Director, Head of Strategy and Corporate Development for Asia Pacific & Japan.

Before joining Hewlett Packard, Mr Kee was a Management Consultant with Arthur Andersen Associates (now known as Accenture). Mr Kee has also served as a Board Director of various companies and JTC Corporation.

Mr Kee holds a Bachelor of Commerce from McMaster University in Canada and a Master of Business Administration from the University of Texas at Arlington in the USA.

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INTERNATIONAL ADVISORY PANEL

yu-Foo yee ShoonSenior Advisor

Mrs Yu-Foo Yee Shoon retired from Singapore politics in 2011, having been an elected Member of Parliament from 1984 to 2011. She was Minister of State for the Ministry of Community Development, Youth and Sports from August 2004 until her retirement. Before that, Mrs Yu-Foo was Mayor of the South West CDC and Senior Parliamentary Secretary for the then Ministry of Community Development and Sports.

Mrs Yu-Foo started her career with the National Trades Union Congress (NTUC), rising through the ranks to become Deputy Secretary-General at the labour movement. She was the first woman to chair the NTUC Central Committee in 1980. An active figure in social and volunteer work, she is the Founder Patron for Singapore’s Breast Cancer Foundation and Chairman of the NTUC Ong Teng Cheong Institute Training Foundation. She advises and sits on the boards of various organisations, including NTUC Childcare, Global Yellow Pages, Singapura Finance and is an executive council member of Hainan University, China. In 2011, she was accorded "NTUC Stalwart" award at the NTUC 50th Anniversary May Day celebrations.

She holds a Master’s degree in Business from the Nanyang Technological University and Honourary Doctorate of Education from Wheelock College of Boston, USA.

Liu jingshengSenior Advisor

Ms Liu Jingsheng joined China International Capital Corporation Limited (CICC) in 1996 and currently serves as Senior Advisor. Previously, she was the Managing Director of CICC, Chairman and CEO of CICC (Singapore) Pte Ltd, and the Head of Strategy Research Department. Ms Liu worked in the Investment Banking Department for years, boasting rich experience in restructuring, reforming, listing and financing for state-owned companies, and abundant client resources in the energy and mining sectors.

At CICC, Ms Liu led and participated in a number of restructuring, reforming and overseas listing projects in the energy, mining, and electricity sectors for state-owned industrial leaders, which included China Shenhua Energy Company Limited, Huadian Power International Corporation Limited, Aluminum Corporation Of China Limited, PetroChina Company Limited and People’s Insurance Company of China. Of her many years in CICC, she had raised more than US$70 billion worth of funds in total. Before joining CICC, Ms Liu had been working in the National Development and Reform Commission, P.R.China for 11 years.

Ms Liu holds a Master’s degree in Developing Economics from Khon Kaen University Thailand, and a Bachelor’s degree in Planning Economics from Renmin University of China.

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KEY MANAGEMENT

Olivia LumExecutive Chairman & Group CEO

winnifred heapGroup EVP, Capital Markets

Sam OngGroup EVP & Group Deputy CEO

Oon jin teikGroup EVP & CEO, China

Cho wee pengGroup EVP & Group CFO

Dr Andrew NgiamGroup EVP & Group COO

peter wuGroup Senior MD & CEO, Galaxy NewSpring

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GEOGRAPHICALPRESENCE

1,300 400MORE THAN PLANTS IN OVER

MEMBRANE PRODUCTS AND SYSTEMS INSTALLED

LOCATIONSWORLDWIDE

LANDMARK pROjeCtS

Singapore's First NEWater Plant

Bedok NEWater Plant

Singapore's Largest Membrane Bioreactor Plant

Jurong Membrane Bioreactor

Singapore's First SWRO Desalination Plant

SingSpring Desalination Plant

Singapore's Largest SWRO Desalination Plant

Tuaspring Desalination Plant

World's Largest SWRO Desalination Plant

Magtaa Desalination Plant

China's Largest SWRO Desalination Plant

Tianjin Dagang Desalination Plant

Our offices

Landmark plants

Membrane installations

France

Algeria

Malaysia

Singapore

IndiaSaudi Arabia

China

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FINANCIALREVIEW

For year ended 31 December

OVeRVIew

Hyflux as a group achieved revenue of $682.4 million and profit attributable to shareholders of $61.0 million for FY2012. Basic earnings per share increased by 3% to 4.43 cents for FY2012.

ReVeNUe

Group revenue for FY2012 increased by 42% to $682.4 million as compared to $482.0 million for FY2011 mainly due to higher contributions from projects in Asia ex-China.

($ million) 2011 2012 % change

Revenue 482.0 682.4 42

Profit before tax 62.0 77.0 24

Profit attributable to shareholders 53.0 61.0 15

Earnings per share (cents) 4.30 4.43 3

GROUp ReVeNUe by SeGMeNt($ million)

FY11 FY12

Municipal

Industrial

Others

417.8(87%)

629.1(92%)

58.8(12%)

49.8(7%)

5.4(1%)

3.5(1%)

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FINANCIALREVIEW

Revenue from the municipal sector continued to be the main contributor to Hyflux's growth as evidenced by the increase from $417.8 million in FY2011 to $629.1 million in FY2012. This represented a 5% point increase from 87% in FY2011 to 92% in FY2012 of our total revenue. Hyflux's municipal projects are in Asia and Middle East & North Africa (MENA).

Industrial sector sales contributed 7% or $49.8 million in FY2012 as compared to 12% or $58.8 million in FY2011.

The Asia ex- China market continued to be the major revenue contributor. Revenue went up from $226.9 million in FY2011 to $494.6 million revenue in FY2012, representing a rise from 47% in FY2011 to 73% in FY2012 of our total revenue.

On the other hand, we saw marginal contributions from the MENA market. Revenue contributions decreased from $114.4 million in FY2011 to $28.9 million in FY2012. This decline from 24% in FY2011 to 4% in FY2012 of our total revenue reflected the shift in geographical mix of projects as major desalination projects in MENA were completed during the year.

Revenue from China was $158.9 million or 23% of the total revenue in FY2012 as compared to $140.7 million or 29% in FY2011. COStS AND eXpeNSeS

Raw materials and consumables used and subcontractors’ costs rose from $259.5 million in FY2011 to $413.5 millionin FY2012, largely driven by construction activities for projects in Asia ex- China. The increase in project- based employees also resulted in a rise in staff costs by 43% from $60.0 million in FY2011 to $85.9 million in FY2012.

Finance costs increased by 26%, from $22.6 million in FY2011 to $28.5 million in FY2012 due to higher bankborrowings.

Depreciation, amortisation and impairment decreased from $36.6 million in FY2011 to $29.4 million in FY2012.

Other expenses increased from $50.1 million for FY2011 to $60.1 million for FY2012 as a result of operating lease expense incurred during the year as well as a gain on sales of machinery and equipment in FY2011.

GROUp ReVeNUe by COUNtRy($ million)

Asia ex-China

China

MENA

226.9(47%)

140.7(29%)

114.4(24%)

28.9(4%)

494.6(73%)

158.9(23%)

FY11 FY12

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FINANCIALREVIEW

The effective tax rate in FY2012 was about 16.9% mainly due to higher contributions from entities in jurisdictions that attracted higher statutory tax rates.

eARNINGS peR ShARe

Basic and fully diluted earnings per share, adjusted for dividends on Class A Cumulative Perpetual Preference Shares (CPS), for FY2012 increased by 3.0% and 3.3% to 4.43 and 4.42 cents respectively as compared to FY2011.

bALANCe Sheet ReVIew

Shareholders’ equity decreased to $860.6 million as at 31 December 2012 from $920.6 million as at 31 December 2011. This was mainly attributable to the purchase of 33,935,000 treasury shares of $47.0 million, dividend payments of $47.6 million and movements of $34.6 million on translation of foreign operations as a result of the strengthening of the Singapore dollar against the US dollar and Chinese renminbi during the financial year. The decrease was offset by net profit for the year.

Current assets decreased to $914.9 million as at 31 December 2012 from $1,099.5 million as at 31 December 2011. This was largely due to lower cash and cash equivalents as well as gross amounts due for contract work.

Non- current assets increased to $1,435.4 million as at 31 December 2012 from $933.0 million as at 31 December 2011 as a result of intangible assets arising from service concession arrangements of $205.4 million and financial receivables of $286.5 million arising from the Group’s activities in Asia ex- China.

Current liabilities increased to $391.8 million as at 31 December 2012 from $356.2 million as at 31 December2011 mainly due to an increase in trade payables. This was

offset by repayments of fixed rate unsecured notes (Notes) of $88.5 million issued under the Multicurrency Debt Issuance Programme.

Non-current liabilities increased to $1,081.5 million as at 31 December 2012 from $740.7 million as at 31 December 2011 due to the increase in loans and borrowings. Included in the loans and borrowings as at 31 December 2012 was $553.2 million of Notes that mature between 2014 and 2019.

Our net gearing ratio remained a healthy 0.67 times as at 31 December 2012.

CAShFLOw AND LIqUIDIty

Hyflux’s cash position decreased to $541.2 million as at 31 December 2012 from $662.4 million as at 31 December 2011.

In FY2012, net cash of $243.9 million was used in our operating activities, mainly towards service concession arrangement projects. Excluding cash used in these projects, net cash generated in the operating activities was $270.9 million in FY2012, mostly contributed by collections from projects executed.

Cash used in investing activities in FY2012 was for the construction of Hyflux’s new headquarters and manufacturing facility at Tuas Hub.

Cash generated from financing activities in FY2012 was mainly from borrowings to fund Hyflux’s projects. Excluding cash flow from borrowings, cash was used for payments of dividends and purchases of treasury shares.

17


OPERATINGREVIEW

eNGINeeRING, pROCUReMeNt AND CONStRUCtION (epC)

Hyflux delivered a creditable performance in 2012 despite a pullback in projects as a result of the combined effects of global economic uncertainties and Arab Spring. Our EPC order book at the end of FY2012 was $1.03 billion.

In March 2012, Hyflux and our Japanese consortium partner Hitachi Ltd signed a Co-developer Agreement with Dahej SEZ Limited to design, build, own and operate a 336,000 m3/day seawater reverse osmosis (SWRO) desalination plant to be located in the Dahej Special Economic Zone in the state of Gujarat, India. This marks Hyflux’s first large-scale water project in India. The total project cost is estimated at US$600 million and will be funded through a combination of equity and non-recourse project finance. Hyflux is expected to undertake a portion of the EPC services amounting to an estimated US$420 million. The water purchase agreement which will be for a period of 30 years, including an estimated three-year construction period, was signed in January 2013 and we are currently working on the financial close.

In Singapore, the 318,500 m3/day Tuaspring Desalination Plant is scheduled to start operations in the third quarter of 2013 for a concession period of 25 years. Construction on Singapore’s second and largest desalination plant commenced in the third quarter of 2011 under a tight project timeline. Work on the on-site 411 MW combined cycle gas turbine power plant is also progressing as planned.

With the desalination plant close to completion, we are working on non-recourse project financing for the entire project which has an estimated total project cost of $1.05 billion.

Hyflux's Kristal® ultrafiltration membranes at Tuaspring Desalination Plant, Singapore

18


OPERATINGREVIEW

In Algeria, our 500,000 m3/day Magtaa Desalination Plant, one of the largest SWRO plants in the world, has recently entered into the testing and commissioning stage after electrical power was supplied to the site. Testing and commissioning is an essential process prior to the startup of the desalination plant.

During the year, Hyflux also undertook expansion and enhancement works estimated at $88 million at six wastewater treatment plants in China to raise the combined treatment capacity by 100,000 m3/day. The plants are under the Galaxy NewSpring portfolio, our 50/50 joint venture with Mitsui & Co. At the close of FY2012, the expansion works were more than 50% completed.

OpeRAtIONS & MAINteNANCe (O&M)

Our O&M order book doubled to $1.87 billion in FY2012 with the addition of two large-scale desalination projects in Singapore and Algeria which are expected to start operation in FY2013. At the close of FY2011, our O&M order book was $943 million. We expect our O&M revenue to capture the full impact of our current portfolio of water projects by FY2016. The growth of our O&M order book is part of Hyflux’s

EPC

O&M

465

43530

601

435

166

1,117

863

254

1,480

1,145

335

1,848

748

1,100

1,378

423

955

1,874

931

943

2,897

1,025

1,872

Dec 05 Dec 06 Dec 08 Dec 10 Dec 12Dec 11Dec 09Dec 07

1,000

1,500

2,000

2,500

3,000

500

0

Note:

1. O&M order book is a summation of future revenues of our portfolio of plants over 20 – 30 year concession periods.2. Dec 2012 EPC order book includes DahejSpring Desalination Plant; WPA was signed in January 2013.3. Dec 2012 O&M order book includes Tuaspring and Magtaa projects.

ORDeR bOOK($ million)

Asia’s Largest SWRO Desalination Plant

At 336,000 m3/day, DahejSpring Desalination Plant which is to be located in the Dahej Special Economic Zone in the state of Gujarat, India, will be Asia’s largest SWRO desalination plant. The co-developer and water purchase agreements were signed in March 2012 and January 2013 respectively, and the project will be undertaken by Hyflux and Hitachi on a design, build, own and operate basis once financial close is achieved.

19


OPERATINGREVIEW

concerted initiative to develop recurring and predictable income streams. A stronger O&M order book translates to a higher proportion of steady and predictable revenues for the Group as the O&M revenues are contractually supported over the concession periods of 20 to 30 years. We are also seeing rising recurring income streams from asset returns, membrane sales and other services within our Group. These will complement that of our EPC revenues which are mainly project-driven.

INNOVAtION

In 2012, we launched Standard Membrane Systems, a series of compact, pre-engineered seawater and brackish water reverse osmosis systems that integrate our proprietary Kristal® ultrafiltration membranes with reverse osmosis membrane units and components. These systems are suitable for a wide range of water treatment applications such as seawater and brackish water desalination, surface water treatment and wastewater recycling. They can be rapidly installed and started up and offer a reliable, cost-effective and high quality water supply to industries and small communities facing water shortages or water usage restrictions.

The Standard Membrane Systems are backed by Hyflux’s years of expertise and experience in design, development, process engineering, installation, operation and maintenance of small to large-scale desalination facilities worldwide.

At Hyflux, we strive for continuous innovation in designs, techniques and processes as well as invest in the development of new products and technologies that will create new value for communities, industries and consumers. Our team of researchers and scientists work closely with the engineering design and technology commercialisation departments that integrate the technologies developed out of our research and development laboratories into viable, cost-effective and sustainable solutions for the global water industry.

We also collaborate with a network of research institutes around the world to provide us with access to new technologies, techniques and methodologies, and to enable us to anticipate tomorrow’s challenges.

Sustainable, Integrated Water Solutions for Industries and Communities

Hyflux’s Standard Membrane Systems, a series of compact, pre-engineered seawater and brackish water reverse osmosis systems that incorporate Hyflux’s proprietary Kristal® ultrafiltration pre-treatment technology, were launched in 2012 to provide a quick, cost-effective and sustainable solution for industries and communities facing water shortages or water usage restrictions.

At Hyflux, we strive for continuous innovation in designs, techniques and processes as well as invest in the development of new products and technologies that will create new value for communities, industries and consumers.

20


OPERATINGREVIEW

On 3 July 2012, Dr Vivian Balakrishnan, Singapore’s Minister for the Environment and Water Resources, inaugurated our new global headquarters, Hyflux Innovation Centre (HIC). HIC is our design, R&D and commercialisation centre to spearhead the development of membrane technologies for municipal and industrial applications. Developing HIC from the ground up allowed us to create a working environment that encourages interaction and the exchange of ideas to spark innovation.

To us, innovation is more than research and development. Innovation encompasses every other aspect of the water value chain in which we are present, from the way we design and develop membrane systems and plants, to the way we structure, bid and finance large-scale water projects.

It is this approach to innovation that has propelled us to become one of the world’s leading fully-integrated water solutions companies and will continue to be crucial for the next phase of our growth.

Hyflux Innovation Centre, Hyflux's new global headquarters

21


OPERATINGREVIEW

present opportunities for Hyflux. PUB, the national water agency, has outlined in a report released in March 2013 its 2030 targets for 50% of Singapore’s water demand to be met by NEWater and 20% of water demand to be met by desalinated water. Together, these two alternative water sources will be able to meet up to 80% of water demand in 2060. As PUB continues to expand and invest in water infrastructure projects to meet the future demand for water, new projects are expected to be unveiled in the coming years.

In India, Hyflux and Hitachi are working on the financial close for a 336,000 m3/day SWRO desalination plant to be located in the Dahej Special Economic Zone after signing a Co-developer Agreement and water purchase agreement with Dahej SEZ Limited. Set to be Asia’s largest desalination plant, Hyflux’s first large-scale municipal water project in India will increase our profile in India and pave the way for our participation in more municipal water projects.

India is also gaining importance as Hyflux seeks to expand our engineering capabilities. During the year, we opened an Engineering Resource Centre in Pune that will support our long-term growth. When the centre becomes fully operational, it will provide engineering services for the Dahej desalination project and other projects around the world.

Hyflux’s New Global Headquarters

Hyflux Innovation Centre, which was opened by Dr Vivian Balakrishnan, Singapore’s Minister for the Environment and Water Resources on 3 July 2012, serves as the nerve centre of Hyflux’s global operations. Besides accommodating the executive and corporate offices, it houses the engineering design and technology commercialisation departments that integrate the technologies developed out of the Group’s research and development laboratories into viable, cost-effective and sustainable solutions for the global water industry.

GeOGRAphICAL MARKetS

Asia ex-China

In FY2012, revenue from Asia ex-China was $494.6 million or 73% of Group revenue. This more than doubled from FY2011 due to higher contributions from projects in Asia ex-China. The development of Tuaspring Desalination Plant in Singapore went into full swing in FY2012. The desalination plant is scheduled to start operations in the third quarter of 2013. Construction work on the 411 MW combined cycle gas turbine plant facility which is being integrated with Tuaspring Desalination Plant is progressing as planned. Hyflux is undertaking the structural, mechanical and electrical works while Siemens will supply an F-class gas turbine. In the meantime, Tuaspring Desalination Plant will obtain electricity from the grid until its on-site power plant starts operations.

In Singapore, Hyflux’s consumer products arm has made inroads into the residential development market. Our antioxidant alkaline ultrafiltration drinking water system will soon come fitted in the residential units of some upcoming developments. Sales through our on-line store, HyfluxShop, have progressively increased with greater awareness created for the channel. Our consumer products are also available at certain retail chains.

Singapore which has a very comprehensive road map for water sustainability and management will continue to

Artist's impression of 411 MW power plant at Tuaspring project

22


OPERATINGREVIEW

Magtaa Desalination Plant, Algeria

Singapore’s Second Desalination Plant to Operate in 3Q2013

The 318,500 m3/day Tuaspring Desalination Plant in Tuas is scheduled to start operations in the third quarter of 2013. Permanent Secretary Mr Choi Shing Kwok of the Ministry of Environment and Water Resources (second from right) visited the plant in November 2012 and was impressed with the progress made in such a short period.

There is huge growth potential for the desalination and water recycling markets in India as many states are increasingly facing water shortages due to low ground water levels and high demand. Desalination and water recycling are cost-efficient and sustainable solutions for cities and industries to address the challenges of securing reliable water supplies and effective wastewater management.

China

Revenue contribution from the Group's operations in China was $158.9 million or 23% of Group revenue in FY2012. The total revenue from China was 13% higher than that registered in FY2011. During the year, we undertook expansion and enhancement works at six wastewater treatment plants in China which had reached high utilisation levels to increase their combined capacity by 100,000 m3/day. The plants, Changshu Wastewater Treatment Plant, Tiantai Wastewater Treatment Plant, Yangzhou Wastewater Treatment Plant, Wuxi Wastewater Treatment Plant, Mingguang Wastewater Treatment Plant and Langfang Wastewater Treatment Plant, are under the Galaxy NewSpring portfolio. As at end 2012, the $88 million organic expansion was more than 50% completed. When fully completed, the total designed capacity of the entire Galaxy NewSpring portfolio of plants will exceed 1 million m3/day.

Hyflux will continue to invest in the organic expansion of Galaxy NewSpring’s portfolio of water projects. Our Group will also invest more resources on industrial-based projects where there are more available opportunities as well as in the sales of membrane products and systems.

Middle East and North Africa

The Middle East and North Africa (MENA) region recorded revenue of $28.9 million or 4% of Group revenue in FY2012 compared to a contribution of $114.4 million or 24% of Group revenue in FY2011. This reflected the shift in the geographical mix of projects as major desalination projects in MENA were completed during the year. The rise of the Arab Spring in 2011 and the ensuing political and social upheavals in some countries also explained the lack of opportunities in the region over the last two years.

However, we are now seeing signs of recovery in the region due to pent-up demand. Water infrastructure projects that have been put on hold have been revived and governments in several Gulf and African countries are pushing forward with their plans for large-scale desalination plants to meet rising water demand for potable and industrial use.

23


INDUStRy OUtLOOK

The global water industry went through a challenging year in FY2012 as the financial crisis and the Arab Spring unrest continued to have an impact on projects. In particular, the desalination industry experienced a dramatic contraction for the second year in a row due to delays and cutbacks in desalination programmes. According to Desaldata, this trend is expected to start to reverse in 2013 and the desalination market could deliver an average compound annual growth rate of 12% over the next five years.

Water is a vital resource for human life and a wide range of activities. The need for clean, safe water for domestic consumption and for use in industries and agriculture is tremendous. However, water is becoming scarcer, exacerbated by a combination of climate change, rapid population and economic growth. At the same time, industrialisation and urbanisation have outpaced wastewater treatment and management in some countries. Wastewater is often discharged into waterways even though it may not meet water quality discharge standards. Such practices cause water pollution and great environmental stress for ecosystems.

Improving economic conditions and the growing urgency for water treatment solutions such as wastewater treatment, water recycling and seawater desalination will drive investments in water infrastructure projects. Countries and industries are increasingly seeking to develop not only sustainable and reliable water sources but also effective wastewater treatment systems that will secure water and the environment for generations to come.

As more countries look toward private funding for public sector water investments, Build-Operate-Transfer (BOT) opportunities will grow. This is an area which Hyflux has the know-how and experience through the expertise we have developed in engineering, procurement and construction, project management, operations and maintenance, and project financing many water treatment plants around the world. We continue to actively pursue BOT water infrastructure projects in Asia, the Middle East and other selective markets.

Organic Expansion of Six Galaxy NewSpring Plants

Expansion and enhancement works at six Galaxy NewSpring wastewater treatment plants in China which had reached high utilisation levels would raise the total capacity of these plants by 100,000 m3/day. At the end of 2012, some 50% of the works had been completed.

OPERATINGREVIEW

24


CORPORATE SOCIALRESPONSIBILITY

hUMAN CApItAL

Hyflux has a workforce of some 2,400 employees around the world. We work to deliver solutions to improve lives in the communities we serve and to translate science and technology into lasting contributions that mitigate global water scarcity.

The Hyflux team is a global, diverse and passionate group. We focus on recruiting, engaging, motivating and retaining individuals who are passionate, willing to dream big, to tread untried paths and to learn along the journey. It is this philosophy and enthusiasm that spurs us to constantly innovate and to find creative ways of doing things better.

We recognise that our people are the foundation of the company and believe that by creating spaces for interaction and the exchange of ideas, ingenious and innovative outcomes can result. With this in mind, we have created in our new global headquarters, Hyflux Innovation Centre (HIC), a seamless link between innovation, creativity, work and play through facilities like a fully-equipped gym, staff lounge and landscaped gardens. To meet the needs of working parents among our employees, we have a child care centre operating in our premises.

To promote family life, the highly popular Bring Your Child to Work Day was held in October in conjunction with Children’s

The Hyflux team is a global, diverse and passionate group. We focus on recruiting, engaging, motivating and retaining individuals who are passionate, willing to dream big, to tread untried paths and to learn along the journey.

Hyflux's marching contingent celebrates Singapore's 47th birthday

25



Day for the fifth consecutive year. A total of 54 children followed their parents to the office and spent a thrilling day being entertained with games, a magic show, balloon sculpting, a movie and party food. Best of all for the children and their parents, it was the opportunity of spending quality time together on an otherwise work-day.

As Hyflux continues to evolve and grow, our employees will have tremendous career development and progression opportunities. We are committed to their learning and development, and invest in a range of training programmes relevant to employees at different career stages, job

GLObAL wORKFORCeDistribution by regions, 2012 (%)

Singapore

India

China

MENA & Others

Malaysia

1.1%1.1%3.5%

51.5%42.8%

Distribution by gender, 2012 (%)

Male

Female

74.1%

25.9%

rotation and overseas postings to equip them with in-depth experience and build skills that are crucial to our ever-growing operations and long-term success. We also run the Hyflux Helping Hands Fund to provide financial assistance, scholarships and bursaries to employees with financial difficulties.

We engage employees through regular dialogue sessions between senior management and employees, the company intranet, workshops and work-life balance programmes. Our employee-run club Hyfun, made up of representatives from various departments, organises activities that foster interaction and bonding.

Outstanding employees are recognised for the significant contributions made to the company with the annual CEO Award. Five employees from our office in Singapore received the award in 2012.

eNVIRONMeNt

Hyflux plays a part in sustainable development by helping to meet the world’s growing water needs in environmentally and socially responsible ways. Our water solutions ease the strain on water resources by enabling industries and communities to tap on non-traditional sources such as used water and seawater, and limit environmental impact by treating wastewater before it is released into the natural environment.

At the same time, we are also conscious about water consumption in our operations. To reduce the amount of water consumed, innovative greywater recycling systems

"Bring Your Child To Work" Day

26



using Hyflux’s proprietary membranes have been installed at HIC and at Hyflux Production Hub – to tap on wastewater for re-use.

For our efforts in incorporating best practices in environmental design and construction and the adoption of green building technologies, including meeting the key criteria of energy efficiency, water efficiency, environmental protection, indoor environmental quality and other green and innovative features that contribute to better building performance, HIC was awarded the BCA Green Mark Platinum Award in May 2012. The BCA Green Mark Platinum Award meets the most stringent criteria set by the Building & Construction Authority of Singapore.

We continuously seek to improve the efficiency of water and wastewater treatment methods through innovative design, layout and processes so that we can mitigate the effects of our activities on the surroundings. By enhancing the performance of our membrane products and water treatment plants, we are able to deliver high quality water for domestic and industrial use at better energy efficiency, smaller plant footprint, lower chemical requirements, and lower costs.

At Hyflux, we are passionate about continually creating solutions to make water clean, safe, accessible and affordable for all.

heALth & SAFety

It is our mission to create an accident-free environment and nurture a safety culture that keeps our employees and contractors safe at every Hyflux facility and project. Our approach is guided by a health and safety management system which has been certified to OHSAS18001 standards.

With a workforce that comes from different cultures and countries, it is important that the concept of safety is easy to understand and follow and becomes a way of life for everyone. Safety practices are integrated into our work processes and emphasis is placed on personal and collective accountability.

To support Hyflux’s aim of an accident-free environment, our Environment, Safety and Health Committee continues to promote initiatives to strengthen our safety culture and reward positive safety performance and behaviour.

COMMUNIty

Hyflux seeks to contribute in meaningful ways to the local communities in which we operate by supporting a variety

COMMUNIty INVeStMeNt SpeNDING, 2012 (%)

Community

Others

Education/ Entrepreneurship

Environment57%20%

16%

7%

of initiatives close to our heart: the environment, education, entrepreneurship and community relations.

Hyflux believes that a good education will help to set the foundation for the future. The knowledge and skills that children learn in school today will determine whether we as a society can meet our greatest challenges in the years to come. We continued to partner educational institutions in the sponsorship of scholarships, bursaries and book prizes so that deserving students continued to have access to quality education.

For the second year running, a Hyflux contingent marched in the National Day Parade held at The Float @ Marina Bay to celebrate our nation’s 47th birthday. For more than 20 members of our 42-strong contingent, it was their second time marching under the Hyflux flag.

Some 49 runners among our employees participated in the JP Morgan Chase Corporate Challenge for a 5.6 km race to raise funds for charity.

In 2012, our corporate social responsibility efforts also took on the added dimension of staff volunteerism.

During the year, some of our employees started volunteering to read and organise activities for the KIDSRead programme under the Asian Women’s Welfare Association’s (AWWA) family service centre in our neighbourhood. The weekly reading programme, targeted at pre-schoolers from less advantaged families, gives them exposure to the English language and seeks to cultivate their interest in reading at

27


an early age. This meaningful project enables us to reach out and engage the community around us, and we intend to commit to it for a second year.

In September, we participated in the NTUC FairPrice Walk for Rice @ Southeast. We organised a 4.3 km walk from Hyflux Innovation Centre to the Singapore Flyer. For every 100 m that each of our staff walked, NTUC FairPrice donated a bowl of rice to some 7,000 needy families. We covered a total distance of 967.5 km and raised 9,675 bowls of rice.

Towards the end of the year, we also organised a charity car wash together with Yong-en Care Centre. We managed to raise more than $20,000 to support the activities of the centre which runs a dementia day care centre, home care and counseling services as well as seeing to the needs of seniors and low-income families.

We will continue to foster the spirit of volunteerism among our employees. Just as we have been able to grow through the opportunities that were presented to us in our early days, we hope to reciprocate and make a difference in the lives of others by devoting time and energy in addition to corporate philanthropy.

Just as we have been able to grow through the opportunities that were presented to us in our early days, we hope to reciprocate and make a difference in the lives of others by devoting time and energy in addition to corporate philanthropy.


Hyflux supports Walk for Rice to raise bowls of rice for the needy

Hyflux employees wash cars for charity

28


INVESTORRELATIONS

2012 was a year characterised by global economic volatility. This led to delays in planned municipal infrastructure investments for a second consecutive year.

During the year, Hyflux’s senior management and investor relations team reassured and informed the investment community of Hyflux’s financial discipline and typical financing model for large-scale water projects. The strategic decision to use corporate funding through a combination of the proceeds from preference shares issued in 2011 and medium term notes for the Tuaspring project was taken in anticipation of the tight project timeline to deliver the desalination plant by 2013, as requested by PUB. This corporate funding route was chosen to provide a suitable bridge financing strategy until the desalination plant of the Tuaspring project was close to completion. Hyflux is currently in discussions with many financial institutions to put in place long-term non-recourse project financing. When this project financing exercise is completed, we will be in an even stronger financial position to capture more opportunities in the global water industry.

Our investor relations efforts are guided by the principle of providing clear, consistent and timely information about the company’s performance, strategies and business outlook to facilitate informed investment decisions, nurture continued confidence in the company and foster strong, enduring relations with the investment community.

Hyflux uses multiple communication channels such as shareholder meetings, briefings to analysts, investors and the media, conference calls, investor conferences and the investor relations website to achieve this. All financial information, announcements, briefing materials to analysts and the media as well as annual reports are made available on www.hyflux.com.

In FY2012, the directors have recommended a final dividend of 2.50 cents per ordinary share. This, together with the interim dividend of 0.70 cents paid earlier in the year, brings the total dividend for FY2012 to 3.20 cents per ordinary share.

Our investor relations efforts are guided by the principle of providing clear, consistent and timely information about the company’s performance, strategies and business outlook to facilitate informed investment decisions, nurture continued confidence in the company and foster strong, enduring relations with the investment community.

29


30 DIRECTORS' REPORT

37 STATEMENT BY DIRECTORS

38 INDEPENDENT AUDITORS' REPORT

39 STATEMENTS OF FINANCIAL POSITION

40 CONSOLIDATED INCOME STATEMENT

41 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

42 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

46 CONSOLIDATED STATEMENT OF CASH FLOWS

48 NOTES TO THE FINANCIAL STATEMENTS

115 CORPORATE GOVERNANCE STATEMENT

126 SUPPLEMENTARY INFORMATION

127 STATISTICS OF SHAREHOLDINGS

129 SUBSTANTIAL ORDINARY SHAREHOLDERS

130 HYFLUX GROUP OF COMPANIES

132 CORPORATE INFORMATION

FINANCIAL STATEMENTS

30

ANNUAL REPORT 2012HYFLUX LTD

30


DIRECTORS' REPORT

We are pleased to submit this annual report to the members of the Company together with the audited financial statements for the financial year ended 31 December 2012.

DIrECTorS

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

Olivia Lum Ooi Lin Executive Chairman and Group CEOTeo Kiang KokLee Joo HaiGay Chee CheongChristopher MurugasuRajsekar Kuppuswami MittaSimon TayGary Kee Eng Kwee

DIrECTorS’ INTErESTS

According to the register kept by the Company for the purposes of Section 164 of the Companies Act, Chapter 50 (the Act), particulars of interests of directors who held office at the end of the financial year (including those held by their spouses and infant children) in shares, debentures, warrants and share options in the Company are as follows:

Direct interest Deemed interestName of director and corporation in which interests are held

At beginningof the year

At endof the year

At 21 January

2013At beginning

of the yearAt end

of the year

At 21 January

2013

The CompanyOrdinary shares

Olivia Lum Ooi Lin 252,351,211 267,351,211 267,351,211 15,000,000 – –Teo Kiang Kok – – – 375,000 375,000 375,000Gay Chee Cheong 1,000,000 1,000,000 1,000,000 – – –Christopher Murugasu 842,343 926,718 926,718 180,000 180,000 180,000

Preference shares

Olivia Lum Ooi Lin 8,020 8,020 8,020 – – –Teo Kiang Kok 3,000 3,000 3,000 – – –Gay Chee Cheong 12,000 12,000 12,000 – – –Christopher Murugasu 1,000 1,000 1,000 – – –Rajsekar Kuppuswami Mitta – – – 20,000 20,000 20,000

31


31


DIRECTORS' REPORT

Direct interest Deemed interestName of director and corporation in which interests are held

At beginningof the year

At endof the year

At 21 January

2013At beginning

of the yearAt end

of the year

At 21 January

2013

The CompanyShare options (2001 Scheme)

Olivia Lum Ooi Lin 6,750,000 6,750,000 6,750,000 – – –Teo Kiang Kok 425,000 425,000 425,000 – – –Lee Joo Hai 425,000 425,000 425,000 – – –Gay Chee Cheong 425,000 425,000 425,000 – – –Christopher Murugasu 678,125 593,750 593,750 – – –Rajsekar Kuppuswami Mitta 425,000 425,000 425,000 – – –

Share options (2011 Scheme)

Olivia Lum Ooi Lin 8,598,000 8,598,000 8,598,000 – – –Teo Kiang Kok – 50,000 50,000 – – –Lee Joo Hai – 50,000 50,000 – – –Gay Chee Cheong – 50,000 50,000 – – –Christopher Murugasu – 50,000 50,000 – – –Rajsekar Kuppuswami Mitta – 50,000 50,000 – – –Simon Tay – 50,000 50,000 – – –Gary Kee Eng Kwee – 50,000 50,000 – – –

By virtue of Section 7 of the Act, Olivia Lum Ooi Lin is deemed to have interests in the other subsidiaries of the Company, at the beginning and at the end of the financial year.

Except as disclosed in this report, no director who held office at the end of the financial year had interests in shares, debentures, warrants or share options of the Company, or of related corporations, either at the beginning 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 January 2013, except as disclosed above.

Except as disclosed under the “Share Options” section of this report, neither at the end of, nor at any time during the financial year, was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

Except salaries, bonuses and fees and those benefits that are disclosed in this report and in note 32 to the financial statements, since the end of the last financial year, no director has received or become entitled to receive, a benefit by reason of a contract made by the Company or a related corporation with the director, or with a firm of which he is a member, or with a company in which he has a substantial financial interest.

32


32


DIRECTORS' REPORT

ShArE opTIoNS

The Hyflux Employees’ Share Option Scheme (the 2001 Scheme) of the Company was approved and adopted by its members at an Extraordinary General Meeting held on 27 September 2001.

On 24 November 2003, the members of the Company approved a modification to the 2001 Scheme which allowed Olivia Lum Ooi Lin, Executive Chairman and Group CEO, and a substantial shareholder of the Company, to participate in the 2001 Scheme. The maximum entitlement of Olivia Lum Ooi Lin is 10% of the total number of shares which may be issued by the Company under the 2001 Scheme.

The 2001 Scheme expired on 26 September 2011.

On 27 April 2011, the members of the Company approved the implementation of new share option scheme (the 2011 Scheme) to replace the 2001 Scheme that expired on 26 September 2011 and allowed Olivia Lum Ooi Lin, Executive Chairman and Group CEO, and a substantial shareholder of the Company, to participate in the 2011 Scheme. The implementation of the 2011 Scheme and replacement of expired scheme do not affect the rights of holders of the options under the expired scheme. The maximum entitlement of Olivia Lum Ooi Lin is 10% of the total number of shares which may be issued by the Company under the 2011 Scheme. The aggregate number of scheme shares available to Olivia Lum Ooi Lin and her associates (as defined in the Listing Manual of Singapore Exchange Securities Trading Limited (SGX-ST's Listing Manual)) shall not exceed 25% of the total number of scheme shares available under the 2011 Scheme.

The 2011 Scheme is administered by the Company’s Remuneration Committee. It has been in force since 27 September 2011 and shall expire on 26 September 2021.

33


33


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--

-(7

50)

53,2

503

29/1

2/2

00

4 –

28/1

2/2

013

07/0

2/2

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1.24

00

1,35

5,25

0-

-(7

3,50

0)(1

80,

00

0)1,

101,

750

2207

/02

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06 –

06/

02/2

015

09/0

5/20

051.

5378

6,75

0,0

00

--

--

6,75

0,0

00

109

/05/

2006

– 0

8/05

/201

501

/06/

2005

1.69

9527

,00

0-

--

-27

,00

01

01/0

6/20

06 –

31/

05/2

015

08/

06/2

005

1.76

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0,50

0-

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0,50

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08/

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006

– 0

7/06

/201

528

/03/

2006

1.77

47

165,

00

0-

--

-16

5,0

00

628

/03/

2007

– 2

7/03

/201

618

/10/

2006

1.57

471,

470,

00

0-

--

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470,

00

03

18/1

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07 –

16/

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016

07/1

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1.58

131,

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0-

--

(261

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0)1,

437,

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035

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– 0

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605

/04

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071.

7493

390,

00

0-

--

(90,

00

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00,

00

01

05/0

4/2

00

8 –

04

/04

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723

/05/

2007

1.73

873

0,0

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--

--

30,

00

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5/20

08

– 22

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25/0

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1726

/05/

200

82.

4187

1,95

0,0

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--

-(3

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1,56

0,0

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2526

/05/

2009

– 2

5/05

/201

831

/10/

200

80.

9813

4,37

6,0

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--

(239

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0)(1

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3,98

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2009

– 3

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809

/01/

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1.27

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0-

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/01/

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1.19

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34


34


DIRECTORS' REPORT

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

Details of options granted to directors of the Company under the 2001 Scheme and 2011 Scheme (collectively as the Schemes) are as follows:

Name of director

options granted for

the financial year ended

31 December 2012

Aggregate options

granted sincecommencement of

Schemes to31 December 2012

Aggregate options

exercised sincecommencement

of Schemes to31 December 2012

Aggregate options

outstanding as at31 December 2012

2001 SchemeOlivia Lum Ooi Lin – 6,750,000 – 6,750,000Teo Kiang Kok – 800,000 (375,000) 425,000Lee Joo Hai – 800,000 (375,000) 425,000Gay Chee Cheong – 725,000 (300,000) 425,000Christopher Murugasu – 1,409,375 (815,625) 593,750Rajsekar Kuppuswami Mitta – 425,000 – 425,000Total – 10,909,375 (1,865,625) 9,043,750

2011 SchemeOlivia Lum Ooi Lin – 8,598,000 – 8,598,000Teo Kiang Kok 50,000 50,000 – 50,000Lee Joo Hai 50,000 50,000 – 50,000Gay Chee Cheong 50,000 50,000 – 50,000Christopher Murugasu 50,000 50,000 – 50,000Rajsekar Kuppuswami Mitta 50,000 50,000 – 50,000Simon Tay 50,000 50,000 – 50,000Gary Kee Eng Kwee 50,000 50,000 – 50,000Total 350,000 8,948,000 – 8,948,000

Except as disclosed in this report, since the commencement of the Schemes to the end of the financial year:

• NooptionshavebeengrantedtothecontrollingshareholdersoftheCompanyortheirassociates;

• Noparticipanthasbeengranted5%ormoreofthetotaloptionsavailableundertheSchemes;

• NooptionshavebeengrantedtodirectorsandemployeesoftheholdingcompanyanditsrelatedcorporationsundertheSchemes;

• Nooptionsthatentitletheholdersoftheoptionstoparticipate,byvirtueofsuchholding,toanyshareissueofanyothercorporationhavebeengranted;and

• Theexercisepriceoftheoptionsissetatthemarketprice,asdefinedintheSchemes,atthetimeofgrant.Nooptionshavebeen granted at a discount.

35


35


DIRECTORS' REPORT

AuDIT CoMMITTEE

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

Lee Joo Hai (Chairman), non-executive independent directorGay Chee Cheong, non-executive independent directorRajsekar Kuppuswami Mitta, non-executive independent directorGary Kee Eng Kwee, non-executive non-independent director

The members of the Audit Committee, collectively, have expertise and extensive experience in accounting, financial management and business, and are qualified to discharge the Audit Committee’s responsibilities.

The primary functions of the Audit Committee are as follows:

1. assiststheBoardindischargingitsstatutoryresponsibilitiesonfinancialandaccountingmatters;

2. reviewsthefinancialandoperatingresultsandaccountingpoliciesoftheGroup;

3. reviews significant financial reporting issues and judgements relating to financial statements for each financial year, interim andannualresultsannouncementbeforesubmissiontotheBoardforapproval;

4. reviews the adequacy of the Company’s internal control (financial and operational) and risk management policies and systemsestablishedbythemanagement;

5. reviews the audit plans and reports of the external and internal auditors and considers the effectiveness of the actions taken bythemanagementontheauditors’recommendations;

6. appraises and reports to the Board on the audits undertaken by the external and internal auditors, the adequacy of the disclosureofinformation,andtheappropriatenessandqualityofthesystemofmanagementandinternalcontrols;

7. reviews the independence of external auditors annually and considers the appointment or re-appointment of external auditors, reviews the level of audit and non-audit fees and matters relating to the resignation or removal of the auditors and approvestheremunerationandtermsofengagementoftheexternalauditors;and

8. reviews interested person transactions, as defined in the SGX-ST's Listing Manual.

The Audit Committee has held 4 meetings since the last directors’ report. In fulfilling its responsibilities, the Audit Committee receives regular reports from the management. The Audit Committee has full access to and co-operation of the management and meets with KPMG LLP in private at least once a year, and more frequently if necessary.

36


36


DIRECTORS' REPORT

The Audit Committee has explicit authority within the scope of its responsibilities to seek any information it requires or investigate any matter within its terms of reference. The Audit Committee has adequate resources to enable it to discharge its responsibilities properly.

The Board has put in place a confidential communication programme as endorsed by the Audit Committee. Employees may, in confidence, raise concerns about possible corporate improprieties in matters of financial reporting or other matters and to ensure that arrangements are in place for the independent investigations of such matters and for appropriate follow-up actions. The details of the confidential communication policies and arrangements have been made available to all employees.

The Audit Committee is satisfied with the independence and objectivity of the external auditors and has recommended to the Board of Directors that the auditors, KPMG LLP, be nominated for re-appointment as auditors at the forthcoming Annual General Meeting of the Company.

In appointing our auditors for the Company, subsidiaries and significant associates, we have complied with Rules 712, 715 and 716 of the SGX-ST's Listing Manual.

AuDITorS

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

On behalf of the Board of Directors

olivia Lum ooi LinExecutive Chairman and Group CEO

Teo Kiang KokDirector

25 March 2013

37


37


STATEMENT BY DIRECTORS

In our opinion:

(a) the financial statements set out on pages 39 to 114 are drawn up so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2012 and the results, changes in equity and cash flows of the Group for the year ended on that date in accordance with the provisions of the Singapore Companies Act, Chapter 50 and Singapore FinancialReportingStandards;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

olivia Lum ooi LinExecutive Chairman and Group CEO

Teo Kiang KokDirector

25 March 2013

38


38


INDEPENDENT AUDITORS' REPORT

MEMBERS OF THE COMPANY HYFLUX LTD

report on the financial statements

We have audited the accompanying financial statements of Hyflux Ltd (the Company) and its subsidiaries (the Group), which comprise the statements of financial position of the Group and the Company as at 31 December 2012, the income statement, statement of comprehensive income, statement of changes in equity and statement of cash flows of the Group for the year then ended, and a summary of significant accounting policies and other explanatory information, as set out on pages 39 to 114.

Management’s responsibility for the financial statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the Act) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded againstlossfromunauthoriseduseordisposition;andtransactionsareproperlyauthorisedandthattheyarerecordedasnecessaryto permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets.

Auditors’ responsibility

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 comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements of the Group and the statement of financial position of the Company are properly drawn up in accordance with the provisions of 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 31 December 2012 and the results, changes in equity and cash flows of the Group for the year ended on that date.

report on other legal and regulatory requirements

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

KpMG LLpPublic Accountants andCertified Public Accountants

Singapore25 March 2013

39


39


STATEMENTS OF FINANCIAL POSITIONAs at 31 December 2012

Group CompanyNote 2012 2011 2012 2011

$’000 $’000 $’000 $’000Non-current assetsProperty, plant and equipment 4 207,071 188,571 – –Intangible assets 5 42,444 43,876 – –Intangible assets arising from service concession

arrangements 6 360,366 154,937 – –Investments in subsidiaries 7 – – 177,420 169,420Investments in joint ventures 8 – – 3,125 3,125Investments in associates 9 104,092 108,887 14,109 13,704Financial receivables 10 704,811 418,320 – –Trade and other receivables 11 14,594 15,552 760,736 445,312Deferred tax assets 12 2,050 2,829 – –Total non-current assets 1,435,428 932,972 955,390 631,561

Current assetsGross amounts due for contract work 13 119,059 176,910 – –Inventories 14 32,456 24,195 – –Financial receivables 10 12,548 4,937 – –Trade and other receivables, including derivatives 11 209,621 231,093 490,628 729,141Cash and cash equivalents 15 541,232 662,358 176,216 96,407Total current assets 914,916 1,099,493 666,844 825,548

Current liabilitiesTrade and other payables, including derivatives 16 318,205 227,840 34,813 135,567Loans and borrowings 17 64,435 118,121 10,000 88,438Tax payable 9,152 10,262 2,868 2,983Total current liabilities 391,792 356,223 47,681 226,988

Net current assets 523,124 743,270 619,163 598,560

Non-current liabilitiesLoans and borrowings 17 1,054,306 712,301 908,519 573,811Deferred tax liabilities 12 27,217 28,374 – –Total non-current liabilities 1,081,523 740,675 908,519 573,811

Net assets 877,029 935,567 666,034 656,310

EquityShare capital 605,196 604,740 605,196 604,740Reserve for own shares (51,484) (4,461) (51,484) (4,461)Capital reserve 9,094 6,467 1,858 796Foreign currency translation reserve (30,480) 3,635 – –Hedging reserve 656 (3,996) – –Employees’ share option reserve 22,457 19,647 22,457 19,647Retained earnings 305,154 294,559 88,007 35,588Total equity attributable to owners of the Company 860,593 920,591 666,034 656,310Non-controlling interests 16,436 14,976 – –Total equity 18 877,029 935,567 666,034 656,310

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

40


40


CONSOLIDATED INCOME STATEMENTYear ended 31 December 2012

Note 2012 2011$’000 $’000

Revenue 21 682,384 481,975Other income 6,964 8,064Changes in inventories of finished goods and work-in-progress 792 (408)Raw materials and consumables used and subcontractors’ cost (413,496) (259,473)Staff costs (85,924) (60,040)Depreciation, amortisation and impairment (29,392) (36,637)Other expenses (60,123) (50,067)Finance costs 22 (28,460) (22,597)Share of profit of associates, net of income tax 4,253 1,226profit before income tax 23 76,998 62,043Tax expense 24 (12,285) (6,318)profit for the year 64,713 55,725

profit attributable to:Owners of the Company 60,994 53,027Non-controlling interests 3,719 2,698profit for the year 64,713 55,725

Earnings per share (cents)Basic earnings per share 25 4.43 4.30Diluted earnings per share 25 4.42 4.28


41


41


CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEYear ended 31 December 2012

2012 2011$’000 $’000

profit for the year 64,713 55,725

other comprehensive incomeForeign currency translation differences for foreign operations (35,609) 18,831Share of hedging reserve of associates 499 342Effective portion of changes in fair value of cash flow hedges 3,001 (778)Net change in fair value of cash flow hedges transferred to profit or loss 1,152 –other comprehensive income for the year, net of income tax (30,957) 18,395Total comprehensive income for the year 33,756 74,120

Total comprehensive income attributable to:Owners of the Company 31,072 70,863Non-controlling interests 2,684 3,257Total comprehensive income for the year 33,756 74,120


42


42


CONSOLIDATED STATEMENT OF CHANGES IN EQUITYYear ended 31 December 2012

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46


46


CONSOLIDATED STATEMENT OF CASH FLOWSYear ended 31 December 2012

Note 2012 2011$’000 $’000

Cash flows from operating activitiesProfit before income tax 76,998 62,043Adjustments for:Allowance for inventory obsolescence 14 644 113Amortisation of transaction costs related to borrowings 636 –Depreciation, amortisation and impairment 29,392 36,637Employees’ share option expense 2,810 1,038Fair value loss on derivative financial instruments 895 594Finance costs 28,460 22,597Financial receivables written off – 3,056Gain on sale of property, plant and equipment (5,223) (11,899)Impairment of trade and other receivables 520 2,889Intangible assets written off 35 25Interest income (3,312) (3,041)Loss/(gain) on liquidation of subsidiaries 603 (296)Share of profit of associates, net of income tax (4,253) (1,226)

128,205 112,530Change in inventories (9,764) 1,576Change in gross amounts due for contract work 58,187 75,747Change in trade and other receivables 22,494 (49,861)Change in trade and other payables 71,776 25,595Cash from operating activities before service concession arrangement projects 270,898 165,587Change in financial receivables from service concession arrangements (294,102) (194,308)Change in intangible assets arising from service concession arrangements (209,274) (20,052)Cash used in operating activities after service concession arrangement projects (232,478) (48,773)Income tax paid (11,398) (7,373)Net cash used in operating activities (243,876) (56,146)


47


47


CONSOLIDATED STATEMENT OF CASH FLOWSYear ended 31 December 2012

Note 2012 2011$’000 $’000

Cash flows from investing activitiesAcquisition of intangible assets (5,901) (5,094)Acquisition of property, plant and equipment (39,878) (53,366)Additional investment in an associate – (33,079)Capital contribution from non-controlling interests of a subsidiary – 50Change in amounts due from related parties (non-trade) – (427)Dividends received from associates 1,770 1,470Interest received 1,757 2,657Net cash outflow from liquidation of subsidiaries – (178)Proceeds from sale of other investments – 2,429Proceeds from sale of property, plant and equipment 7,835 26,280Net cash used in investing activities (34,417) (59,258)

Cash flows from financing activitiesDividends paid (47,646) (47,908)(Increase)/decrease in deposits pledged (9,589) 204Interest paid (36,191) (17,702)Net proceeds from CPS issue – 392,569Proceeds from borrowings 653,842 605,085Proceeds from exercise of share options 456 4,697Purchases of treasury shares (47,023) (3,169)Repayment of borrowings (371,619) (399,125)Net cash from financing activities 142,230 534,651

Net (decrease)/increase in cash and cash equivalents (136,063) 419,247Cash and cash equivalents at 1 January 641,415 222,082Effect of exchange rate fluctuations on cash held (15,165) 86Cash and cash equivalents at 31 December 15 490,187 641,415


48


48


NOTES TO THE FINANCIAL STATEMENTS

These notes form an integral part of the financial statements.

The financial statements were authorised for issue by the Board of Directors on 25 March 2013.

1 DoMICILE AND ACTIvITIES

Hyflux Ltd (the Company) is incorporated in the Republic of Singapore. The address of the Company’s registered office is Hyflux Innovation Centre, 80 Bendemeer Road, Singapore 339949.

The financial statements of the Group as at and for the year ended 31 December 2012 comprise the Company and its subsidiaries (together referred to as the Group and individually as Group entities) and the Group’s interests in associates and joint ventures.

The principal activities of the Company are those relating to investment holding.

The principal activities of the subsidiaries comprise the following:

Water

- Seawater desalination, raw water purification, wastewater cleaning, water recycling, water reclamation and ultra pure waterproductionformunicipalandindustrialclientsaswellashomeconsumerfiltrationandpurificationproducts;and

- Design, building and sale of water treatment plants, seawater desalination plants, wastewater treatment plants and water recycling plants under service concession arrangements.

renewable resources Management

- Development of membrane applications in resource recovery, waste recycling and energy reclamation, including applicationssuchasusedoilrecoveryandrecycling;

- Developmentandcommercialisationofspecialtymaterials,suchasL-lacticacidfromnaturalrenewableresources;and

- Separation, concentration and purification treatments for manufacturing process streams. Energy

Design, building and operation of power plants and trading in the electricity markets.

2 BASIS oF prEpArATIoN

2.1 Statement of compliance

The financial statements have been prepared in accordance with the Singapore Financial Reporting Standards (FRS).

2.2 Basis of measurement

The financial statements have been prepared on the historical cost basis except for derivative financial instruments which are measured at fair value.

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49



2.3 Functional and presentation currency

These financial statements are presented in Singapore dollars, which is the Company’s functional currency. Other significant entities within the Group have Chinese Renminbi, US dollars and Algerian Dinar as their functional currency. All financial information presented in Singapore dollars has been rounded to the nearest thousand, unless otherwise stated.

2.4 use of estimates and judgements

The preparation of the financial statements in conformity with FRSs requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected.

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in note 5 on capitalisation of development costs.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes:

Note4 – residualvaluesandusefullivesofproperty,plantandequipment;Note5 – usefullivesandrecoverabilityofintangibleassets;Notes4and5 – keyassumptionsusedindiscountedcashflowprojections;Note20 – recoverabilityoftradeandotherreceivables;andNote 31 – contingencies.

2.5 Changes in accounting policies

The Group has adopted all the new or revised FRSs that became mandatory from 1 January 2012. The adoption of these new FRSs has no significant impact to the Group.

3 SIGNIFICANT ACCouNTING poLICIES

The accounting policies set out below have been applied consistently to all periods presented in these financial statements, and have been applied consistently by Group entities, except as explained in note 2.5 which addresses changes in accounting policies.

3.1 Basis of consolidation

Business combinations

Business combinations are accounted for using the acquisition method as at the acquisition date, which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

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50



Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

When share-based payment awards (replacement awards) are exchanged for awards held by the acquiree’s employees (acquiree’s awards) and relate to past services, then all or a portion of the amount of the acquirer’s replacement awards is included in measuring the consideration transferred in the business combination. This determination is based on the market-based value of the replacement awards compared with the market-based value of the acquiree’s awards and the extent to which the replacement awards relate to past and/or future service.

Non-controlling interests that are present ownership interests and entitle their holders to a proportionate share of the acquiree’s net assets in the event of liquidation are measured either at fair value or at the non-controlling interests’ proportionate share of the recognised amounts of the acquiree’s identifiable net assets, at the acquisition date. The measurement basis taken is elected on a transaction-by-transaction basis. All other non-controlling interests are measured at acquisition-date fair value or, when applicable, on the basis specified in another standard.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Acquisition of non-controlling interests

Acquisitions of non-controlling interests are accounted for as transactions with owners in their capacity as owners and therefore no goodwill is recognised as a result. Adjustments to non-controlling interests arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary.

Subsidiaries

Subsidiaries are entities controlled by the Group. 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 accounting policies of subsidiaries have been changed when necessary to align them with the policies adopted by the Group. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

Loss of control

Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as a jointly-controlled entity, an equity-accounted investee or as an available-for-sale financial asset depending on the level of influence retained.

Joint ventures

Joint ventures are those entities over whose activities the Group has joint control, established by contractual agreement and requiring unanimous consent for strategic financial and operating decisions. Joint ventures are accounted for using proportionate consolidation. The financial statements of joint ventures are proportionately consolidated from the date that joint control commences until the date that joint control ceases. The accounting policies of joint ventures have been changed where necessary to align them with the policies adopted by the Group.

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Associates

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies of these entities. Significant influence is presumed to exist when the Group holds between 20% and 50% of voting power of another entity.

Associates are accounted for using the equity method and are recognised initially at cost. The cost of investments includes transaction costs. The consolidated financial statements include the Group’s share of the profit or loss and other comprehensive income of associates, after adjustments to align the accounting policies with those of the Group, from the date that significant influence commences until the date that significant influence ceases.

When the Group’s share of losses exceeds its interest in an associate, the carrying amount of that interest, including any long-term investments, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation to fund the associate’s operations or has made payments on behalf of the associate.

Transactions eliminated on consolidation

Intra-group balances and transactions, and any unrealised income and expenses arising from intra-group transactions, are eliminated in preparing the consolidated financial statements.

Unrealised gains arising from transactions with joint ventures are eliminated to the extent of the Group’s interest in the joint ventures. Unrealised losses are eliminated in the same way as unrealised gains except that losses are recognised immediately when they represent a reduction in the net realisable value of assets or an impairment loss. Balances with joint ventures are eliminated to the extent of the Group’s interest in the joint ventures.

Unrealised gains arising from transactions with associates are eliminated against the investment to the extent of the Group’s interest in the associates. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

Accounting for subsidiaries, joint ventures and associates in the separate financial statements

Investments in subsidiaries, joint ventures and associates are stated in the Company’s statement of financial position at cost less accumulated impairment losses.

3.2 Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of Group entities at the exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the end of the reporting date are retranslated to the functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items is the difference between amortised cost in the functional currency at the beginning of the year, adjusted for effective interest and payments during the year, and the amortised cost in foreign currency translated at the exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured in terms of historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in profit or loss, except for differences which are recognised in other comprehensive income arising on the retranslation of available-for-sale equity instruments (except on impairment in which case foreign currency differences that have been recognised in other comprehensive income are reclassifiedtoprofitorloss);andqualifyingcashflowhedgestotheextentthehedgeiseffective.

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Foreign operations

The assets and liabilities of foreign operations, excluding goodwill and fair value adjustments arising on acquisition, are translated to Singapore dollars at exchange rates at the end of the reporting date. The income and expenses of foreign operations are translated to Singapore dollars at exchange rates at the dates of the transactions. Goodwill and fair value adjustments arising on the acquisition of a foreign operation on or after 1 January 2005 are treated as assets and liabilities of the foreign operation and translated at the exchange rates at the end of the reporting period. For acquisitions prior to 1 January 2005, the exchange rates at the date of acquisition were used.

Foreign currency differences are recognised in other comprehensive income, and presented in the foreign currency translation reserve (translation reserve) in equity. However, if the foreign operation is a non-wholly-owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interests. When a foreign operation is disposed of such that control, significant influence or joint control is lost, the cumulative amount in the translation reserve related to that foreign operation is reclassified to profit or loss as part of the gain or loss on disposal. When the Group disposes of only part of its interest in a subsidiary that includes a foreign operation while retaining control, the relevant proportion of the cumulative amount is reattributed to non-controlling interests. When the Group disposes of only part of its investment in an associate or joint venture that includes a foreign operation while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.

When the settlement of a monetary item receivable from or payable to a foreign operation is neither planned nor likely to occur in the foreseeable future, foreign exchange gains and losses arising from such a monetary item that are considered to form part of a net investment in a foreign operation are recognised in other comprehensive income, and are presented as equity in the translation reserve.

3.3 Financial instruments

Non-derivative financial assets

The Group initially recognises loans and receivables and deposits on the date that they are originated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on the trade date, which is the date the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred. Any interest in transferred financial assets that is created or retained by the Group is recognised as a separate asset or liability.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group classifies non-derivative financial assets into the following categories: loans and receivables and available-for-sale financial assets.

Loans and receivables

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, loans and receivables are measured at amortised cost using the effective interest method, less any impairment losses.

Loans and receivables comprise cash and cash equivalents, trade and other receivables, including service concession receivables, and gross amounts due from contract work.

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53



Cash and cash equivalents

Cash and cash equivalents comprise cash balances and bank deposits.

For the purpose of the statement of cash flows, pledged deposits are excluded whilst bank overdrafts that are repayable in demand and that form an integral part of the Group’s cash management are included in cash and cash equivalents.

Service concession arrangements

The Group recognises a financial asset arising from a service concession arrangement when it has an unconditional contractual right to receive cash or another financial asset from or at the direction of the grantor for the construction or upgrade services provided. Such financial assets are measured at fair value upon initial recognition. Subsequent to initial recognition, the financial assets are measured at amortised cost.

If the Group is paid for the construction services partly by a financial asset and partly by an intangible asset, then each component of the consideration is accounted for separately and is recognised initially at the fair value of the consideration (see also note 3.5).

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale or are not classified in any of the above categories of financial assets. Available-for-sale financial assets are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses and foreign currency differences on available-for-sale debt instruments, are recognised in other comprehensive income and presented in the fair value reserve in equity. When an investment is derecognised, the gain or loss accumulated in equity is reclassified to profit or loss.

Non-derivative financial liabilities

The Group initially recognised debt securities issued and subordinated liabilities on the date that they are originated. Financial liabilities for contingent consideration payable in a business combination are recognised at the acquisition date. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expired.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition, these financial liabilities are measured at amortised cost using the effective interest method.

Other financial liabilities comprise loans and borrowings, and trade and other payables.

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Intra-group financial guarantees

Financial guarantees are financial instruments issued by the Group that require the issuer to make specified payments to reimburse the holder for the loss it incurs because a specified debtor fails to meet payment when due in accordance with the original or modified terms of a debt instrument.

Financial guarantees are recognised initially at fair value and are classified as financial liabilities. Subsequent to initial measurement, the financial guarantees are stated at the higher of the initial fair value less cumulative amortisation and the amount that would be recognised if they were accounted for as contingent liabilities. When financial guarantees are terminated before their original expiry date, the carrying amount of the financial guarantees is transferred to profit or loss.

Share capital

Ordinary shares

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options are recognised as a deduction from equity, net of any tax effects.

Preference share capital

Preference share capital is classified as equity as it is non-redeemable, or redeemable only at the Company’s option, and any dividends are discretionary. Dividends thereon are recognised as distributions within equity upon approval by the Board of Directors.

Repurchase, disposal and reissue of share capital (treasury shares)

When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented in the reserve for own share account. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is transferred to/from retained earnings.

Derivative financial instruments, including hedge accounting

The Group holds derivative financial instruments to hedge its foreign currency risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the economic characteristics and risks of the host contract and the embedded derivative are not closely related, a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative, and the combined instrument is not measured at fair value through profit or loss.

On initial designation of the derivative as the hedging instruments, the Group formally documents the relationship between the hedging instrument and the hedged item, including the risk management objectives and strategy in undertaking the hedge transaction and the hedged risk, together with the methods that will be used to assess the effectiveness of the hedging relationship. The Group makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis, of whether the hedging instruments are expected to be “highly effective” in offsetting the changes in the fair value or cash flows of the respective hedged items attributable to the hedged risk, and whether the actual results of each hedge are within a range of 80% - 125%. For a cash flow hedge of a forecast transaction, the transaction should be highly probable to occur and should present an exposure to variations in cash flows that could ultimately affect reported profit or loss.

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55



Derivativesarerecognisedinitiallyatfairvalue;attributabletransactioncostsarerecognisedinprofitorlossasincurred.Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for as described below.

Cash flow hedges

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a highly probable forecast transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income and presented in the hedging reserve in equity. Any ineffective portion of changes in the fair value of the derivative is recognised immediately in profit or loss.

When the hedged item is a non-financial asset, the amount accumulated in equity is included in the carrying amount of the asset when the asset is recognised. In other cases, the amount accumulated in equity is reclassified to profit or loss in the same period that the hedged item affects profit or loss. If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast transaction is no longer expected to occur, then the balance in equity is reclassified to profit or loss.

Separable embedded derivatives

Changes in the fair value of separated embedded derivatives are recognised immediately in profit or loss.

Other non-trading derivatives

When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge accounting, all changes in its fair value are recognised immediately in profit or loss.

3.4 property, plant and equipment

Recognition and measurement

Items of property, plant and equipment are measured at cost less accumulated depreciation and accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, when the Group has an obligation to move the asset or restore the site, an estimate of the costs of dismantling and removing the items and restoring the site on which they are located, and capitalised borrowing costs.

Cost may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of property, plant and equipment. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items (major components) of property, plant and equipment.

The gain and loss on disposal of an item of property, plant and equipment is determined by comparing the proceeds from disposal with the carrying amount of property, plant and equipment, and is recognised net within other expenses in profit or loss.

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Subsequent costs

The cost of replacing a component of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within the component will flow to the Group, and its cost can be measured reliably. The carrying amount of the replaced component is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised in profit or loss as incurred.

Depreciation

Depreciation is based on the cost of an asset, less its residual value. Significant components of individual assets are assessed and if a component has a useful life that is different from the remainder of that asset, that component is depreciated separately.

Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each component of an item of property, plant and equipment, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. Leased assets are depreciated over the shorter of the lease term and their useful lives unless it is reasonably certain that the Group will obtain ownership by the end of the lease term. Construction-in-progress is not depreciated.

Depreciation is recognised from the date that the property, plant and equipment are installed and are ready for use, or in respect of internally constructed assets, from the date that the asset is completed and ready to use.

The estimated useful lives for the current and comparative years are as follows:

Plant and machinery - 4 to 10 years Motor vehicles - 4 to 5 years Computers - 1 to 5 years Office equipment - 4 to 5 years Leasehold properties and improvements - 4 to 5 years or over the lease period ranging from 5 to 36 years Furniture and fittings - 4 to 5 years

Depreciation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.

3.5 Intangible assets

Goodwill

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. The Group measures goodwill at the acquisition date as:

• thefairvalueoftheconsiderationtransferred;plus• therecognisedamountofanynon-controllinginterestsintheacquiree;plus• ifthebusinesscombinationisachievedinstages,thefairvalueoftheexistingequityinterestintheacquiree, over the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

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Subsequent measurement

Goodwill is measured at cost less accumulated impairment losses. In respect of equity-accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity-accounted investee.

Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognised in profit or loss as incurred.

Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure is capitalised only if development costs can be measured reliably, the product or process is technically and commercially feasible, future economic benefits are probable, and the Group intends to and has sufficient resources to complete development and to use or sell the asset. The expenditure capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and capitalised borrowing costs. Other development expenditure is recognised in profit or loss as incurred.

Capitalised development expenditure is measured at cost less accumulated amortisation and accumulated impairment losses.

Service concession arrangements

The Group recognises an intangible asset arising from a service concession arrangement when it has a right to charge for usage of the concession infrastructure. An intangible asset received as consideration for providing construction or upgrade services in a service concession arrangement is measured at fair value upon initial recognition. Subsequent to initial recognition the intangible asset is measured at cost, which includes capitalised borrowing costs, less accumulated amortisation and accumulated impairment losses.

Other intangible assets

Other intangible assets that are acquired by the Group and have finite useful lives are measured at cost less accumulated amortisation and accumulated impairment losses.

Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in profit or loss as incurred.

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Amortisation

Amortisation is calculated based on the cost of the asset, less its residual value.

Amortisation is recognised in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are available for use, since this most closely reflects the expected pattern of consumption of the future economic benefits embodied in the asset. The estimated useful lives for the current and comparative years are as follows:

Intellectual property rights - 10 years Capitalised development costs - 8 years Licensing fees - 10 to 20 years Service concession arrangements - 10 to 25 years

Amortisation methods, useful lives and residual values are reviewed at the end of each reporting period and adjusted if appropriate.

The estimated useful life of an intangible asset in a service concession arrangement is the period from when the Group is able to charge for the use of the infrastructure to the end of the concession period.

3.6 Leased assets

Leases in which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition, the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that asset.

Other leases are operating leases and are not recognised in the Group’s statement of financial position.

3.7 Inventories

Inventories are measured at the lower of cost and net realisable value. The cost of inventories is based on the weighted average cost principle, and includes expenditure incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Cost may also include transfers from equity of any gain or loss on qualifying cash flow hedges of foreign currency purchases of inventories.

Net realisable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

3.8 Gross amounts due for contract work

Gross amounts due for contract work represent the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognised to date less progress billings and recognised losses. Cost includes all expenditure related directly to specific projects and an allocation of fixed and variable overheads incurred in the Group’s contract activities based on normal operating capacity.

Gross amounts due for contract work are presented as part of assets in the statement of financial position for all contracts in which costs incurred plus recognised profits exceed progress billings. If progress billings exceed costs incurred plus recognised profits, the difference is presented as part of trade and other payables in the statement of financial position.

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3.9 Impairment

Non-derivative financial assets

A financial asset not carried at fair value through profit or loss is assessed at the end of each reporting period to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, and indications that a debtor will enter bankruptcy.


The Group considers evidence of impairment for loans and receivables at both a specific asset and collective level. All individually significant loans and receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired are then collectively assessed for any impairment that has been incurred but not yet identified. Loans and receivables that are not individually significant are collectively assessed for impairment by grouping together loans and receivables with similar risk characteristics.

In assessing collective impairment, the Group uses historical trends of the probability of default, the timing of recoveries and the amount of loss incurred, adjusted for management’s judgement as to whether current economic and credit conditions are such that the actual losses are likely to be greater or less than suggested by historical trends.

An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows, discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance account against loans and receivables. Interest on the impaired asset continues to be recognised. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Available-for-sale financial assets

Impairment losses on available-for-sale investment securities are recognised by reclassifying the losses accumulated in the fair value reserve in equity to profit or loss. The cumulative loss that is reclassified from equity to profit or loss is the difference between the acquisition cost, net of any principal repayment and amortisation, and the current fair value, less any impairment loss previously recognised in profit or loss. Changes in cumulative impairment provisions attributable to time value are reflected as a component of interest income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognised, then the impairment loss is reversed. The amount of the reversal is recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognised in other comprehensive income.

Non-financial assets

The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite useful lives or that are not yet available for use, the recoverable amount is estimated each year at the same time. An impairment loss is recognised if the carrying amount of an asset or its related cash-generating unit (CGU) exceeds its estimated recoverable amount.

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The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. 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 or CGU. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU. Subject to an operating segment ceiling test, for the purposes of goodwill impairment testing, CGUs to which goodwill has been allocated are aggregated so that the level at which impairment testing is performed reflects the lowest level at which goodwill is monitored for internal reporting purposes. Goodwill acquired in a business combination is allocated to groups of CGUs that are expected to benefit from the synergies of the combination.

The Group’s corporate assets do not generate separate cash inflows and are utilised by more than one CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment as part of the testing of the CGU to which the corporate asset is allocated.

Impairment losses are recognised in profit or loss. Impairment losses recognised in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. 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.

Goodwill that forms part of the carrying amount of an investment in an associate is not recognised separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired.

3.10 Non-current assets held for sale

Non-current assets, or disposal groups comprising assets and liabilities, that are expected to be recovered primarily through sale rather than through continuing use, are classified as held for sale. Immediately before classification as held for sale, the assets, or components of a disposal group, are remeasured in accordance with the Group’s accounting policies. Thereafter, generally the assets, or disposal group, are generally measured at the lower of their carrying amount and fair value less costs to sell. Any impairment loss on a disposal group is first allocated to goodwill, and then to remaining assets and liabilities on a pro rata basis, except that no loss is allocated to inventories, financial assets, deferred tax assets, employee benefit assets, and investment property, which continue to be measured in accordance with the Group’s accounting policies. Impairment losses on initial classification as held for sale, and subsequent gains or losses on remeasurement, are recognised in profit or loss. Gains are not recognised in excess of any cumulative impairment loss.

Intangible assets and property, plant and equipment once classified as held for sale are not amortised or depreciated. In addition, equity accounting of associates ceases once classified as held for sale.

3.11 Employee benefits

Defined contribution plans

A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised as an employee benefit expense in profit or loss in the periods during which related services are rendered by employees.

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Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee, and the obligation can be estimated reliably.

Share-based payment transactions

The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market performance conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that do meet the related service and non-market performance conditions at the vesting date. For share-based payment awards with non-vesting conditions, the grant date fair value of the share-based payment is measured to reflect such conditions and there is no true-up for differences between expected and actual outcomes.

The fair value of the amount payable to employees in respect of share appreciation rights, which are settled in cash, is recognised as an expense with a corresponding increase in liabilities, over the period that the employees become unconditionally entitled to payment. The liability is remeasured at each reporting date and at settlement date. Any changes in the fair value of the liability are recognised as personnel expense in profit or loss.

Share-based payment arrangements in which the Group receives goods or services as consideration for its own equity instruments are accounted for as equity-settled share-based payment transactions, regardless of how the equity instruments are obtained by the Group.

3.12 provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The unwinding of the discount is recognised as finance cost.

3.13 revenue

Construction revenue - Construction contracts and sale of plants under service concession arrangements

Contract revenue includes the initial amount agreed in the contract plus any variations in contract work, claims and incentive payments, to the extent that it is probable that they will result in revenue and can be measured reliably. As soon as the outcome of a construction contract can be estimated reliably, contract revenue is recognised in profit or loss in proportion to the stage of completion of the contract. Contract expenses are recognised as incurred unless they create an asset related to future contract activity.

The stage of completion is assessed by reference to the proportion that contract costs incurred for work performed to date bear to the estimated total contract costs. When the outcome of a construction contract cannot be estimated reliably, contract revenue is recognised only to the extent of contract costs incurred that are likely to be recoverable. An expected loss on a contract is recognised immediately in profit or loss. Net revenue from the sale of plants under service concession arrangements previously not recognised as construction revenue under the service concession arrangements is recognised when significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs can be estimated reliably, and the amount of revenue can be measured reliably.

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Revenue relating to construction or upgrade services under a service concession arrangement is recognised based on the stage of completion of the work performed, consistent with the Group’s accounting policy on recognising revenue on construction contract (see above). Operation or service revenue is recognised in the period in which the services are provided by the Group. When the Group provides more than one service in a service concession arrangement, the consideration received is allocated by reference to the relative fair values of the services delivered.

Operating and maintenance income

Revenue from the provision of operating and maintenance services is recognised when the services are rendered.

Sale of goods

Revenue from the sale of goods in the course of ordinary activities is measured at the fair value of the consideration received or receivable, net of returns, trade discounts and volume rebates. Revenue is recognised when significant risks and rewards of ownership have been transferred to the customer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. If it is probable that discounts will be granted and the amount can be measured reliably, the discount is recognised as a reduction of revenue as the sales are recognised.

Transfers of risks and rewards occur upon delivery to customers.

Finance income

Finance income represents the interest income on the financial receivable arising from a service concession arrangement, and is recognised in profit or loss using the effective interest method.

Finance lease income

Finance lease income is recognised on accrual basis, taking into account the effective yield of the asset.

Others

Rental income from investment property is recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives granted are recognised as an integral part of the total rental income, over the term of the lease.

Interest income from funds invested (including available-for-sale financial assets) is recognised as it accrues as other income in profit or loss, using the effective interest method.

3.14 Government grants

The government grants are deducted against the carrying amounts of the assets when there is reasonable assurance that government grants will be received to compensate the Group for the cost of an asset and the Group will comply with the conditions associated with the grant.

3.15 Lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease.

Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

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Contingent lease payments are accounted for by revising the minimum lease payments over the remaining term of the lease when the lease adjustment is confirmed.

Determining whether an arrangement contains a lease

At inception of an arrangement, the Group determines whether such an arrangement is or contains a lease. A specific asset is the subject of a lease if fulfilment of the arrangement is dependent on the use of that specified asset. An arrangement conveys the right to use the asset if the arrangement conveys to the Group the right to control the use of the underlying asset.

3.16 Finance costs

Finance costs comprise interest expense on borrowings that are recognised in profit or loss. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

3.17 Tax

Tax expense comprises current and deferred tax. Current tax and deferred tax are recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for:

• temporarydifferencesontheinitialrecognitionofassetsorliabilitiesinatransactionthatisnotabusinesscombinationandthataffectsneitheraccountingnortaxableprofitorloss;

• temporarydifferences related to investments in subsidiariesand jointly controlledentities to theextent that theGroup is able to control the timing of reversal of the temporary difference and it is probable that they will not reverse intheforeseeablefuture;and

• taxabletemporarydifferencesarisingontheinitialrecognitionofgoodwill.

The measurement of deferred taxes reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.

A deferred tax asset is recognised for unused tax losses, tax credits and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilised. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realised.

In determining the amount of current and deferred tax, the Group takes into account the impact of uncertain tax positions and whether additional taxes and interest may be due. The Group believes that its accruals for tax liabilities are adequate for all open tax years based on its assessment of many factors, including interpretations of tax law and prior experience. This assessment relies on estimates and assumptions and may involve a series of judgements about future events. New information may become available that causes the Group to change its judgement regarding the adequacy of existing tax liabilities, such changes to tax liabilities will impact tax expense in the period that such a determination is made.

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3.18 Earnings per share

The Group presents basic and diluted earnings per share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the year, adjusted for own shares held. Diluted EPS is determined by adjusting the profit or loss attributable to ordinary shareholders and the weighted average number of ordinary shares outstanding, adjusted for own shares held for the effects of all dilutive potential ordinary shares, which comprise share options granted to employees and directors. Both basic and diluted EPS of the Group are adjusted for the effect of any provision for preference shares dividends.

3.19 Segment reporting

An operating segment is a component of the Group that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Group’s other components. All operating segments’ operating results are reviewed regularly by the Group’s CEO (the chief operating decision maker) to make decisions about resources to be allocated to the segment and assess its performance, and for which discrete financial information is available.

Segment results that are reported to the Group’s CEO include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly corporate assets (primarily the Company’s headquarters), head office expenses, and tax assets and liabilities.

Segment capital expenditure is the total cost incurred during the year to acquire property, plant and equipment, and intangible assets other than goodwill.

3.20 New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2012, and have not been applied in preparing these financial statements. Those new standards, amendments to standards and interpretations that are not expected to have a significant effect on the financial statements of the Group and the Company in future financial periods, and which the Group does not plan to early adopt except as set out below:

FRS 110 Consolidated Financial Statements, FRS 111 Joint Arrangements, FRS 112 Disclosure of Interests in Other Entities, Revised FRS 27 Separate Financial Statements, and Revised FRS 28 Investments in Associates and Joint Ventures

The Group will early adopt these FRSs from the financial period beginning 1 January 2013. These FRS’s mandatory effective date would have been from 1 January 2014 onwards.

FRS 110 changes the definition of control such that an investor controls an investee when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power with the investee. FRS 110 introduces a single control model with a series of indicators to assess control. FRS 110 also adds additional context, explanation and application guidance based on the principle of control.

The Group has re-evaluated its involvement with investees under the new control model. Based on its assessment, there are no changes to the existing classification of its investments in the various investees.

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FRS 111 establishes the principles for classification and accounting of joint arrangements. The adoption of this standard would require the Group to re-assess and classify its joint arrangements as either joint operations or joint ventures based on its rights and obligations arising from the joint arrangements. Under this standard, interests in joint ventures will be accounted for using the equity method whilst interests in joint operations will be accounted for using the applicable FRSs relating to the underlying assets, liabilities, revenue and expense items arising from the joint operations.

The Group has re-evaluated the rights and obligations of the parties to respective existing joint arrangements and has determined that the parties in the respective joint arrangements have rights to the net assets of the arrangements. Accordingly, all the existing joint arrangements will be classified as joint ventures under FRS 111 and will be accounted for using the equity method.

The Group currently accounts for its investments in joint arrangements using proportionate consolidation method. Arising from the application of FRS 111, all the existing joint arrangements will be classified as joint venture and will be accounted for using the equity method.

These changes will be applied retrospectively and prior periods in the Group’s 2013 financial statements will be restated. TheeffectoftheapplicationofFRS111isdecreasesintotalrevenueof$31.7millionfor2012;andtotalassetsandtotalliabilities as at 31 December 2012 of $200.1 million respectively. There will be no change to the Group’s net assets as at 31 December 2012 and net profits for 2012.

FRS 112 sets out the disclosures required to be made in respect of all forms of an entity’s interests in other entities, including subsidiaries, joint arrangements, associates and unconsolidated structured entities. The adoption of this standard would result in more extensive disclosures being made in the Group’s financial statements in respect of its interests in other entities;asFRS112isprimarilyadisclosurestandard,therewillbenofinancialimpactontheresultsandfinancialpositionof the Group and the Company upon early adoption of this standard by the Group in 2013. The Group is currently collating the information of the additional disclosures required.

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4 propErTy, pLANT AND EquIpMENT

Note

plant and

machineryMotor

vehicles Computersoffice

equipment

Leaseholdproperties

andimprovements

Furniture and

fittingsConstruction-

in-progress Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Group

CostAt 1 January 2011 40,350 2,883 11,567 2,558 73,376 2,214 67,412 200,360Additions 4,679 197 735 95 1,712 356 45,592 53,366Transfers 10,202 (10) 715 45 4,767 (53) (15,666) –Transfer from/(to) intangible assets 5 7,057 – – – – – (89) 6,968

Disposals (14,399) (434) (157) (212) (4,794) (7) (323) (20,326)Effect of movements in exchange rates 86 37 (155) 20 3,017 107 2,438 5,550

At 31 December 2011 and 1 January 2012 47,975 2,673 12,705 2,506 78,078 2,617 99,364 245,918Additions 2,051 191 939 1,167 20,981 2,492 18,279 46,100Transfers 1,177 – 622 367 54,261 110 (56,537) –Disposals (1,386) (292) (588) (556) (427) (232) (2,447) (5,928)Effect of movements in exchange rates (1,405) (119) (129) (60) (2,806) (88) (2,709) (7,316)

At 31 December 2012 48,412 2,453 13,549 3,424 150,087 4,899 55,950 278,774

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Note

plant and

machineryMotor

vehicles Computersoffice

equipment

Leaseholdproperties

and improvements

Furniture and

fittingsConstruction-

in-progress Total

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Accumulated depreciation and impairment losses

At 1 January 2011 17,201 1,557 7,614 1,695 10,402 1,109 4,956 44,534Depreciation for the

year 5,453 466 2,354 245 3,505 363 – 12,386Disposals (4,046) (381) (148) (177) (749) (107) – (5,608)Impairment loss – – – – – – 3,717 3,717Transfer – (4) – (4) – 8 – –Transfer from

intangible assets 5 1,157 – – – – – – 1,157Effect of movements

in exchange rates 5 23 (92) 10 1,200 15 – 1,161At 31 December 2011

and 1 January 2012 19,770 1,661 9,728 1,769 14,358 1,388 8,673 57,347Depreciation for the

year 5,174 380 1,909 347 5,270 571 – 13,651Disposals (1,336) (240) (568) (542) (408) (217) – (3,311)Impairment loss – – – – – – 5,321 5,321Effect of movements

in exchange rates (520) (82) (89) (38) (432) (144) – (1,305)At 31 December 2012 23,088 1,719 10,980 1,536 18,788 1,598 13,994 71,703

Carrying amountsAt 1 January 2011 23,149 1,326 3,953 863 62,974 1,105 62,456 155,826At 31 December 2011

and 1 January 2012 28,205 1,012 2,977 737 63,720 1,229 90,691 188,571At 31 December 2012 25,324 734 2,569 1,888 131,299 3,301 41,956 207,071

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ComputersFurniture

and fittings Total$’000 $’000 $’000

Company

CostAt 1 January 2011, 31 December 2011, 1 January 2012 and 31 December 2012 1,018 11 1,029

Accumulated depreciationAt 1 January 2011, 31 December 2011, 1 January 2012 and 31 December 2012 1,018 11 1,029

Carrying amountsAt 1 January 2011, 31 December 2011, 1 January 2012 and 31 December 2012 – – –

Estimation of residual values and useful lives of property, plant and equipment

The Group reviews the useful lives of the property, plant and equipment at the end of each reporting period in order to determine the amount of depreciation expense to be recorded during any reporting period. The useful lives are based on the Group’s historical experience with similar assets and taking into account anticipated technological changes. Changes in the expected level of usage and technological developments could impact the economic useful lives and the residual values of these assets. Therefore future depreciation charges could be revised.

Impairment loss

In 2012, due to the unfavourable market conditions, the Group has deferred the production and expected launch date of a new product in the industrial segment, which was originally expected to be available for sale in 2013. The Group has assessed the recoverable amount of the related production plant.

The recoverable amount was estimated based on its value in use, assuming that the production line would go live in 2015 using a pre-tax discount rate of 13% (2011: 11%). Based on the assessment, the Group recognised an impairment loss of $5,321,000 (2011: $3,717,000). The production plant is included in the People’s Republic of China Industrial (PRC) CGU.

The calculation of the value in use was based on the cash flows that were projected from financial budgets approved by management covering a five-year period. The key assumptions made are regarding the commencement period of the production plant, revenue and costs.

The anticipated annual revenue growth included in the cash flow projections was 6% (2011: 5%) for the years 2015 to 2017 (2011: 2013 to 2016). From 2018 (2011: 2017) onwards, management has assumed that the revenue would remain constant. The costs are assumed to increase with the increase in revenue growth adjusted for the trend of the raw material prices based upon the published market rates of the futures.

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Sensitivity to changes in assumptions

Following the impairment in the PRC CGU, the recoverable amount is equal to the carrying amount. Therefore, any adverse movement in a key assumption would lead to further impairment.

Property, plant and equipment under construction

In 2011, the Group commenced the construction of its new headquarters and research center. In 2012, total capitalised construction costs of the new premises amounting to $49,836,000 was transferred to leasehold properties and improvements upon completion of the construction.

Included in the carrying value of the new premises was capitalised borrowing costs related to the acquisition of the land and the construction of the new premises amounting to $1,085,000 (2011: $652,000), with a capitalisation rate of 2.41% (2011: 2.09%).

5 INTANGIBLE ASSETS

Note Goodwill

Intellectualproperty

rights Development

costsLicensing

fees Total$’000 $’000 $’000 $’000 $’000

Group

CostAt 1 January 2011 22,408 4,860 52,643 8,399 88,310Additions – 40 – – 40Disposal of subsidiaries to a joint venture 1,124 – – – 1,124Additions – internally developed – – 3,930 – 3,930Transfer to property, plant and equipment 4 – – (6,968) – (6,968)Disposals – – (147) – (147)Effect of movements in exchange rates – 2 (1) (18) (17)At 31 December 2011 and 1 January 2012 23,532 4,902 49,457 8,381 86,272Additions – 71 – – 71Additions – internally developed – – 5,101 – 5,101Liquidation of subsidiary (1,146) – – – (1,146)Disposals – (295) (3,461) (3,898) (7,654)Effect of movements in exchange rates – (19) (80) (223) (322)At 31 December 2012 22,386 4,659 51,017 4,260 82,322

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Note Goodwill


rights Development

costsLicensing

fees Total$’000 $’000 $’000 $’000 $’000

Accumulated amortisation and impairment lossesAt 1 January 2011 3,927 999 16,836 4,473 26,235Amortisation for the year – 59 5,130 324 5,513Impairment loss 8,484 – 3,326 – 11,810Disposals – – (89) – (89)Transfer to property, plant and equipment 4 – – (1,157) – (1,157)Effect of movements in exchange rates – 2 82 – 84At 31 December 2011 and 1 January 2012 12,411 1,060 24,128 4,797 42,396Amortisation for the year – 220 4,250 310 4,780Impairment loss – – 1,451 – 1,451Disposals – (260) (3,461) (3,898) (7,619)Liquidation of subsidiary (954) – – – (954)Effect of movements in exchange rates – 74 (175) (75) (176)At 31 December 2012 11,457 1,094 26,193 1,134 39,878

Carrying amountsAt 1 January 2011 18,481 3,861 35,807 3,926 62,075At 31 December 2011 and 1 January 2012 11,121 3,842 25,329 3,584 43,876At 31 December 2012 10,929 3,565 24,824 3,126 42,444


rightsLicensing

fees Total$’000 $’000 $’000

Company

CostAt 1 January 2011 1,779 137 1,916Disposals (1,779) (137) (1,916)At 31 December 2011, 1 January 2012 and 31 December 2012 – – –

Accumulated amortisationAt 1 January 2011 96 41 137Amortisation for the year 18 14 32Disposals (114) (55) (169)At 31 December 2011, 1 January 2012 and 31 December 2012 – – –

Carrying amountsAt 1 January 2011 1,683 96 1,779At 31 December 2011, 1 January 2012 and 31 December 2012 – – –

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Capitalisation of development costs

Initial capitalisation of costs is based on management’s judgement that technological and economical feasibility is confirmed, usually when a product development project has reached a defined milestone according to an established project management model. In 2011, development costs with carrying amount of $5,811,000 were reclassified to property, plant and equipment to better reflect the nature of the assets.

Recoverability of development costs

The recoverable amounts of the cash-generating units are estimated based on their value in use. When value in use calculations are undertaken, management estimates the expected future cash flows from the cash-generating unit and chooses a suitable discount rate in order to calculate the present value of those cash flows. The recoverable amounts were estimated to be higher than the carrying amounts of the units, and no impairment was required, except for the amounts discussed below.

Impairment loss on development costs

Annually, the management will perform specific review on the development projects to identify projects that no longer meet the recognition criteria set forth in the FRS.

Accordingly, in 2012, taking into consideration the changes in the Group’s business plan, an impairment loss of $1,451,000 (2011: $3,326,000) was recognised in profit or loss.

Estimation of useful lives of development costs

Significant judgement is required in estimating the useful lives of development projects, which are affected by various factors, such as technological developments.

Impairment testing for cash-generating units (CGUs) containing goodwill

For the purpose of impairment testing, goodwill is allocated to the Group’s operating divisions which represent the lowest level within the Group at which the goodwill is monitored for internal management purposes, which is not higher than the Group’s operating segments as reported in note 26. The aggregate carrying amounts of goodwill allocated to each unit are as follows:

2012 2011$’000 $’000

Singapore – Others – 192Kingdom of Saudi Arabia – Industrial 1,585 1,585People’s Republic of China – Municipal 9,344 9,344

10,929 11,121

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In 2012, following a management review of the business portfolio, no impairment loss was recognised in profit or loss. Impairment losses for 2011 were as follows:

2012 2011$’000 $’000

Industrial- The Netherlands – 2,402- Kingdom of Saudi Arabia – 4,217- People’s Republic of China – 1,865

– 8,484

The Netherlands Industrial CGU

In 2011, management had fully written off the carrying amount of goodwill and recorded an impairment loss against the remaining goodwill amount from the Netherlands Industrial CGU of $2,402,000. As at 31 December 2012, the carrying amount of the goodwill from the Netherlands Industrial CGU was $Nil.

Kingdom of Saudi Arabia Industrial CGU

The recoverable amount of the Kingdom of Saudi Arabia Industrial CGU was determined based upon the fair value less costs to sell method. The fair value less costs to sell has been estimated based on indicative quotes obtained from potential buyers. Based on this basis of estimated recoverable amount, the Group recorded an impairment loss of $4,217,000 to the goodwill arising from Kingdom of Saudi Arabia Industrial CGU in 2011.

People’s Republic of China Municipal CGU

The recoverable amounts of the People’s Republic of China Municipal CGU were based on the values in use. Values in use were determined by discounting the future cash flows generated from the continuing use of the units. Unless indicated otherwise, values in use in 2012 were determined in a similar manner as in 2011.

Calculation of value in use is derived from the financial projections approved by management with key assumptions made relating to forecast period, revenue and costs, growth rates and discount rates. Cash flows were projected over 20 to 30 years in accordance with the duration of the concession agreements.

The anticipated annual revenue growth included in the cash flow projections was 5% (2011: 5%). The forecast revenue and costs, and growth rates are based on past performance of operating plants, expectations of market development as well as industry reports.

A pre-tax discount rate of 10% (2011: 10%) was applied in determining the recoverable amounts of the CGUs and reflect specific risks related to the relevant segments.

The values assigned to the key assumptions represent management’s assessment of future trends in the industries and are based on both external sources and internal sources (historical data).

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6 INTANGIBLE ASSETS ArISING FroM SErvICE CoNCESSIoN ArrANGEMENTS

$’000Group

CostAt 1 January 2011 129,934Additions 22,769Effect of movements in exchange rates 6,400At 31 December 2011 and 1 January 2012 159,103Additions 217,825Effect of movements in exchange rates (8,504)At 31 December 2012 368,424

Accumulated amortisationAt 1 January 2011 440Amortisation for the year 3,211Effect of movements in exchange rates 515At 31 December 2011 and 1 January 2012 4,166Amortisation for the year 4,189Effect of movements in exchange rates (297)At 31 December 2012 8,058

Carrying amountsAt 1 January 2011 129,494At 31 December 2011 and 1 January 2012 154,937At 31 December 2012 360,366

At 31 December 2012, the Group owns water plants in PRC, including water treatment plants (WTPs) and wastewater treatment plants (WWTPs), through the special project companies (SPCs) incorporated in PRC. The principal activities of the SPCs are development and operation of WTPs and WWTPs, as well as sales of treated and recycled water. Each of these SPCs has entered into service concession arrangements with the respective local municipals (the grantor), via either Transfer-Operate-Transfer (TOT) or Build-Operate-Transfer (BOT) arrangements.

Under the TOT arrangements, the rights of use of the water plants were transferred to the Group and the Group is responsible for any upgrading services to bring the water plants into proper working conditions. Under the BOT arrangements, the Group is responsible for the construction of the water plants. Upon completion of the construction, the Group is responsible for operating the water plants and sale of the treated and recycled water to the industrial or domestic customers. The concession periods range from 20 years to 30 years.

During the concession period, the Group received the right to charge the customers for the sale of water. Additionally, some of the service concession arrangements provide the Group a guaranteed minimum annual payment for the initial years of the concession period, ranging from 3 years to 30 years. These guaranteed minimum annual payments are recognised as financial receivables to the extent that the Group has contractual rights under the concession arrangements (see note 10). The financial receivables are measured on initial recognition at their fair value.

Intangible assets arising from service concession arrangements represent the right to operate the water plants and to sell the water to the customers.

At the end of the concession period, the water plants will be transferred to the grantor.

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The service concession agreement does not contain a renewal option. The standard rights of the grantor to terminate the agreement include poor performance by the Group and in the event of a material breach in the terms of the agreement. The standard rights of the Group to terminate the agreement include failure of the grantor to make payment under the agreement, a material breach in the terms of the agreement, and any changes in law that would render it impossible for the Group to fulfill its obligations under the agreement.

7 INvESTMENTS IN SuBSIDIArIES

Company2012 2011

$’000 $’000

Unquoted equity securities, at cost 164,011 156,011Impairment losses (11,100) (11,100)

152,911 144,911Loans to subsidiaries 24,509 24,509

177,420 169,420

Loans to subsidiaries are unsecured and interest-free, and settlement is neither planned nor likely to occur in the foreseeable future. As these balances are, in substance, part of the Company’s net investments in the subsidiaries, they are stated at cost less impairment losses, if any.

In 2012, the Company has assessed the recoverable amount of its investments in subsidiaries that have been loss-making since the previous financial years. The recoverable amount was estimated based on value in use.

When value in use calculations are undertaken, management estimates the expected future cash flows from the cash-generating unit and chooses a suitable discount rate in order to calculate the present value of those cash flows. The recoverable amounts were estimated to be higher than the carrying amounts of the units, and no additional impairment was required in 2012.

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Details of major subsidiaries are as follows:

Name of subsidiaryCountry of

incorporationownership

interest2012 2011

% %held by the Company

Hydrochem (S) Pte Ltd Singapore 100 100Hyflux Membrane Manufacturing (S) Pte. Ltd. Singapore 100 100SinoSpring Utility Ltd British Virgin Islands 100 100Spring China Utility Ltd British Virgin Islands 100 100TuaSpring Pte Ltd Singapore 100 100Hyflux Engineering Pte Ltd Singapore 100 100

held through subsidiaries

Hydrochem Engineering (Shanghai) Co., Ltd People’s Republic of China (PRC) 100 100Hyflux Filtech (Shanghai) Co., Ltd PRC 71 71Hyflux Unitech (Shanghai) Co., Ltd PRC 71 71Hyflux Hi-tech Product (Yangzhou) Co., Ltd PRC 100 100Hyflux NewSpring Construction Engineering (Shanghai)

Co., Ltd PRC 100 100

Hyflux Engineering (Shanghai) Co., Ltd PRC 100 100Hyflux-TJSB Algeria SPA Algeria 51 51Hyflux Engineering Algeria EURL Algeria 100 100Sinolac (Huludao) Biotech Co., Ltd PRC 100 100

KPMG LLP, Singapore is the auditor of all significant Singapore-incorporated subsidiaries. The foreign-incorporated subsidiaries that are considered significant are Hyflux NewSpring Construction Engineering (Shanghai) Co., Ltd, and Hyflux Engineering Algeria EURL. Their respective statutory auditors are Shanghai Hongyi CPA Co., Ltd, PRC and Guerza Rafik Expert Comptable G.R.E.C.

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8 INvESTMENTS IN JoINT vENTurES

Company2012 2011

$’000 $’000

Unquoted equity securities, at cost 3,125 3,125

Details of major joint ventures are as follows:

Name of joint ventureCountry of

incorporation ownership interest2012 2011

% %

held by the Company

Hyflux Marmon Development Pte. Ltd. Singapore 50 50

held through subsidiaries

Galaxy NewSpring Pte. Ltd. Singapore 50 50H.J. NewSpring Limited Hong Kong 50 50

held through joint ventures

Tianjin Dagang NewSpring Co., Ltd People’s Republic of China (PRC) 50 50Galaxy Newspring Capital Pte. Ltd. Singapore 50 50Hyflux Water Trust Singapore 50 50Galaxy Operation and Management (Shanghai) Co., Ltd PRC 50 50Hyflux NewSpring (Dezhou) Co., Ltd PRC 50 50Hyflux NewSpring (LiaoYang GongChangLing) Co., Ltd. PRC 50 50Hyflux NewSpring Sewage Disposal (Rudong) Co., Ltd PRC 50 50Hyflux NewSpring (Tianjin) Co., Ltd. PRC 50 50Hyflux NewSpring Waste Water Treatment (Mingguang)

Co., LtdPRC 50 50

Hyflux NewSpring (Yangzhou) Co., Ltd PRC 50 50Hyflux NewSpring (Zunhua) Co., Ltd. PRC 50 50Langfang Hyflux NewSpring Co., Ltd. PRC 50 50Wuxi Hyflux NewSpring Sewage Disposal Co., Ltd PRC 50 50

KPMG LLP, Singapore is the auditor of the Singapore-incorporated joint ventures. The foreign-incorporated joint venture that is considered significant is Tianjin Dagang NewSpring Co., Ltd and the statutory auditor is KPMG Huazhen, Shanghai, PRC.

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The summarised financial information of the joint ventures, which are adjusted for the percentage of ownership held by the Group, are as follows:

2012 2011$’000 $’000

Assets and liabilitiesNon-current assets 396,925 405,518Current assets 68,030 53,603Total assets 464,955 459,121

Non-current liabilities (143,539) (131,904)Current liabilities (56,543) (48,678)Total liabilities (200,082) (180,582)

resultsRevenue 31,731 38,218Expenses (37,628) (39,264)Loss before income tax (5,897) (1,046)

Contingent liabilities in respect of bank guarantees for which the Group is liable (57,257) (62,652)

9 INvESTMENTS IN ASSoCIATES

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Unquoted equity securities 104,092 108,887 14,109 13,704

Unquoted equity securities of the Group with a carrying amount of $81,686,000 (2011: $88,195,000) have been pledged as collateral for banking facilities granted to the associates.

Details of major associates are as follows:

Name of associateCountry of


interest2012 2011

% %held by the Company

SingSpring Trust Singapore 30 30

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78



Name of associateCountry of


interest2012 2011

% %held through subsidiaries

Ningxia Hypow Bio-Technology Co., Ltd People’s Republic of China 25 25Tlemcen Desalination Investment Company SAS France 30 30Tahlyat Myah Magtaa SPA Algeria 47 47

SingSpring Trust is audited by Ernst & Young Singapore and Tahlyat Myah Magtaa SPA is audited by Cabinet Benmahsour Med El Bachir. An associated company is considered significant as defined under the SGX-ST's Listing Manual if the Group’s share of its net tangible assets represents 20% or more of the Group’s consolidated net tangible assets, or if the Group’s share of its pre-tax profits accounts for 20% or more of the Group’s consolidated pre-tax profits. None of the Group’s associates is considered significant in accordance with SGX-ST's Listing Manual.

The summarised financial information of the associates, which are adjusted for the percentage of ownership held by the Group, are as follows:

2012 2011$’000 $’000

Assets and liabilitiesTotal assets 340,297 345,251Total liabilities (241,217) (296,566)

resultsRevenue 29,544 27,227Profit after income tax 4,253 1,226

10 FINANCIAL rECEIvABLES

Group2012 2011

$’000 $’000Non-currentFinancial receivables 704,811 418,320

CurrentFinancial receivables 12,548 4,874Lease receivables – 63

12,548 4,937

Total 717,359 423,257

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The financial receivables represent the unconditional rights to receive cash or other financial asset from or at the direction of the grantors for the construction or upgrade services provided. See note 6 for the background of the service concession arrangements.

At 31 December 2012, the Group has no receivables under finance lease. In 2011, the Group had receivables under finance leases as follows:

Minimum lease payment

receivablesunearned finance

income

present value of minimum lease

payment receivables2011 2011 2011

$’000 $’000 $’000Group

Within one year 82 19 63

Under the terms of the lease arrangements, no contingent rents were recognised and there were no unguaranteed residual values accruing to the Group.

The weighted average effective interest rate of the lease receivables at 31 December 2011 was 5.5% per annum.

11 TrADE AND oThEr rECEIvABLES

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000Non-currentTrade receivables – 66 – –Amounts due from:- subsidiaries (non-trade) – – 760,736 445,312- an associate (non-trade) 14,594 15,486 – –

14,594 15,552 760,736 445,312

CurrentTrade receivables 99,375 90,691 – –Prepayments 6,477 4,927 3,631 3,276Deposits 2,425 2,512 – –Advances to suppliers 28,768 19,826 – –Staff advances 231 323 – –Other receivables 9,822 12,801 12 –Derivatives 21 546 – 514Amounts due from:- subsidiaries (trade) – – 17,073 17,548- subsidiaries (non-trade) – – 464,295 701,871- joint ventures (trade) 34,634 30,015 – –- joint ventures (non-trade) 1,815 1,688 509 527- associates (trade) 15,328 64,955 – –- an associates (non-trade) 10,725 2,809 5,108 5,405

209,621 231,093 490,628 729,141

Total 224,215 246,645 1,251,364 1,174,453

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80



At 31 December 2012, trade receivables for the Group included a retention sum of $10,001,000 (2011: $9,353,000) relating to construction contracts in progress.

Included in current trade receivables of the Group are note receivables of $5,187,000 (2011: $6,356,000) relating to bank promissory notes for payment within the next six months.

Outstanding balances with subsidiaries, joint ventures and associates are unsecured. There is no allowance for doubtful debts arising from the outstanding balances.

Except for balances amounting to $744,858,000 (2011: $428,462,000) that bear interest at rates of 5% to 6.5% (2011: 5% to 6.5%), remaining non-current non-trade amounts due from subsidiaries are interest-free, have no fixed terms of repayment and are not expected to be repaid within the next 12 months. As these amounts are in substance, a part of the entity’s net investment in the subsidiaries, they are stated at cost.

The non-current non-trade amount due from an associate bears interest at rate of 5.94% (2011: 5.94%) per annum and is repayable in 2014.

The current amounts due from subsidiaries, joint ventures and associates are interest-free and are repayable on demand.

The Group’s and the Company’s exposure to credit and currency risks, and impairment losses related to trade and other receivables, are as set out in note 20.

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81



12 DEFErrED TAx ASSETS AND LIABILITIES

Unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items:

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Tax losses 18,914 17,880 – –Deductible temporary differences 18 18 – –

18,932 17,898 – –

The tax losses and deductible temporary differences are subject to agreement by the tax authorities and compliance with tax regulations in the respective countries in which the Company and certain subsidiaries operate. Tax losses of $8,358,000 (2011: $7,545,000) expire in 2013 to 2017 (2011: 2012 to 2016). Remaining tax losses and deductible temporary differences do not expire under current tax legislation. Deferred tax assets have not been recognised in respect of these items because it is not probable that future taxable profit will be available against which the Group can utilise the benefits therefrom.

Recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

Assets Liabilities2012 2011 2012 2011

$’000 $’000 $’000 $’000Group

Property, plant and equipment – – 1,009 182Intangible assets – – 4,056 4,445Intangible assets arising from service concession arrangements (417) (417) 22,152 23,747Tax loss carry-forwards (1,633) (2,412) – –Deferred tax (assets)/liabilities (2,050) (2,829) 27,217 28,374

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82



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83


83



13 GroSS AMouNTS DuE For CoNTrACT WorK

GroupNote 2012 2011

$’000 $’000

Costs incurred and attributable profits 837,243 1,127,765Progress billings (730,223) (964,410)

107,020 163,355

Comprising of:Gross amounts due from contract work 119,059 176,910Progress payments from customers 16 (12,039) (13,555)

107,020 163,355

14 INvENTorIES

Group2012 2011

$’000 $’000

Raw materials and consumables 19,267 11,798Work in progress 8,541 11,010Finished goods 4,648 1,387

32,456 24,195

During the year, the write-down of inventories to net realisable value amounted to $644,000 (2011: $113,000) for the Group. The write-down is included as part of other expenses in profit or loss.

15 CASh AND CASh EquIvALENTS


$’000 $’000 $’000 $’000

Bank balances 304,280 198,789 170,741 13,782Fixed deposits with financial institutions 236,952 463,569 5,475 82,625Cash and cash equivalents in the statements of financial position 541,232 662,358 176,216 96,407Deposits pledged (9,589) –Bank overdrafts used for cash management purposes 17 (41,456) (20,943)Cash and cash equivalents in the statement of cash flows 490,187 641,415

Deposits pledged represent bank balances of certain subsidiaries and joint venture pledged as securities for performance guarantees and credit facilities, respectively.

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84



16 TrADE AND oThEr pAyABLES


$’000 $’000 $’000 $’000

Trade payables 261,378 183,335 – –Progress payments from customers 13 12,039 13,555 – –Derivatives 81 395 – 354Accrued expenses 18,725 13,958 1,019 762Other payables 25,131 15,412 8,219 8,403Amounts due to:- subsidiaries (trade) – – 36 41- subsidiaries (non-trade) – – 25,539 126,007- joint ventures (trade) 623 1,001 – –- joint ventures (non-trade) 228 184 – –

318,205 227,840 34,813 135,567

Amounts due to subsidiaries, joint ventures and associates are unsecured, interest-free and repayable on demand.

The Group’s and the Company’s exposure to currency and liquidity risk related to trade and other payables are described in note 20.

17 LoANS AND BorroWINGS

This note provides information about the contractual terms of the Group’s and the Company’s interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the Group’s and Company’s exposures to interest rate, foreign currency and liquidity risks, see note 20.


$’000 $’000 $’000 $’000Non-current liabilitiesSecured bank loans 89,178 78,096 – –Unsecured bank loans 411,899 180,950 355,290 120,556Unsecured notes 553,229 453,255 553,229 453,255

1,054,306 712,301 908,519 573,811

Current liabilitiesBank overdraft 15 41,456 20,943 – –Secured bank loans 9,284 6,482 – –Unsecured bank loans 13,695 2,258 10,000 –Unsecured notes – 88,438 – 88,438

64,435 118,121 10,000 88,438

Total 1,118,741 830,422 918,519 662,249

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85



Secured bank loans of the Group at 31 December 2012 and 31 December 2011 were secured by land and building of a subsidiary with carrying amount of $67,559,000 (2011: $41,787,000), a joint venture’s mortgages of its shares of various subsidiaries and deposits pledged of $2,502,000 (2011: $Nil).

Unsecured bank loans and overdraft of the Group totalling $514,272,000 (2011: $256,291,000) are guaranteed by the Company and a subsidiary of the Group.

Unsecured bank loans of the Company totalling $355,291,000 (2011: $120,556,000) are guaranteed by a subsidiary of the Group.

At the reporting date, the Group does not consider it probable that a claim will be made against the Group under the guarantees as described above.

In 2011, the Company increased the unsecured multi-currency debt established in 2008 from $300 million to $800 million, pursuant to which the Company may issue notes which bear currency, interest and maturity terms that vary with each series, as may be agreed between the Company and the dealers. As at 31 December 2012, $555 million (2011: $544 million) of unsecured fixed rate notes were in issue.

Terms and debt repayment schedule

Terms and conditions of outstanding loans and borrowings are as follows:

2012 2011

CurrencyNominal

interest rate year

of maturityFace

valueCarrying

amountFace

valueCarrying

amount$’000 $’000 $’000 $’000

Group

Unsecured bank loans SGD SIBOR + 1.95% 2017 100,000 99,465 – –Unsecured bank loans SGD SOR + 1.0% 2014 30,000 30,000 – –Unsecured bank loans USD LIBOR + 1.66% 2016 125,825 125,825 120,556 120,556Unsecured bank loans SGD LIBOR + 1.66% 2016 25,000 25,000 - -Unsecured bank loans SGD COF* + 2.25% 2013 50,000 50,000 – –Unsecured bank loans SGD COF* + 1.75% 2013 10,000 10,000 – –Unsecured bank loans RMB 6.6% - 7.05% 2023 57,725 57,293 63,281 62,652Secured bank loans USD COF* + 2.5% 2012 - 2017 28,585 28,585 33,704 33,704Secured bank loans USD LIBOR + 2.5% 2012 - 2014 70,507 69,877 51,963 50,874Unsecured bank loans SGD COF* + 1.5% 2015 25,000 25,000 – –Unsecured bank loans USD 1.41%-3.73% 2023 3,011 3,011 – –Unsecured notes SGD 3.5% - 5.68% 2014 - 2019 555,000 553,229 543,500 541,693Bank overdraft DZD 6% - 9% 2013 41,456 41,456 20,943 20,943Total loans and

borrowings 1,122,109 1,118,741 833,947 830,422

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86



2012 2011

CurrencyNominal

interest rate year

of maturityFace

valueCarrying

amountFace

valueCarrying

amount$’000 $’000 $’000 $’000

Company

Unsecured bank loans SGD SIBOR + 1.95% 2017 100,000 99,465 – –Unsecured bank loans SGD SOR + 1.0% 2014 30,000 30,000 – –Unsecured bank loans USD LIBOR + 1.66% 2016 125,825 125,825 120,556 120,556Unsecured bank loans SGD LIBOR + 1.66% 2016 25,000 25,000 - -Unsecured bank loans SGD COF* + 2.25% 2013 50,000 50,000 – –Unsecured bank loans SGD COF* + 1.75% 2013 10,000 10,000 – –Unsecured bank loans SGD COF* + 1.50% 2015 25,000 25,000 – –Unsecured notes SGD 3.5% - 5.68% 2014 - 2019 555,000 553,229 543,500 541,693Total loans and

borrowings 920,825 918,519 664,056 662,249

COF* : Costs of funds, the rate per annum determined by the bank to be the aggregate of :i. The rate at which the bank would be able to acquire funds in the Singapore interbank market (or from such

sources as the bank may select for the purpose), andii. The rate determined by the bank to represent the bank’s costs of compliance with liquidity, reserve or

similar requirements imposed by any relevant authority (if any).

18 CApITAL AND rESErvES

Share capital

ordinary shares CpS*2012 2011 2012 2011

No. of shares No. of shares’000 ’000 ’000 ’000

Group and Company

On issue at 1 January 858,679 857,931 4,000 –Issue of CPS – – – 4,000Exercise of share options 479 3,459 – –Purchase of treasury shares (33,935) (2,711) – –On issue at 31 December 825,223 858,679 4,000 4,000

* 6% Cumulative Non-convertible Non-voting Perpetual Class A Preference Shares

All shares rank equally with regard to the Company’s residual assets, except that CPS shareholders which rank senior to the ordinary shareholders participate only to the extent of the face value of the CPS.

All issued shares are fully paid, with no par value.

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87



Ordinary shares

The holders of ordinary shares are entitled to receive dividends as declared from time to time, and are entitled to one vote per share at meetings of the Company. In respect of the Company’s shares that are held by the Group, the rights are suspended until these shares are issued.

Issuance of ordinary shares

479,000 (2011: 3,459,000) ordinary shares were issued as a result of the exercise of vested options arising from the 2001 share option programme granted to key management staff. Options were exercised at an average price of $0.953 (2011: $1.364) per option.

All issued shares were fully paid.

CPS

Group and Company2012 2011

$’000 $’000

At 1 January 392,569 –Proceeds from issue of CPS – 400,000Transaction costs – (7,431)At 31 December 392,569 392,569

On 25 April 2011, the Company issued 4,000,000 CPS listed on the Main Board of the Singapore Exchange Securities Trading Limited.

The CPS do not carry the right to vote at general meeting except in certain limited circumstances as specified in the Offer Information Statement dated 13 April 2011 (the OIS) and rank senior to the ordinary shares with regard to the Company’s residual assets, to the extent of the face value of the CPS. All issued shares are fully paid.

The CPS carry a dividend rate of 6% per annum of their liquidation preference (being $100 per CPS), payable semi-annually when, as and if declared by the Board, in arrears on 25 April and 25 October of each year, subject to certain conditions specified in the OIS.

The Company has the right, but not the obligation, to redeem the CPS on or after 25 April 2018, at the liquidation preference for each CPS plus accrued but unpaid dividends up to (but excluding) the redemption date. If the CPS are not redeemed by the Company on 25 April 2018, dividends will accrue on the CPS at the rate of 8% per annum of their liquidation preference on and from 25 April 2018.

The CPS are perpetual securities with no maturity date and are not redeemable at the option of the holders of the CPS. The Company may at its sole discretion, redeem the CPS for cash, in whole or in part (on a pro rata basis), under certain circumstances, subject to the terms and conditions of the OIS.

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Reserve for own shares

The reserve for the Company’s own shares comprises the cost of the Company’s shares held by the Group. At 31 December 2012, the Group held 37,146,000 (2011: 3,211,000) of the Company’s shares.

Capital reserve

The capital reserve comprises:

(a) Capital gain arising from the payment of the Group’s subscription to the share capital of a subsidiary by a non-controlling interest.

(b) Statutory Reserve Fund (SRF)

In accordance with the Foreign Enterprise Law in the People’s Republic of China (PRC), the Group’s subsidiaries in the PRC are required to appropriate earnings to a SRF. 10% of the statutory profits after tax as determined in accordance with the applicable PRC accounting standards and regulations are allocated to the SRF annually until the cumulative total of the SRF reaches 50% of the subsidiaries’ registered capital. Subject to approval from the relevant PRC authorities, the SRF may be used to offset any accumulated losses or increase the registered capital of the subsidiaries. The SRF is not available for dividend distribution to shareholders.

(c) Difference between the consideration paid and net assets acquired in acquisition of non-controlling interest.

(d) Accumulated amortisation of transaction costs incurred in the issuance of redeemable preference shares.

Foreign currency translation reserve

The translation reserve comprises foreign currency differences arising from the translation of the financial statements of foreign operations.

Hedging reserve

The hedging reserve comprises:

(a) The effective portion of the cumulative net change in the fair value of cash flow hedging instruments relating to hedgedtransactionsthathavenotyetoccurred;and

(b) The Group’s share of the hedging reserve of associates.

Employees’ share option reserve

The employees’ share option reserve represents the equity-settled share options granted to employees. This reserve is made up of the cumulative value of services received from employees recorded over the vesting period commencing from the grant date of equity-settled share options.

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Dividends

The following dividends were declared and paid by the Group and the Company:

For the year ended 31 December


$’000 $’000

Final tax-exempt dividend paid of 2.10 cents (2010: 3.50 cents) per share in respect of previous financial year 17,805 30,108

Interim tax-exempt dividend paid of 0.70 cent (2011: 0.67 cent) per share in respect of current financial year 5,775 5,767

$6 (2011: $3) per CPS 24,066 12,03347,646 47,908

After the respective reporting dates, the following dividends were proposed by the directors. As at the respective year end, the dividends were not provided for and there were no income tax consequences.


$’000 $’000

Final proposed tax-exempt dividend of 2.50 cents (2011: 2.10 cents) per share 20,631 18,032

19 ShArE-BASED pAyMENT

Description of the share-based payment arrangements

At 31 December 2012, the Group has the following share-based payment arrangements:

Share option scheme (equity-settled)

On 27 April 2011, the members of the Company have approved the implementation of new share option scheme (the Scheme) to replace the 2001 Scheme that expired on 26 September 2011. The implementation of the Scheme and replacement of expired scheme do not affect the rights of holders of the options under the expired scheme. The maximum entitlement of Olivia Lum Ooi Lin is 10% of the total number of shares which may be issued by the Company under the Scheme. The aggregate number of scheme shares available to Olivia Lum Ooi Lin and her associates (as defined in SGX-ST's Listing Manual) shall not exceed 25% of the total number of scheme shares available under the Scheme. It was in force since 27 September 2011 and shall expire on 26 September 2021.

The Scheme is administered by the Remuneration Committee.

Once these options have vested, the options are exercisable by an employee during a contractual option term of 10 years from the date of grant of that option. 20% of the options granted are exercisable after the director or employee completed each year of service from the date of the grant. All options are to be settled by physical delivery of shares.

The duration of the Scheme may be extended with the approval of the members of the Company at a general meeting of the Company and of any relevant authorities which may then be required. The vesting of the options under the Schemes are conditional upon various factors including the directors and employees completing their years of service to the Group.

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Disclosure of share option scheme

The number and weighted average exercise prices of share options are as follows:

Weightedaverageexercise

priceNumber

of options

Weightedaverageexercise

priceNumber

of options2012 2012 2011 2011

$ $

Outstanding at 1 January 1.658 41,713,681 1.656 35,640,369Forfeited during the year 1.831 (3,072,329) 1.782 (4,517,572)Exercised during the year 0.953 (478,875) 1.364 (3,437,116)Granted during the year 1.469 7,305,000 1.631 14,028,000Option granted but not accepted 1.469 (50,000) – –Outstanding at 31 December 1.623 45,417,477 1.658 41,713,681

Exercisable at 31 December 1.565 22,028,677 1.564 19,588,481

The options outstanding at 31 December 2012 have an exercise price in the range of $0.3997 to $2.4187 (2011: $0.2749 to $2.4187) and a weighted average contractual life of 5.78 years (2011: 6.66 years).

The weighted average share price at the date of exercise for share options exercised in 2012 was $1.366 (2011: $1.990) per share.

Inputs for measurement of grant date fair values

The grant date fair value of the share-based payment plans was measured based on the Black-Scholes standard option valuation model. Expected volatility is estimated by considering historic average share price volatility. The inputs used in the measurement of the fair values at grant date of the share-based payment plans are the following:

Fair value of share options and assumptions

Date of grant of options 5 March 2012

Fair value at grant date $0.405Share price at grant date $1.430Exercise price $1.469Expected volatility (weighted average volatility) 46%Option life (expected weighted average life) 100 daysExpected dividends 2.77%Risk-free interest rate (based on government bonds) 0.46%

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20 FINANCIAL INSTruMENTS

Credit risk

Exposure to credit risk

The carrying amount of financial assets in the statements of financial position represents the Group's and the Company’s respective maximum credit exposure. The maximum exposure to credit risk at the reporting date was:


$’000 $’000 $’000 $’000

Financial receivables 10 717,359 423,257 – –Trade receivables 11 99,375 90,757 – –Deposits 11 2,425 2,512 – –Advances to suppliers 11 28,768 19,826 – –Staff advances 11 231 323 – –Other receivables 11 9,822 12,801 12 –Amounts due from:- subsidiaries (trade) 11 – – 17,073 17,548- subsidiaries (non-trade) 11 – – 1,225,031 1,147,183- joint ventures (trade) 11 34,634 30,015 – –- joint ventures (non-trade) 11 1,815 1,688 509 527- associates (trade) 11 15,328 64,955 – –- associates (non-trade) 11 25,319 18,295 5,108 5,405Cash and cash equivalents 15 541,232 662,358 176,216 96,407Loans and receivables 1,476,308 1,326,787 1,423,949 1,267,070Derivatives 11 21 546 – 514Recognised financial assets 1,476,329 1,327,333 1,423,949 1,267,584

The Group’s revenue is earned from a wide range of customers whose credit quality have not changed significantly.

The maximum exposure to credit risk for loans and receivables at the reporting date by type of counterparty was:

Group Company2012 2011 2012 2011

$’000 $’000 $’000 $’000

Municipal 1,364,204 1,150,088 – –Industrial 84,222 138,227 – –Subsidiaries – – 1,242,104 1,164,731Joint ventures – – 509 527Associates – – 5,108 5,405Others 27,882 38,472 176,228 96,407

1,476,308 1,326,787 1,423,949 1,267,070

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The credit quality of trade and other receivables is assessed based upon the credit policy in place. At the reporting date, the Group and the Company believe that the credit quality of trade and other receivables that were not past due or impaired is of acceptable risk.

The Group does not require collateral in respect of trade and other receivables.

Impairment losses

The ageing of loans and receivables at the reporting date was:

Gross Impairment Gross Impairment 2012 2012 2011 2011

$’000 $’000 $’000 $’000Group

Not past due 1,416,774 – 1,275,441 –Past due 0 to 60 days 11,702 – 10,271 5Past due 61 to 180 days 6,530 – 10,249 –More than 180 days 46,872 5,570 35,753 4,922

1,481,878 5,570 1,331,714 4,927Company

Not past due 1,423,949 – 1,267,070 –

The movement in the allowance for impairment in respect of loans and receivables during the year was as follows:

Group2012 2011

$’000 $’000

At 1 January 4,927 5,280Impairment loss recognised 1,311 1,980Impairment loss written off (55) (1,503)Impairment loss written back (455) (903)Effect of movements in exchange rates (158) 73At 31 December 5,570 4,927

At 31 December 2012, an impairment loss of the Group of $1,311,000 (2011: $1,980,000) relates to several customers that have indicated that they are not expecting to be able to pay their outstanding balances, mainly due to financial difficulties.

The impairment losses recognised and written back during the year are included as part of other expenses in profit or loss.

The Group and the Company believe that the unimpaired amounts that are past due are still collectible, based on historic payment behaviour and analysis of the customers’ underlying credit ratings.

Based on historic default rates, the Group believes that, apart from the above, no impairment allowance is necessary in respect of the Group’s loans and receivables that are unimpaired at 31 December 2012 as these loans and receivables are mainly due from governing bodies or agencies of the People’s Republic of China, or customers that have a good payment record with the Group. Management believes that no additional impairment allowance is necessary on the Company’s loans and receivables as at 31 December 2012.

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Cash and cash equivalents

The Group held cash and cash equivalents of $541,232,000 at 31 December 2012 (2011: $662,358,000), which represents its maximum credit exposure on these assets. The cash and cash equivalents are held with bank and financial institution counterparties, which are rated A+ to AA-, based on rating agency Standard & Poor’s ratings.

Liquidity risk

The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

Cash flows

Carryingamount

Contractualcash flows

Within1 year

Between1 and

5 yearsMore than

5 yearsGroup $’000 $’000 $’000 $’000 $’000

2012Non-derivative financial liabilitiesBank overdraft 41,456 (44,306) (44,306) – –Variable interest rate loans 524,056 (580,897) (37,259) (498,094) (45,544)Fixed interest rate notes 553,229 (667,200) (23,705) (359,865) (283,630)Trade and other payables* 306,085 (306,085) (306,085) – –

1,424,826 (1,598,488) (411,355) (857,959) (329,174)Derivative financial instrumentsForward exchange contracts (gross-settled) (21)- Outflow (1,975) (1,640) (335) –- Inflow 1,989 1,652 337 –

Interest rate swaps used for hedging (net-settled) 81 (81) (56) (25) –60 (67) (44) (23) –

2011Non-derivative financial liabilitiesBank overdraft 20,943 (22,427) (22,427) – –Variable interest rate loans 267,786 (315,818) (20,799) (236,586) (58,433)Fixed interest rate notes 541,693 (642,636) (110,674) (351,302) (180,660)Trade and other payables* 213,890 (213,890) (213,890) – –

1,044,312 (1,194,771) (367,790) (587,888) (239,093)Derivative financial instrumentsForward exchange contracts (gross-settled) (546)- Outflow (80,961) (80,961) – –- Inflow 81,611 81,611 – –

Forward exchange contracts (gross-settled) 354- Outflow (38,955) (38,955) – –- Inflow 38,640 38,640 – –

Interest rate swaps used for hedging (net-settled) 41 (65) (41) (24) –(151) 270 294 (24) –

* Exclude derivatives (shown separately) and progress payments from customers.

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94



Cash flows

Carryingamount

Contractualcash flows

Within1 year

Between1 and

5 yearsMore than

5 yearsCompany $’000 $’000 $’000 $’000 $’000

2012Non-derivative financial liabilitiesVariable interest rate loans 365,290 (390,712) (17,219) (373,493) –Fixed interest rate notes 553,229 (667,200) (23,705) (359,865) (283,630)Trade and other payables 34,813 (34,813) (34,813) – –

953,332 (1,092,725) (75,737) (733,358) (283,630)

2011Non-derivative financial liabilitiesVariable interest rate loans 120,556 (131,365) (2,358) (129,007) –Fixed interest rate notes 541,693 (642,636) (110,674) (351,302) (180,660)Trade and other payables* 135,213 (135,213) (135,213) – –

797,462 (909,214) (248,245) (480,309) (180,660)

Derivative financial instrumentsForward exchange contracts (gross-settled) (514)- Outflow (77,910) (77,910) – –- Inflow 78,527 78,527 – –

Forward exchange contracts (gross-settled) 354- Outflow (38,955) (38,955) – –- Inflow 38,640 38,640 – –

(160) 302 302 – –

* Excludes derivatives (shown separately).

The maturity analysis shows the undiscounted cash flows of the financial liabilities of the Group and the Company on the basis of their earliest possible contractual maturity.

For derivative financial instruments, the cash inflows/(outflows) represent the contractual undiscounted cash flows relating to these instruments. Gross inflows and outflows are included for derivatives that are gross-settled on a simultaneous basis.

Except for the cash flow arising from the intragroup financial guarantee, it is not expected that the cash flows included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

At the reporting date, the Company does not consider it probable that a claim will be made against the Company under the intragroup financial guarantee.

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95



Currency risk

Exposure to currency risk

The Group’s and Company’s exposure to foreign currency risk is as follows based on notional amounts:

31 December

2012

31 December

2011uS dollars uS dollars

$’000 $’000Group

Trade and other receivables 160,743 245,732Cash and cash equivalents 39,873 75,478Loans and borrowings (227,298) (154,260)Trade and other payables (156,542) (96,952)

(183,224) 69,998Company

Trade and other receivables 4,382 302,601Cash and cash equivalents 19,176 808Loans and borrowings (125,825) (120,556)Trade and other payables (152) (9,912)

(102,419) 172,941

Sensitivity analysis

A 10% strengthening of the Singapore dollar, as indicated below, against the US dollar at 31 December would have increased equity and profit before income tax in profit or loss by the amounts shown below. This analysis is based on foreign currency exchange rate variances that the Group considered to be reasonably possible at the end of the reporting period. The analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for 2011, although the reasonably possible foreign exchange rate variances were different, as indicated below:

Group Companyprofit

before income tax Equity

profit before

income tax Equity$’000 $’000 $’000 $’000

31 December 2012US dollars (10% strengthening) 18,322 – 10,242 –

31 December 2011US dollars (10% strengthening) (7,000) – (17,294) –

A weakening of the Singapore dollar against the above currency at 31 December would have had the equal but opposite effect to the amounts shown above, on the basis that all other variables remain constant.

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96



Interest rate risk

Profile

At the reporting date, the interest rate profile of the interest-bearing financial instruments was:

Group CompanyCarrying amount Carrying amount

2012 2011 2012 2011$’000 $’000 $’000 $’000

Fixed rate instrumentsBank overdraft (41,456) (20,943) – –Unsecured notes (553,229) (541,693) (553,229) (541,693)

(594,685) (562,636) (553,229) (541,693)

variable rate instrumentsVariable interest rate loans (524,056) (267,786) (365,290) (120,556)

Fair value sensitivity analysis for fixed rate instruments

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore a change in interest rates at the reporting date would not affect profit or loss.

Cash flow sensitivity analysis for variable rate instruments

A change of 75 basis points in interest rates at the reporting date would have increased/(decreased) equity and profit before income tax in profit or loss by the amounts shown below. This analysis assumes that all other variables, in particular foreign currency rates, remain constant. The analysis is performed on the same basis for 2011.

profit before income tax Equity

75 bp increase

75 bp decrease

75 bp increase

75 bp decrease

Group $’000 $’000 $’000 $’000

31 December 2012Variable rate instruments (3,943) 3,943 – –


Company


31 December 2011Variable rate instruments (904) 904 – –

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Accounting classifications and fair values

Fair values versus carrying amounts

The fair values of financial assets and liabilities, together with the carrying amounts shown in the statements of financial position, are as follows:

NoteDesignated at fair value


otherfinancial

liabilitieswithin the

scope ofFrS 39

Totalcarryingamount Fair value

Group $’000 $’000 $’000 $’000 $’000

31 December 2012Cash and cash equivalents 15 – 541,232 – 541,232 541,232Trade and other receivables* 11 – 217,717 – 217,717 217,888Financial receivables 10 – 717,359 – 717,359 722,251Gross amounts due for contract work 13 – 119,059 – 119,059 119,059Financial assets designated at fair value

through profit or loss 11 21 – – 21 2121 1,595,367 – 1,595,388 1,600,451

Secured bank loans 17 – – (98,462) (98,462) (98,462)Unsecured bank loans 17 – – (425,594) (425,594) (425,594)Unsecured notes 17 – – (553,229) (553,229) (582,816)Trade and other payables# 16 – – (306,085) (306,085) (306,085)Financial liabilities designated at fair

value through profit or loss 16 (81) – – (81) (81)Bank overdraft 17 – – (41,456) (41,456) (41,456)

(81) – (1,424,826) (1,424,907) (1,454,494)

* Excluding derivatives (shown separately) and prepayment. # Excluding progress payments from customers and derivatives (shown separately).

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98





otherfinancial


scope of FrS 39


Group $’000 $’000 $’000 $’000 $’000

31 December 2011Cash and cash equivalents 15 – 662,358 – 662,358 662,358Trade and other receivables* 11 – 241,172 – 241,172 241,356Financial receivables 10 – 423,257 – 423,257 424,527Gross amounts due for contract work 13 – 176,910 – 176,910 176,910Financial assets designated at fair value


Secured bank loans 17 – – (84,578) (84,578) (84,578)Unsecured bank loans 17 – – (183,208) (183,208) (183,208) Unsecured notes 17 – – (541,693) (541,693) (563,951)Trade and other payables# 16 – – (213,890) (213,890) (213,890)Financial liabilities designated at fair

value through profit or loss 16 (395) – – (395) (395)Bank overdraft 17 – – (20,943) (20,943) (20,943)

(395) – (1,044,312) (1,044,707) (1,066,965)

* Excluding derivatives (shown separately) and prepayments. # Excluding progress payments from customers and derivatives (shown separately).



otherfinancial


scope of FrS 39


Company $’000 $’000 $’000 $’000 $’000

31 December 2012Cash and cash equivalents 15 – 176,216 – 176,216 176,216Trade and other receivables* 11 – 1,247,733 – 1,247,733 1,247,733

– 1,423,949 – 1,423,949 1,423,949

Unsecured bank loans 17 – – (365,290) (365,290) (365,290)Unsecured notes 17 – – (553,229) (553,229) (582,816)Trade and other payables 16 – – (34,813) (34,813) (34,813)

– – (953,332) (953,332) (982,919)

* Excluding prepayments.

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99





otherfinancial


scope of FrS 39

Total carryingamount Fair value

Company $’000 $’000 $’000 $’000 $’000

31 December 2011Cash and cash equivalents 15 – 96,407 – 96,407 96,407Trade and other receivables* 11 – 1,170,663 – 1,170,663 1,170,663Financial assets designated at fair value


Unsecured bank loans 17 – – (120,556) (120,556) (120,556)Unsecured notes 17 – – (541,693) (541,693) (563,951)Trade and other payables# 16 – – (135,213) (135,213) (135,213)Financial liabilities designated at fair

value through profit or loss 16 (354) – – (354) (354)(354) – (797,462) (797,816) (820,074)

* Excluding derivatives (shown separately) and prepayments. # Excluding derivatives (shown separately).

Interest rates used for determining fair value

The interest rates used to discount estimated cash flows, when applicable, are based on the government yield curve at the reporting date plus an adequate credit spread, and are as follows:

Group2012 2011

Amounts due from associates (non-trade) 6.0% 6.0%Unsecured notes 3.0% 3.0%Financial receivables 2.18% - 4.78% 2.36% -4.45%

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Fair value hierarchy

The table below analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:

Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices).

Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Level 1 Level 2 Level 3 Total$’000 $’000 $’000 $’000

Group

31 December 2012Derivatives – (60) – (60)

– (60) – (60)

31 December 2011Derivatives – 151 – 151

– 151 – 151

Company*

31 December 2011Derivatives – 160 – 160

– 160 – 160

* none as at 31 December 2012

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101



21 rEvENuE

Group2012 2011

$’000 $’000

Construction revenue 605,971 418,530Operating and maintenance income 49,331 39,001Sale of goods 16,633 15,576Finance income 8,294 6,755Finance lease income 331 394Others 1,824 1,719

682,384 481,975

22 FINANCE CoSTS

Group2012 2011

$’000 $’000

Interest expense - bank loans 28,460 22,597

23 proFIT BEForE INCoME TAx

The following items have been included in arriving at profit before income tax:

Group2012 2011

$’000 $’000

Net foreign currency exchange loss 3,151 2,123Rental income from leasehold property (920) –Interest income:- fixed deposits with financial institutions (1,025) (775)- associates (2,287) (2,266)Fair value loss on derivative financial instruments 895 594Gain on sale of property, plant and equipment (5,223) (11,899)Impairment of trade and other receivables 520 2,889Financial receivables written off – 3,056Operating lease expense 15,158 8,884Professional fees paid to firms in which a director is member 164 279

102


102



Group2012 2011

$’000 $’000

Contribution to defined contribution plans, included in staff costs 7,050 6,531Employees’ share option expense, included in staff costs 2,810 1,038Research expense 1,423 1,380Audit fees paid to:- auditors of the Company 527 579- other member firms of KPMG International 183 218- other auditors 68 88Non-audit fees paid to:- auditors of the Company 35 28- other member firms of KPMG International - 49

24 TAx ExpENSE

Group2012 2011

$’000 $’000Current tax expenseCurrent year 13,021 11,655Over provided in prior years (1,567) (3,292)

11,454 8,363Deferred tax expenseOrigination and reversal of temporary differences 831 (2,006)Over provided in prior years – (39)

831 (2,045)

Tax expense 12,285 6,318

Reconciliation of effective tax rate

Profit before income tax 76,998 62,043

Income tax using Singapore tax rate of 17% 13,090 10,547Effect of different tax rates in foreign jurisdictions 472 998Tax exempt income (1,091) (2,199)Non-deductible expenses 3,902 5,558Effect of partial tax exemption and tax reliefs (2,521) (5,255)Over provided in prior years (1,567) (3,331)

12,285 6,318

A subsidiary was granted Pioneer Status in Singapore in respect of the production and sale of membrane systems. Accordingly, the subsidiary enjoys tax exemption on income arising from sale of membrane systems subject to the terms and conditions of the Pioneer Status.

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103



Another subsidiary was awarded a 7-year Development and Expansion Incentive. Qualifying income earned during this period is taxed at a concessionary rate of 5%.

In accordance with the “Income Tax Law of the People’s Republic of China for Enterprises with Foreign Investment and Foreign Enterprises”, certain subsidiaries are entitled to full exemption from Enterprise Income Tax (EIT) for the first two years and a 50% reduction in EIT for the next three years, commencing from the first profitable year after offsetting all tax losses carried forward from the previous five years. A new Corporate Income Tax Law which took effect on 1 January 2008 stated that subsidiaries in the People’s Republic of China which have not utilised their five-year tax concessions under the old tax law were required to utilise their first year of tax concession commencing from 2008. In addition, one of the subsidiaries has High-Technology Status which is subject to a tax rate of 15%.

Subsidiaries incorporated in the British Virgin Islands (BVI) are exempt from income taxes in BVI in accordance with local tax laws.

25 EArNINGS pEr ShArE

Basic earnings per share

The calculation of basic earnings per share at 31 December 2012 was based on the profit attributable to ordinary shareholders of $36,994,000 (2011: $37,027,000), and a weighted average number of ordinary shares outstanding of 835,839,000 (2011: 860,219,000), calculated as follows:

Profit attributable to ordinary shareholdersGroup

2012 2011$’000 $’000

Profit for the year 60,994 53,027Dividends on CPS (24,000) (16,000)Profit attributable to ordinary shareholders 36,994 37,027

Weighted average number of ordinary sharesGroup

Note 2012 2011’000 ’000

Issued ordinary shares at 1 January 18 858,679 857,931Effect of own shares held (23,128) (345)Effects of share options exercised 288 2,633Weighted average number of ordinary shares at 31 December 835,839 860,219

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104



Diluted earnings per share

The calculation of diluted earnings per share at 31 December 2012 was based on profit attributable to ordinary shareholders of $36,994,000 (2011: $37,027,000), and a weighted average number of ordinary shares outstanding after adjustment for the effects of all dilutive potential ordinary shares of 837,238,000 (2011: 865,451,000), calculated as follows:

Weighted average number of ordinary shares (diluted)Group

2012 2011’000 ’000

Weighted average number of ordinary shares (basic) 835,839 860,219Effect of share options on issue 1,399 5,232Weighted average number of ordinary shares (diluted) at 31 December 837,238 865,451

The average market value of the Company’s shares for purposes of calculating the dilutive effect of share options was based on quoted market prices for the period during which the options were outstanding.

26 SEGMENT rEporTING

(a) operating segments

The Group has two reportable segments, as described below, which are the Group’s strategic business units. The strategic business units offer different products and services, and are managed separately because they require different technology and marketing strategies. For each of the strategic business units, the Group’s CEO (the chief operating decision maker) reviews internal management reports on at least a quarterly basis. The following summary describes the operations in each of the Group’s reportable segments:

• Municipal. Supplier of comprehensive range of innovative water and fluid treatment solutions to municipalities and governments, including commissioning, operation and maintenance of a wide range of water treatment and liquid separation plants on a turnkey or Design-Build-Own-Operate-Transfer arrangements.

• Industrial. Liquid separation applications for the manufacturing sector such as the pharmaceutical, biotechnology, food processing and petrochemical oil-related industries.

Other operations include emerging segments such as the renewable resources management business. None of these segments meets any of the quantitative thresholds for determining reportable segments in 2012 or 2011.

Information regarding the results of each reportable segment is included below. Performance is measured based on segment profit before income tax, as included in the internal management reports that are reviewed by the Group’s CEO. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of certain segments relative to other entities that operate within these industries. Inter-segment pricing is determined on an arm’s length basis.

(b) Geographical segments

The Group operates in 3 principal geographical areas: Asia ex-China, China and Middle East & North Africa. In presenting information on the basis of geographical segments, segment revenue is based on the geographical location of customers. Segment assets are based on the geographical location of the assets.

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Information about reportable segments

Municipal IndustrialAll other

segments Total2012 2011 2012 2011 2012 2011 2012 2011

$’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

External revenues 629,146 417,816 49,831 58,784 3,407 5,375 682,384 481,975

Inter-segment revenue 46,416 115,225 429 2,839 8,803 703 55,648 118,767

Interest income 1,811 203 1,381 1,322 1 8 3,193 1,533

Finance costs (14,956) (11,734) – (3) (556) (3) (15,512) (11,740)

Depreciation, amortisation and impairment (8,889) (7,778) (8,532) (16,315) (2,127) (387) (19,548) (24,480)

Reportable segment profit/(loss) before income tax 91,578 93,972 6,630 (12,800) (2,791) 2,660 95,417 83,832

Share of profit/(loss) of associates, net of income tax 2,070 287 (418) (1,145) 2,601 2,084 4,253 1,226

Tax (expenses)/income (11,455) (6,160) 261 (450) (1,091) 292 (12,285) (6,318)

Operating lease expenses (13,846) (6,713) (295) (493) (1,017) (1,678) (15,158) (8,884)

Contribution to defined contribution plan, included in staff cost (5,221) (5,099) (1,437) (1,316) (392) (116) (7,050) (6,531)

Reportable segment assets 1,741,235 1,418,559 186,189 214,036 104,412 86,088 2,031,836 1,718,683

Investments in associates 92,741 99,111 1,737 2,550 9,614 7,226 104,092 108,887

Capital expenditure 13,347 12,419 318 601 30,610 260 44,275 13,280

Reportable segment liabilities 479,373 353,344 24,808 25,683 50,615 55,623 554,796 434,650

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Reconciliations of reportable segment revenues, profit or loss, assets and liabilities and other material items

2012 2011$’000 $’000

revenuesTotal revenue for reportable segments 678,977 476,600Other revenue 3,407 5,375Consolidated revenue 682,384 481,975

profit or lossTotal profit or loss for reportable segments 98,208 81,172Other profit or loss (2,791) 2,660

95,417 83,832Unallocated amounts:- Other corporate expenses (22,672) (23,015)Share of profit of associates, net of income tax 4,253 1,226Consolidated profit before income tax 76,998 62,043

AssetsTotal assets for reportable segments 1,927,424 1,632,595Other assets 104,412 86,088Investments in associates 104,092 108,887Other unallocated amounts 214,416 204,895Consolidated total assets 2,350,344 2,032,465

LiabilitiesTotal liabilities for reportable segments 504,181 379,027Other liabilities 50,615 55,623Other unallocated amounts 918,519 662,248Consolidated total liabilities 1,473,315 1,096,898

Other material items in 2012

reportablesegment

totals AdjustmentsConsolidated

totals$’000 $’000 $’000

Interest income 3,192 120* 3,312Finance costs (14,956) (13,504)* (28,460)Capital expenditure 13,665 37,607^ 51,272Depreciation, amortisation and impairment (17,421) (11,971)^ (29,392)

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Other material items in 2011

reportablesegment

totals AdjustmentsConsolidated

totals$’000 $’000 $’000

Interest income 1,525 1,516* 3,041Finance costs (11,737) (10,860)* (22,597)Capital expenditure 13,020 45,440^ 58,460Depreciation, amortisation and impairment (24,093) (12,544)^ (36,637)

* This represents interest income and interest expense that are not allocated to segments, as this activity is driven by Group Treasury, which manages the cash position of the Group.

^ This represents capital expenditure and its related depreciation, amortisation and impairment incurred as a result of the overall business strategy adopted by the Group. The allocation of these resources to the various reportable segments cannot be determined.

Geographical information

revenuesNon-current

assets$’000 $’000

31 December 2012

Middle East & North Africa 28,871 88,806People’s Republic of China 158,902 574,520Asia ex-China 494,611 772,102

682,384 1,435,428

31 December 2011

Middle East & North Africa 114,410 99,504People’s Republic of China 140,716 529,612Asia ex-China 226,849 303,856

481,975 932,972

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27 DETErMINATIoN oF FAIr vALuES

A number of the Group’s accounting policies and disclosures require the determination of fair value, for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to that asset or liability.

Property, plant and equipment

The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market value of property is the estimated amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller in an arm’s length transaction after proper marketing wherein the parties had each acted knowledgeably and willingly.

Intangible assets

The fair value of intangible assets received as consideration for providing construction services in a service concession arrangement is estimated by reference to the fair value of the construction services provided. The fair value of the construction services provided is calculated as the estimated total cost plus a profit margin which the Group considers as a reasonable margin. When the Group receives an intangible asset and a financial asset as consideration for providing construction services in a service concession arrangement, the Group estimates the fair value of intangible assets as the difference between the fair value of the construction services provided and the fair value of the financial asset received.

The fair value of other intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets.

Trade and other receivables

The fair value of trade and other receivables, including service concession receivables, is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date.

Non-derivative financial liabilities

Fair value, which is determined for disclosure purposes, is calculated based on the present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date. For finance leases, the market rate of interest is determined by reference to similar lease agreements.

Derivatives

The fair value of forward exchange contracts is based on their quoted price, if available. If a quoted price is not available, then fair value is estimated by discounting the difference between the contractual forward price and the current forward price for the residual maturity of the contract using a credit-adjusted risk-free interest rate (based on government bonds).

Intra-group financial guarantees

The value of financial guarantees provided by the Company to its subsidiaries is determined by reference to the difference in the interest rates, by comparing the actual rates charged by the bank with these guarantees made available, with the estimated rates that the banks would have charged had these guarantees not been made available.

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Share-based payment transactions

The fair value of the employees’ share options is measured using the Black-Scholes standard option valuation model. Measurement inputs include share price on measurement date, exercise price of the instrument, expected volatility (based on weighted average historic volatility adjusted for changes expected due to publicly available information), weighted average expected life of the instruments (based on historical experience and general option holder behaviour), expected dividends, and the risk-free interest rate (based on government bonds). Service and non-market performance conditions attached to the grants are not taken into account in determining the fair value of the options.

28 FINANCIAL rISK MANAGEMENT

The Group has exposure to the following risks from its use of financial instruments:

• creditrisk• liquidityrisk• marketrisk

This note presents information about the Group’s exposure to each of the above risks, the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative disclosures are included throughout these financial statements.

Risk management framework

The Board of Directors has overall responsibility for the establishment and oversight of the Group’s risk management framework. The Board has established the Risk Management Committee, which is responsible for developing and monitoring the Group’s risk management policies. The committee reports regularly to the Board of Directors on its activities.

The Group’s risk management policies are established to identify and analyse the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities.

The Group Audit Committee oversees how management monitors compliance with the Group’s risk management policies and procedures, and reviews the adequacy of the risk management framework in relation to the risks faced by the Group. The Group Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes regular reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

Credit risk

Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group’s receivables from customers.

Loan and other receivables

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate, as these factors may have an influence on credit risk.

The Group has a credit policy in place which establishes credit limits for all customers and monitors their balances on an ongoing basis.

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The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect of loan and other receivables. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets.

Guarantees

The Group’s policy is to provide financial guarantees only to subsidiaries and joint ventures.

Liquidity risk

Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with its financial liabilities that are settled by delivering cash or another financial asset. The Group’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses, including the servicingoffinancialobligations;thisexcludesthepotentialimpactofextremecircumstancesthatcannotreasonablybepredicted, such as natural disasters. In addition, the Group maintains lines of credit that can be drawn down to meet short-term financing needs.

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect the Group’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimising the return.

The Group buys and sells derivatives, and also incurs financial liabilities, in order to manage market risks. All such transactions are carried out within the guidelines set by the Risk Management Committee. Generally the Group seeks to apply hedge accounting in order to manage volatility in profit or loss.

Capital management

The primary objective of the Group’s capital management is to support the Group’s growth strategy and maximise shareholder value with the optimal capital structure.

The Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares.

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The Group monitors capital using a gearing ratio, which is net debt divided by total capital. The Group includes within net debt, loans and borrowings, less cash and cash equivalents. Total equity of the Group represents capital for the Group.

Group2012 2011

$’000 $’000

Loans and borrowings 1,118,741 830,422Less: Cash and cash equivalents (541,232) (662,358)Net debt 577,509 168,064

Total equity 877,029 935,567

Gearing ratio 66% 18%

From time to time, the Group purchases its own shares on the market pursuant to the Shares Purchase Mandate (the Mandate) obtained at the Annual General Meeting (AGM) on 26 April 2012. The Mandate is subject to renewal annually by Shareholders at the AGM.

There were no changes in the Group’s approach to capital management during the year.

The Group and its subsidiaries are not subject to externally imposed capital requirements other than the following:

(i) Certain subsidiaries of the Group are required by the Foreign Enterprise Law of the People’s Republic of China (PRC) to contribute to and maintain a non-distributable Statutory Reserve Fund (SRF) whose utilisation is subject to approval by the relevant PRC authorities (see note 18).

(ii) The Company is required under financial covenants clause to maintain a consolidated total tangible net worth (TNW) fortheGroupofnot lessthan$160million,consolidatednetborrowingstoTNWofnotmorethan1.5times;andconsolidated earnings before interest, tax, depreciation and amortisation to consolidated interest expenses of at least 3 times.

These externally imposed capital requirements have been complied with by the Company and the relevant subsidiaries for the financial year ended 31 December 2012.

29 opErATING LEASES

Leases as lessor

Non-cancellable operating lease rentals are payable as follows:

Group2012 2011

$’000 $’000

Within one year 4,900 –Between one and five years 8,994 –

13,894 –

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29 opErATING LEASES

Leases as lessee

Non-cancellable operating lease rentals are payable as follows:

Group2012 2011

$’000 $’000

Within one year 12,286 9,984Between one and five years 42,478 38,635More than five years 45,115 49,474

99,879 98,093

The Group has various operating lease agreements for site equipment, membrane production facilities, office equipment, offices and rental of land. Most leases contain renewable options and some leases contain escalation clauses. The lease terms typically do not contain restrictions on the Group’s activities concerning dividends, additional debt or further leasing.

30 CApITAL CoMMITMENTS

(i) At 31 December 2012, the Group has outstanding commitments in respect of uncalled capital of approximately US$5,100,000 (2011: US$5,100,000) in an associate.

(ii) At 31 December 2012, the Group has outstanding capital commitments of $1,974,000 (2011: $23,988,000).

31 CoNTINGENCIES

The Group has potential contingencies arising from the delayed completion of the construction of the Magtaa desalination plant in Algeria in its capacity as the Engineering, Procurement and Construction (EPC) contractor. In respect of such delays, the Group has brought several claims against the project owner for an extension of the contractual completion date as the delay was primarily caused by various reasons that were beyond the control of the Group, including a fire that broke out in July 2011 which destroyed key materials and equipment, as well as delay in testing and commissioning works due to lack of power supply by the local government. Notwithstanding this, in 2012, the project owner has claimed for full contractual liquidated damages under the EPC contract. The Group is confident that its claim for extension of time will invalidate the liquidated damages claimed by the project owner and no contingent liabilities have been recognised as at 31 December 2012.

In another desalination project in Algeria which was completed and handed over in 2011, the Group has potential contingencies arising from the delayed completion of a desalination plant in its capacity as the EPC contractor. The project owner has claimed for full contractual liquidated damages due to the delay in completion under the EPC contract. On its part, the Group has claimed for an extension of the contractual completion date as it had been prevented by the project owner from commencing testing and commissioning works sooner than it was eventually allowed to do so. Furthermore, the Group, in its capacity as the Operation and Maintenance contractor, has a claim against the project owner for unpaid mobilisation fees that it is contractually entitled to. As at 31 December 2012, the Group is still in negotiation with the project owner and no contingent liabilities have been recognised.

In a separate design and supply of a seawater desalination facility, the customer has claimed for liquidated damages from the delay in completion. On its part, the Group in its capacity as the water technology provider for the project, has claimed for an extension of the completion deadline as well as prolongation costs as the customer, who is responsible for the civil and structural works for the project, was late in its deliverables thereby obstructing the timely completion of project. As at 31 December 2012, the Company is still in negotiation with the customer and no contingent liabilities or assets have been recognised.

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The Group has potential contingencies arising from delayed completion of a waste water plant construction project with a local government agency. The delay in completion was due to, amongst other things, delays due to inclement weather, difficult site conditions, as well as modifications of original specifications from that of tender information. As at 31 December 2012, the Group has applied for an extension to the project completion date and negotiating for variation orders for the additional work performed. As at 31 December 2012, no contingent liabilities or assets have been recognised by the Group in relation to the project.

On 28 February 2012, the Company announced that it has been served with an Arbitration Notice (the Notice) by the China International Economic and Trade Arbitration Commission. The Notice relates to an arbitration (Arbitration) commenced by an associate of the Group, Ningxia Hypow Bio-Technology Co., Ltd (the Claimant). The Arbitration claim is for an amount up to RMB436 million for certain non-water industrial project works carried out by subsidiaries of the Group for the Claimant. The Company and the subsidiaries involved have filed their defence as well as counterclaims against the Claimant to recover the shareholders loan made to the Claimant, outstanding EPC payments and deposits placed with the Claimant for contract manufacturing purposes. At 31 December 2012, the outcome of the Arbitration remains uncertain and no contingent liabilities or assets have been recognised by the Group.

32 rELATED pArTIES

Transactions with key management personnel

Key management personnel

Key management personnel of the Group are those persons having the authority and responsibility for planning, directing and controlling the activities of the Group. The directors and management committee of the Company and the Group are considered as key management personnel of the Company and the Group.

Key management personnel compensation comprised:

Group2012 2011

$’000 $’000

Directors’ fees 550 541Short-term employee benefits 3,542 4,589Share-based payments 1,058 692

5,150 5,822

Comprise amounts paid/payable to:- Directors of the Company 1,262 2,324- Other key management personnel 3,888 3,498

5,150 5,822

The directors of the Company also participate in the Hyflux Employees’ Share Option Scheme. Details of options granted to the directors under the Scheme are described in note 19.

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32 rELATED pArTIES

Other related party transactions

Other than as disclosed elsewhere in the financial statements, significant transactions carried out in the normal course of business on terms agreed with related parties are as follows:

Transaction value for the year ended

31 DecemberBalance outstanding

as at 31 December2012 2011 2012 2011

$’000 $’000 $’000 $’000Group

Joint ventureRevenue from construction contracts 39,178 50,168 29,954 25,470Revenue from maintenance contracts 6,249 4,919 4,446 3,458Rental income 190 170 332 155Service income 1,017 980 914 976

AssociatesRevenue from construction contracts 1,091 74,751 38,259 84,391Revenue from maintenance contracts 28,965 18,991 5,318 2,159

33 SuBSEquENT EvENTS

On 5 March 2013, the Company granted 2,180,000 share options pursuant to Hyflux Employees’ Share Option Scheme 2011 at an exercise price of $1.396 per share. The validity period of options granted is from 5 March 2013 to 4 March 2023.

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CORPORATE GOVERNANCE STATEMENT

INTroDuCTIoN

Hyflux Ltd (“the Company”) continues to place great importance on the governance of the Company and its subsidiaries (together, “the Group”), which it believes is vital to its well being and success. The Company is committed to maintaining high standards of corporate governance and processes that will enhance the Group’s effectiveness, ensure the appropriate degree of accountability and transparency and an increase in long term value and return to shareholders.

The Group subscribes to the Singapore Code of Corporate Governance issued by the Monetary Authority of Singapore (“Code”) and believes that this forms a sound platform for supporting good corporate governance practices.

This corporate governance statement ("Statement") outlines the main corporate governance practices of the Group with specific reference made to the principles and guidelines of the Code, forming part of the continuing obligations set out in the Listing Manual of Singapore Exchange Securities Trading Limited ("SGX-ST") .

The Company will continue to review and refine its practices in light of best practices in the market, consistent with the needs and the circumstances of the Group.

In developing the appropriate corporate governance practices, the Group takes into account all applicable legislations and recognised standards. The Company is committed to instilling and maintaining good corporate governance at all times.

The Board is pleased to report that throughout the reporting period for the financial year ended 31 December 2012, the Company complied with the Code’s applicable principles and guidelines.

BoArD MATTErS

BoArD’S CoNDuCT oF ITS AFFAIrS:

Principle 1: Effective Board to lead and control the Company

role of the Board

The primary role of the Company’s board of directors (“Board”) is to protect and enhance long-term shareholders' value and to ensure that the Company is run in accordance with best international management and corporate governance practices, appropriate to the needs and development of the Company.

The Board is responsible for general oversight of the Company’s activities and performance and for setting the Company’s overall strategic direction. It provides leadership and guidance on corporate strategies, business directions, risk policies and implementation of corporate objectives, thereby taking responsibility for the overall corporate governance of the Group.

In delegating responsibility for the day-to-day operation and leadership of the Company to the Executive Chairman and Chief Executive Officer and the management team, the Board has processes and systems in place to ensure that significant issues, risks and major strategic decisions are monitored and considered at Board level.

To assist in the execution of its responsibilities, the Board has established several Board Committees, namely, Audit Committee, Nominating Committee, Remuneration Committee and Risk Management Committee. These Board Committees function within clearly defined terms of reference, which are reviewed on a regular basis.

Matters which are specifically reserved to the full Board for decision are those involving material acquisitions, disposal of assets, corporate or financial restructuring, share issuances, dividends and other returns to shareholders, conflict of interest for substantial shareholder or Director, as well as interested person transactions.

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The meeting schedules of all the Board and Board Committees for the calendar year are given to all Directors well in advance. The Board may convene additional meetings to address any specific significant matters that may arise from time to time.

The Articles of Association of the Company provide for Directors to conduct meetings by teleconferencing or videoconferencing. The Board and Board Committees may also make decisions by way of circulating resolutions.

The Board held four meetings in the 2012 financial year. A summary of attendance by Directors at Board and Board Committees meetings for the financial year ended 31 December 2012 is as follows:

Board of Directors Audit CommitteeNominating Committee

remuneration Committee

risk Management Committee

Name of Directors

No. of Meetings

held

No. of Meetings Attended

No. of Meetings

held


No. of Meetings

held


No. of Meetings

held


No. of Meetings

held


Olivia Lum Ooi Lin 4 3 4 3* 2 2 2 2* 5 5*Teo Kiang Kok 4 4 NA NA 2 2 2 2 5 4Lee Joo Hai 4 4 4 4 NA NA 2 2 5 5Gay Chee Cheong 4 4 4 4 2 2 2 2 NA NAChristopher Murugasu 4 4 NA NA 2 2 2 2 NA NARajsekar Kuppuswami Mitta 4 4 4 3 NA NA NA NA 5 4Simon Tay 4 3 NA NA NA NA NA NA 5 5Gary Kee Eng Kwee 4 4 4 4 NA NA NA NA 1 1*

Legend:* Attendance by invitationNA Not Applicable

The Company has adopted a set of Policy on Signing Limits, setting out the level of authorization required for specific transactions, including those that require Board’s approval.

Newly appointed Directors are provided with a training and induction programme, so as to familiarise them with the Company’s business activities, strategic directions, policies and new key projects. In addition, newly appointed Directors are also introduced to the senior management team.

Directors are updated from time to time on changes in relevant laws and regulations; industry developments and businessinitiatives;andanalystandmediacommentariesonmattersrelatedtotheCompanyandwaterindustry.

BoArD CoMpoSITIoN AND GuIDANCE

Principle 2: Strong and independent element on the Board

As at the date of this Statement, the Board comprises eight Directors, of whom six are Non-Executive Independent Directors.

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Composition of Board and Board Committees

Name of Directors BoardAudit

CommitteeNominating Committee

remuneration Committee

risk Management Committee

Olivia Lum Ooi Lin Executive Chairman and Director

Member

Teo Kiang Kok Lead Independent Director

Chairman Member Member

Lee Joo Hai Non-Executive Independent Director

Chairman Member Member

Gay Chee Cheong Non-Executive Independent Director

Member Member Chairman

Christopher Murugasu Non-Executive Independent Director

Member Member

Rajsekar Kuppuswami Mitta Non-Executive Independent Director

Member Chairman

Simon Tay Non-Executive Independent Director

Member

Gary Kee Eng Kwee Non-Executive Non-Independent Director

Member

The Board considers an independent Director as one who has no relationship with the Company, its related companies or its officers that could interfere or be reasonably perceived to interfere, with the exercise of the Director’s independent business judgment acting in the interests of the Company. The Company’s policy is to have independent Directors make up at least half of the Board.

While all the Directors have equal responsibilities for the performance of the Group, Non-Executive Directors exercise no management function in the Company or any of its subsidiaries. The role of Non-Executive Directors is primarily to ensure that the strategies proposed by the management are fully discussed, vigorously examined, taking into consideration the long-term interest of the shareholders, employees, customers, suppliers and the communities in which the Group conducts its business.

The Board is of the view that there is a strong and independent element on the Board in that all Directors, other than Ms Olivia Lum Ooi Lin and Mr Gary Kee Eng Kwee, are Independent Directors. The present Board size and number of Board Committees facilitate effective decision making and is appropriate for the nature and scope of the Group’s business and operations.

The Board believes the composition of the Board requires consideration of a number of factors, including the mix in skills, abilities and expertise, the mix in the length of time Directors have had on the Board, as well as experience on other boards.

The Board consists of respected business leaders and professionals whose collective core competencies and experience are extensive, diverse and relevant to the Group. The names, qualifications and relevant skills, experience and expertise of the Directors can be found on pages 8 to 10 of this report. As evidenced by this information, the Directors bring to the Board a broad range of experience and expertise.

Where necessary, the Company arranges informal meeting sessions for Independent Directors to meet without the presence of the management.

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ChAIrMAN AND ChIEF ExECuTIvE oFFICEr

Principle 3: Clear division of responsibilities at the top of the Company

Ms Olivia Lum Ooi Lin is the Executive Chairman and Chief Executive Officer of the Company. The Board considers that vesting two roles in the same person provides the Group with strong and consistent leadership in the development and execution of the Group’s business strategies and is beneficial to the Group.

In compliance with the Code, the Board had appointed Mr Teo Kiang Kok as Lead Independent Director on 22 February 2012. If shareholders of the Company have serious concerns for which contact through the normal channels of the Executive Chairman and Chief Executive Officer or the Chief Financial Officer have failed to resolve or is inappropriate, they may contact the Lead Independent Director.

The Board is of the opinion that the process of decision making by the Board has been independent, based on collective decisions without any individual exercising any considerable concentration of power or influence.

BoArD MEMBErShIp

Principle 4: Formal and transparent process for appointment of new directors to the Board

The Nominating Committee (“NC”) has been tasked by the Board to identify, select and recommend individuals with the appropriate skills, expertise and experience for appointment, thereby ensuring a balanced and effective Board at all times.

The NC comprises four Directors:Mr Teo Kiang Kok (Chairman) Mr Gay Chee CheongMs Olivia Lum Ooi LinMr Christopher Murugasu The primary function and duties of the NC are outlined as follows: 1. to make recommendations to the Board on all Board appointments and re-nominations having regard to the composition and

each Director’s competencies, commitment, contribution and performance (e.g. attendance, preparedness, participation, candour,andanyothersalientfactors);

2. to ensure that all Directors would be required to submit themselves for re-nomination and re-election at regular intervals andatleastonceineverythreeyears;

3. to determine annually whether a Director is independent, in accordance with the independence guidelines set out in the Code;

4. to review whether a Director is able to and has adequately carried out his duties as a Director of the Company, in particular wheretheDirectorconcernedhasmultipleboardrepresentations;and

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

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In carrying out the annual assessment of the independence of the Non-Executive Directors, the NC considered the following attributes and contributions of all the Non-Executive Independent Directors and found that the length of tenure does not have any impact on their independence: 1. TheNon-ExecutiveIndependentDirectorsprovidetheirobjectiveandconstructiveviewstotheBoardandmanagement; 2. The Non-Executive Independent Directors always speak up and offer practical solutions to issues and work towards

increasingvalueoftheGroupforthebenefitofallshareholders;and

3. The Non-Executive Independent Directors evaluate and assess the information provided to the Board in an independent and constructive manner and render such advice as may be necessary to assist management to implement plans/policies adopted by the Group.

The NC believes that the Non-Executive Independent Directors’ experience and knowledge of the Group’s business, combined with their external business and professional experience enable them to provide effective challenges and make constructive contributions to management discussions.

In addition, all the Non-Executive Independent Directors have made written confirmations to their independence in accordance with the Code and the SGX-ST’s Listing Manual.

Accordingly, the NC is of the view that in respect of financial year ended 31 December 2012, Mr Teo Kiang Kok, Mr Lee Joo Hai, Mr Gay Chee Cheong, Mr Rajsekar Kuppuswami Mitta, Mr Christopher Murugasu and Mr Simon Tay are independent. The Board accepts the NC’s view and affirms the independence of the Non-Executive Independent Directors.

The NC has recommended the nomination of Directors retiring by rotation under the Company’s Articles of Association, namely, Mr Lee Joo Hai and Mr Gay Chee Cheong.

In reviewing the nomination of the retiring Directors, the NC considered the performance and contribution of each of the retiring Directors, having regard not only to their attendance and participation at Board and Board Committees meetings but also the time and efforts devoted to the Group’s business and affairs.

BoArD pErForMANCE

Principle 5: Formal assessment of the effectiveness of the Board as a whole and contributions by each Director

The Code recommends that the NC be responsible for assessing the effectiveness of the Board as a whole and the individual Directors’ contribution. The NC believes that it is more appropriate and effective to assess the Board as a whole, bearing in mind that each member of the Board contributes in different ways to the success of the Group.

The NC in conducting the evaluation and appraisal process focuses on a set of performance criteria which includes the evaluation of the size and composition of the Board, the Board’s access to information, Board processes and accountability, Board performance in relation to discharging its principal responsibilities and the Directors’ standards of conduct.

The Board is of the view that the financial indicators, as set out in the Code as a guide for the evaluation of the Board and its Directors, may not be appropriate as they are more relevant as a form of measurement of the management’s performance. The NC conducted a Board performance evaluation to assess the effectiveness of the Board throughout the financial year ended 31 December 2012 and is satisfied that sufficient effort, time and attention have been given by the Directors to the affairs of the Group.

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ACCESS To INForMATIoN

Principle 6: Board members to have complete, adequate and timely information

The Board has separate and independent access to senior management of the Company, the Company Secretary and the external auditors at all times. The Directors also have unrestricted access to the Company’s records and information, all minutes of meetings held by the Board and Board Committees and management accounts to enable them to carry out their duties.

The Company Secretary attends all Board and Board Committees meetings. The Company Secretary administers, attends and prepares minutes of the Board and Board Committees meetings, and assists in ensuring that Board procedures are followed and reviewed in accordance with the Company’s Articles of Association so that the Board functions effectively and the relevant rules and regulations applicable to the Company are complied with. The Company Secretary’s role is to advise the Board on all governance matters, ensuring that legal and regulatory requirements, as well as Board policies and procedures are complied with. The appointment and the removal of the Company Secretary are subject to the Board’s approval.

Should Directors, whether as a group or individually, require professional advice, the Company shall upon the direction of the Board, appoint a professional advisor selected by such Director(s), approved by management, to render the service. The costs of such service shall be borne by the Company.

proCEDurES For DEvELopING rEMuNErATIoN poLICIES

Principle 7: Formal and transparent procedure for fixing remuneration packages of Directors and senior management

The Remuneration Committee (“RC”) comprises four Directors: Mr Gay Chee Cheong (Chairman)Mr Teo Kiang Kok Mr Christopher MurugasuMr Lee Joo Hai

The RC is committed to the principles of accountability and transparency; and it ensures that remuneration arrangementsdemonstrate a clear link between reward and performance.

The RC is responsible for ensuring a formal and transparent procedure for developing policy on executive remuneration, and for fixing the remuneration packages of individual Director and senior management employees.

The RC’s review covers all aspects of remuneration, including but not limited to Directors’ fees, salaries, allowances, bonus, employees' share options and benefits in kind and specific remuneration package for each Director.

In structuring a compensation framework for Executive Director and senior management employees, the RC seeks to link a proportion of the compensation to the Group’s performance. The RC also reviews and recommends to the Board the remuneration package for the Non-Executive Directors. Its recommendations are submitted for endorsement by the Board. The RC, when deemed necessary, may obtain expert advice with regard to remuneration matters.

LEvEL AND MIx oF rEMuNErATIoN

Principle 8: The level and structure of remuneration for Directors and senior management should be adequate, not excessive, and linked to performance

The remuneration policy of the Company is to provide compensation packages at market rates, reward performance and attract, retain and motivate Directors and members of the senior management team.

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The Executive Director does not receive Directors’ fees. The Executive Director and senior management employees’ remuneration packages are based on service contracts and their remuneration is determined having due regard to the performance of the individuals, the Group as well as market trends.

Non-Executive Independent Directors are paid yearly Directors’ fees of an agreed amount based on their contributions, taking into account factors such as effort and time spent, responsibilities of the Directors and the need to pay competitive fees to attract, motivate and retain the Directors.

DISCLoSurE oN rEMuNErATIoN

Principle 9: Clear disclosure of remuneration policy, level and mix of remuneration, and the procedure for setting the remuneration

An appropriate and attractive level of remuneration has been set to attract, retain and motivate Directors and employees. The remuneration package for Executive Director and employees consists of both fixed and variable components. The variable component is determined based on the performance of the individual employee and the Group’s performance in the relevant financial year. Annual increments and adjustments to remuneration are reviewed and approved taking into account the outcome of the annual appraisal of the employees.

Non-Executive Directors are paid Directors’ fees that are subject to shareholders’ approval at the Company’s Annual General Meeting (“AGM”). The RC recommends a total Directors’ fees of S$550,000 be paid to Non-Executive Directors for the financial year ended 31 December 2012. This will be tabled for the shareholders’ approval at the forthcoming AGM. The following table sets out the summary compensation table for Directors and top five key executives for the financial year ended 31 December 2012:

Salary Bonus Fees

Employees’ Share option

Scheme

Allowances and other benefits Total

DIrECTorSBetween S$1,000,000 to S$1,250,000Olivia Lum Ooi Lin 49% 4% 0% 44% 3% 100%

Below S$250,000Gay Chee Cheong 0% 0% 73% 27% 0% 100%Lee Joo Hai 0% 0% 75% 25% 0% 100%Teo Kiang Kok 0% 0% 73% 27% 0% 100%Christopher Murugasu 0% 0% 68% 32% 0% 100%Rajsekar Kuppuswami Mitta 0% 0% 71% 29% 0% 100%Simon Tay 0% 0% 93% 7% 0% 100%Gary Kee Eng Kwee 0% 0% 93% 7% 0% 100%

Top FIvE KEy ExECuTIvES Between S$1,000,000 to S$1,250,000 Olivia Lum Ooi Lin 49% 4% 0% 44% 3% 100%

S$750,000 to S$1,000,000Sam Ong 60% 20% 0% 11% 9% 100%

Below S$750,000Cho Wee Peng 64% 21% 0% 12% 3% 100%Winnifred Heap 62% 21% 0% 14% 3% 100%Oon Jin Teik 70% 18% 0% 9% 3% 100%Andrew Ngiam 72% 18% 0% 8% 2% 100%

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Immediate Family members of Directors

There are no immediate family members of Directors or controlling shareholders in employment with the Group and whose remuneration exceeds S$150,000 during financial year ended 31 December 2012.

ACCouNTABILITy

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

The Board promotes timely and balanced disclosure of all material matters concerning the Group. It updates shareholders on the operations and financial position of the Group through quarterly, half yearly and full year results announcements as well as timely announcements of other matters as prescribed by the SGX-ST’s Listing Manual requirements and other relevant rules and regulations.

The Board is accountable to shareholders for the management of the Group and the management is accountable to the Board by providing the Board with the necessary information for the discharge of its duties.

AuDIT CoMMITTEE

Principle 11: Establishment of Audit Committee with written terms of reference

The Audit Committee (“AC”) comprises four Directors:Mr Lee Joo Hai (Chairman) Mr Gay Chee Cheong Mr Rajsekar Kuppuswami MittaMr Gary Kee Eng Kwee

In accordance with the principles in the Code, the AC comprises all Non-Executive Directors. The members of AC, collectively, have expertise and extensive experience in accounting, financial management and business, and are qualified to fulfill the AC’s responsibilities.

The primary functions of the AC are as follows:

1. assiststheBoardindischargingitsstatutoryresponsibilitiesonfinancialandaccountingmatters;

2. reviewsthefinancialandoperatingresultsandaccountingpoliciesoftheGroup;

3. reviews significant financial reporting issues and judgments relating to financial statements for each financial year, interim andannualresultsannouncementbeforesubmissiontotheBoardforapproval;

4. reviews the adequacy of the Company’s internal control (financial and operational) and risk management policies and systemsestablishedbythemanagement;

5. reviews the audit plans and reports of the external and internal auditors and considers the effectiveness of the actions taken bymanagementontheauditors’recommendations;

6. appraises and reports to the Board on the audits undertaken by the external and internal auditors, the adequacy of the disclosureofinformation,andtheappropriatenessandqualityofthesystemofmanagementandinternalcontrols;

7. reviews the independence of external auditors annually and considers the appointment or re-appointment of external auditors and matters relating to the resignation or removal of the auditors and approves the remuneration and terms of engagementoftheexternalauditors;and

8. reviews interested person transactions, as defined in the SGX-ST’s Listing Manual.

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In fulfilling its responsibilities, the AC receives regular reports from the management and the external auditors, Messrs KPMG LLP. The AC has full access to and co-operation of the management and meets with Messrs KPMG LLP in private at least once a year, and more frequently if necessary.

The AC reviewed all the non-audit services provided by the external auditors and the aggregate amount of audit fees paid to them. The AC is satisfied that the nature and extent of such services will not prejudice the independence and objectivity of the external auditors;hencehasrecommendedthere-appointmentofMessrsKPMGLLPasexternalauditorsoftheCompanyatthecomingAGM of the Company.

The AC has explicit authority within the scope of its responsibilities to seek any information it requires or investigate any matter within its terms of reference. The AC has adequate resources to enable it to discharge its responsibilities properly.

The Board has put in place a confidential communication programme as endorsed by the AC. Employees may, in confidence, raise concerns about possible corporate improprieties in matters of financial reporting or other matters and to ensure that arrangements are in place for the independent investigations of such matters and for appropriate follow up actions. The details of the confidential communication programme and arrangements have been made available to all employees.

INTErNAL CoNTroLS

Principle 12: The Board to ensure that the management maintains a sound system of internal controls to safeguard the shareholders’ investments and the Company’s assets

The AC is fully aware of the need to put in place a system of internal controls within the Group to safeguard the shareholders’ interests and the Group’s assets, and to manage risks. The system is intended to provide reasonable but not absolute assurance against material misstatements or loss, and to safeguard assets and ensure maintenance of proper accounting records, reliability of financial information, compliance with appropriate legislations, regulations and best practices, and the identification and containment of business risks.

The Board regularly reviews and improves its business and operational activities to identify areas of significant business risks as well as taking appropriate measures to control and mitigate these risks. The management reviews all significant control policies and procedures and highlights all significant matters to the AC and the Board. The financial risk management objectives and policies are outlined in the financial statements. Risk management alone does not guarantee that business undertakings will not fail. However, by identifying and managing risks that may arise, the Board is in a position to make more informed decisions and will benefit from a better balance between risk and reward. This will assist in protecting and creating shareholders’ value.

The AC, together with the Board, have reviewed the effectiveness of the Group’s system of internal controls put in place to address the key financial, operational and compliance risks affecting the operations.

Based on the reports submitted by internal and external auditors, and reviews by the management, the Board with the concurrence of the AC are satisfied that the internal control systems put in place to address the key financial, operational and compliance risks affecting the operations are adequate to meet the needs of the Group in its current business environment as at 31 December 2012.

INTErNAL AuDIT

Principle 13: Setting up independent internal audit function

The Board has put in place a dedicated team of internal auditors. The internal audit function includes reviewing the effectiveness of the material internal controls of the Group. The head of internal audit reports directly to the Chairman of the AC and has an appropriate standing within the Group. The AC meets with the internal auditor in private at least once a year. The AC also ensures that the internal audit function is adequately resourced, and reviews annually the adequacy of the internal audit function. The internal audit team meets the standards set by nationally and internationally recognized professional bodies including the Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors.

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Within this framework, the internal audit function provides reasonable assurance that the risks incurred by the Group in each major activity will be identified, analysed and managed by management. The internal auditors will also make recommendations to enhance the effectiveness and security of the Group’s operations.

CoMMuNICATIoN WITh ShArEhoLDErS

Principle 14: Regular, effective and fair communication with shareholders

Principle 15: Shareholders’ participation at AGM

The Company is committed to regular and proactive communication with its shareholders. It aims to provide shareholders with clear, balanced, useful and material information on a timely basis to ensure that shareholders receive a balanced and up-to-date view of the Group’s performance and business.

Communication is made through:

1. an annual report that is prepared and issued to all shareholders. The Board makes every effort to ensure that the annual report includes all relevant information about the Group, including future development and other disclosures required by theCompanies’Act,Chapter50,andSingaporeStatementsofAccountingStandards;

2. quarterly and full-year financial statements comprising a summary of the financial information and affairs of the Group for therelevantperiod;

3. explanatorymemorandaforAGMandextraordinarygeneralmeetings;

4. pressreleasesonmajordevelopmentsoftheGroup;

5. disclosurestotheSGX-STviaSGXNET;and

6. the Group’s website at http://www.hyflux.com at which shareholders can access information on the Group at all times.

In addition, shareholders are encouraged to attend the Company’s AGM to ensure a high level of accountability and to stay informed of the Group’s strategies and growth.

In accordance with the principles in the Code, the full Board of Directors and the external auditors in office are required to attend the Company’s AGM and will address any question raised at such meeting. The Group fully supports the Code’s principle to encourage active shareholder participation.

rISK MANAGEMENT CoMMITTEE

The Risk Management Committee (“RMC”) comprises four Directors:Mr Rajsekar Kuppuswami Mitta (Chairman)Mr Lee Joo Hai Mr Teo Kiang KokMr Simon Tay

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The functions of the RMC are as follows:

1. to review with management, and, where needed, with external consultants on areas of risk that may affect the viability and smooth operations of the Group, as well as management’s risk mitigation efforts, with the view of safeguarding shareholder’s interestandGroup’sassets;

2. to direct and work with management to develop and review policies and processes to address and manage identified areas ofriskinasystematicandstructuredmanner;

3. tomakerecommendationstotheBoardinrelationtobusinessrisksthatmayaffecttheGroup,asandwhenthesemayarise;

4. toreviewnewinvestments;and

5. to perform any other functions as may be agreed by the Board.

Management Committee

The Management Committee comprises the following members:Ms Olivia Lum Ooi Lin (Chairman)Mr Sam OngMr Cho Wee PengMs Winnifred HeapMr Oon Jin TeikDr Andrew NgiamMr Peter Wu

DEALING IN SECurITIES

The Company has adopted its own internal compliance code pursuant to the SGX-ST’s best practices on dealings in securities and these are applicable to all its officers in relation to their dealings in the Company’s securities. Its officers are advised not to deal in the Company’s shares during the period commencing two weeks or one month before the announcement of the Company’s quarterly or full-year results respectively, or if they are in possession of unpublished price-sensitive information of the Company. All officers and employees are also not allowed to deal in the Company’s securities on short-term considerations, and are expected to observe insider trading laws at all times even when dealing in securities within the permitted trading period.

MATErIAL CoNTrACTS

There are no material contracts of the Company or its subsidiaries involving the interests of the Executive Chairman and Group CEO, each Director or controlling shareholders, either still subsisting at the end of the financial year or entered into since the end of the previous financial year.

INTErESTED pArTy TrANSACTIoN

The Company has established procedures to ensure that all transactions with interested persons are reported in a timely manner to the AC and that the transactions are at arm’s length basis. All interested person transactions are subject to review by the AC to ensure compliance with established procedures.

For the financial year ended 31 December 2012, the Group did not enter into any transaction that would be regarded as an interested person transaction pursuant to SGX-ST's Listing Manual.

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SUPPLEMENTARY INFORMATION

MAJor propErTIES

Description LocationSite area

(sqm)Existing

use

Approximatetotal lettable

area (sqm) Tenure

Group’s effective

interest (%)

Office and factorybuilding

80 Bendemeer RoadSingapore 339949

17,374 Industrial 36,193 30 yearscommencingfrom 1 February2010

100

Factory and warehouse building

8 Tuas South LaneSingapore 637302

77,172 Industrial 22,262 30 yearscommencingfrom 1 April2008

100

Factory building No. 99 Juli RoadZhangjiangHigh-Tech ParkPudong ShanghaiChina 201203

5,633 Commercial 7,647 50 yearscommencing from 1 January2002

100

Office building 1307-1309 CentrePlaza 188,Jiefangbei HePing,District Tianjin,China 300042

384 Commercial 232 50 yearscommencing from 12 June1994

100

Office building 1310-1312 CentrePlaza 188,Jiefangbei HePing,District Tianjin,China 300042

428 Commercial 257 50 yearscommencing from 12 June1994

100

Office and factory 8# Factory in FTZ,9# Yang Zi JiangSouth Road, YangzhouJiangsu Province,China 225131

18,040 Commercial 23,115 50 yearscommencing from 11 November2005

100

Office and factory No 99 Tai Zhen RoadBin Jiang Industrial ParkTaizhou Economic Development ZoneTaizhou City, Jiangsu ProvinceChina 225300

25,959 Commercial 12,980 50 yearscommencing from 15 October2007

100

Office and factory Long Gang DistrictBeigang Industrial ParkLong Cheng RoadHuludao CityLiaoning ProvinceChina 125003

112,556 Commercial 93,565 50 yearscommencing from 31 October 2006

100

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STATISTICS OF SHAREHOLDINGSAs at 11 March 2013

orDINAry ShArES Class of shares : Ordinary shares Voting rights : One vote per ordinary share Total number of issued ordinary shares : 862,527,739 No. of issued ordinary shares (excluding treasury shares) : 825,381,739 No. of treasury shares and percentage : 37,146,000 (4.31%)

DISTrIBuTIoN oF orDINAry ShArEhoLDINGS

Size of Shareholdings

No. ofordinary

Shareholders %

No. of ordinary Shares (excluding

Treasury Shares) %

1 - 999 360 2.12 176,709 0.021,000 - 10,000 12,922 76.26 59,359,957 7.1910,001 - 1,000,000 3,633 21.44 119,690,816 14.501,000,001 and above 30 0.18 646,154,257 78.29Total : 16,945 100.00 825,381,739 100.00

TWENTy LArGEST ShArEhoLDErS

S/No. NameNo. of

ordinary Shares %

1. Olivia Lum Ooi Lin 267,351,211 32.392. DBS Nominees Pte Ltd 139,438,152 16.893. Citibank Nominees Singapore Pte Ltd 53,153,749 6.444. HSBC (Singapore) Nominees Pte Ltd 48,697,200 5.905. DBSN Services Pte Ltd 17,389,516 2.116. Nomura Securities Singapore Pte Ltd 15,260,000 1.857. Murugasu Deirdre 12,306,267 1.498. United Overseas Bank Nominees Pte Ltd 10,242,413 1.249. DB Nominees (S) Pte Ltd 9,803,025 1.1910. BNP Paribas Securities Services Singapore Pte Ltd 7,367,671 0.8911. Raffles Nominees (Pte) Ltd 7,215,159 0.8712. UOB Kay Hian Pte Ltd 5,746,405 0.7013. Paramount Assets Investments Pte Ltd 5,000,000 0.6114. Yang Chyan Yeow Aylwin 4,533,000 0.5515. Phillip Securities Pte Ltd 4,419,893 0.5416. Foo Hee Kiang 3,953,368 0.4817. OCBC Nominees Singapore Private Limited 3,914,708 0.4718. Bank of Singapore Nominees Pte Ltd 3,797,264 0.4619. OCBC Securities Private Ltd 3,782,271 0.4620. Merrill Lynch (Singapore) Pte Ltd 3,736,666 0.45

Total : 627,107,938 75.98

Approximately 45.83% of the Company’s ordinary shares are held in the hands of the public. Accordingly, the Company has complied with Rule 723 of the Listing Manual of SGX-ST.

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STATISTICS OF SHAREHOLDINGSAs at 11 March 2013

6% CuMuLATIvE NoN-CoNvErTIBLE NoN-voTING pErpETuAL CLASS A prEFErENCE ShArES

DISTrIBuTIoN oF prEFErENCE ShArEhoLDINGS

Size of Shareholdings

No. of preference

Shareholders %

No. of preference

Shares %

1 - 999 21,802 98.27 1,933,000 48.331,000 - 10,000 370 1.67 722,110 18.0510,001 - 1,000,000 13 0.06 1,344,890 33.62Total : 22,185 100.00 4,000,000 100.00

TWENTy LArGEST prEFErENCE ShArEhoLDErS

S/No. Name

No. of preference

Shares %

1. DBS Nominees Pte Ltd 537,610 13.442. Citibank Nominees Singapore Pte Ltd 176,490 4.413. HSBC (Singapore) Nominees Pte Ltd 163,740 4.094. Bank of Singapore Nominees Pte Ltd 117,930 2.955. Raffles Nominees (Pte) Ltd 100,600 2.526. United Overseas Bank Nominees Pte Ltd 79,290 1.987. BNP Paribas Nominees Singapore Pte Ltd 53,420 1.348. BNP Paribas Securities Services Singapore Pte Ltd 50,000 1.259. E M Services Pte Ltd 17,000 0.4310. OCBC Nominees Singapore Private Limited 14,430 0.3611. Ronny Sim 12,010 0.3012. Committee of The Person and Estate of Lee Henrietta 11,250 0.2813. DB Nominees (S) Pte Ltd 11,120 0.2814. China Taiping Insurance (Singapore) Pte Ltd 10,000 0.2515. Morgan Stanley Asia (Singapore) Securities Pte Ltd 10,000 0.2516. OCBC Securities Private Limited 8,220 0.2117. Olivia Lum Ooi Lin 8,020 0.2018. Foo Hee Kiang 8,000 0.2019. Tay Soi Lee @ Tay Lee Tee 8,000 0.2020. Tay Hui Leng (Zheng Huiling) 7,500 0.19

Total : 1,404,630 35.13

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SUBSTANTIAL ORDINARY SHAREHOLDERSAs at 11 March 2013

Name of Shareholder Direct Interest Deemed Interest %

Olivia Lum Ooi Lin 267,351,211 - 32.39Mondrian Investment Partners Limited - 49,848,248¹ 6.04Matthews International Capital Management, LLC - 67,535,030² 8.18Matthews International Funds - 59,929,280³ 7.26

Note: ¹ Mondrian Investment Partners Limited (“Mondrian”) is a London-based discretionary investment manager. In respect of

assets managed under investment management agreement between Mondrian and its clients, various clients (in this regard) are the beneficial owners of holdings which are held in custody by the client’s own appointed custodian.

² Shares held for the benefit of accounts managed by Matthews International Capital Management, LLC.

³ The amount reported includes shares reported by Matthews International Capital Management, LLC which act as Investment Advisor to the Matthews International Funds and its other clients.

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HYFLUX GROUP OF COMPANIES

SingaporeAcquaSpring Utility (Benghazi) Pte LtdAcquaSpring Utility (S) Pte Ltd AcquaSpring Utility (Tobruk) Pte LtdAcquaSpring Utility (Tripoli East) Pte LtdBendemeer Infrastructure Pte Ltd (formerly known as Sinolac (Singapore) Pte Ltd)Eflux Singapore Pte LtdGalaxy NewSpring Capital Pte Ltd Galaxy NewSpring Pte Ltd Galaxy Operation and Management Pte LtdHIH DahejSpring Desalination Pte LtdH.J. Technical Consultant Pte LtdHydrochem (S) Pte LtdHydrochem Desalination Technologies (Singapore) Pte LtdHydrochem Engineering (S) Pte LtdHydrochem Membrane Products (Singapore) Pte. Ltd.Hyflux Academy Pte LtdHyflux Aquosus (Singapore) Pte LtdHyflux Asset Management Pte LtdHyflux Capital (Singapore) Pte LtdHyflux Cleantech Pte LtdHyflux Consumer Products Pte LtdHyflux Construction Engineering (Singapore) Pte LtdHyflux Energy Pte LtdHyflux Engineering Pte LtdHyflux EPC Pte LtdHyflux Filtech (Singapore) Pte LtdHyflux Filtration (S) Pte LtdHyflux Innovation Centre Pte LtdHyflux International Engineering Pte LtdHyflux International Pte LtdHyflux IP Resources Pte LtdHyflux Lifestyle Products (S) Pte LtdHyflux Management and Consultancy Pte LtdHyflux Marmon Development Pte LtdHyflux Membrane Manufacturing (S) Pte LtdHyflux O&M Pte LtdHyflux SIP Pte LtdHyflux Utility (India) Pte LtdHyflux Utility (Indonesia) Pte LtdHyflux Utility (Oman) Pte LtdHyflux Utility WT (HCWT) Pte LtdHyflux Utility WTP (DZ) Pte LtdHyflux Utility WTP (FN) Pte LtdHyflux Utility WTP (NNWT) Pte LtdHyflux Utility WWT (HCCJ) Pte LtdHyflux Utility WWT (HCHX) Pte LtdHyflux Utility WWT (HCWT) Pte LtdHyflux Utility WWT (ZY) Pte LtdHyflux Utility WWTP (LP) Pte Ltd

Hyflux Utility WWTP (WH) Pte LtdHyflux Water TrustHyflux Water Trust Management Pte LtdHyfluxShop Pte LtdKallang Infrastructure Pte LtdKallang Spring Pte LtdMarmon Hyflux Investments Pte LtdMenaSpring Utility (S) Pte LtdMenaSpring Utility (Tlemcen) Pte LtdNewSpring Utility Pte LtdSingSpring TrustTuaSpring Pte Ltd

people's republic of ChinaBeijing Shouren Water Engineering Co., LtdEflux (Taizhou) Co., LtdGalaxy Operation and Management (Shanghai) Co., LtdHydrochem Engineering (Shanghai) Co., LtdHydrochem Desalination Technologies (Shanghai) Co., LtdHydrochem Membrane and Membrane Products (Shanghai) Co., LtdHyflux (Tianjin) Sewage Disposal Co., LtdHyflux (Zunyi) Sewage Disposal Co., LtdHyflux Caojie Sewage Disposal (Chongqing) Co., LtdHyflux Engineering Design (Shanghai) Co., LtdHyflux Engineering (Shanghai) Co., LtdHyflux Filtech (Shanghai) Co., LtdHyflux GaoYang Sewage Disposal (ChongQing) Co., LtdHyflux Hi-tech Product (Yangzhou) Co., LtdHyflux Investment Consultancy and Management Service (Tianjin) Co., LtdHyflux NewSpring (Changshu) Co., LtdHyflux NewSpring (Dafeng) Co., LtdHyflux NewSpring (Dezhou) Co., LtdHyflux NewSpring (Funing) Co., LtdHyflux NewSpring (Guanyun) Co., LtdHyflux NewSpring (Leping) Co., LtdHyflux NewSpring (Liaoyang) Co., LtdHyflux NewSpring (LiaoYangGongChangLing) Co., LtdHyflux NewSpring (Nantong) Co., LtdHyflux NewSpring (Nantong) WT Co., LtdHyflux NewSpring (Nantong) WWT Co., LtdHyflux NewSpring (Taizhou) Co., LtdHyflux NewSpring (Taoyuan) Co., LtdHyflux NewSpring (Tianjin) Co., LtdHyflux NewSpring (Tiantai) Co., LtdHyflux NewSpring (Wuxi) Co., LtdHyflux NewSpring (Wuhu) Co., Ltd.Hyflux NewSpring (Yangzhou) Co., LtdHyflux NewSpring (Zunhua) Co., Ltd

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HYFLUX GROUP OF COMPANIES

Hyflux NewSpring Construction Engineering (Shanghai) Co., LtdHyflux NewSpring Sewage Disposal (Guanyun) Co., LtdHyflux NewSpring Sewage Disposal (Rudong) Co., LtdHyflux NewSpring Sewage Disposal (Funing) Co., LtdHyflux NewSpring Water Treatment (Leping) Co., LtdHyflux NewSpring Waste Water Treatment (Mingguang) Co., LtdHyflux NewSpring Water Treatment (Mingguang) Co., LtdHyflux NewSpring Weituo WT (Chongqing) Co., Ltd.Hyflux Newspring WT (Dafeng) Co., LtdHyflux Salt Industry Technology Development (Tianjin) Co., LtdHyflux Unitech (Shanghai) Co., LtdHyflux Weituo Sewage Disposal (Chongqing) Co., LtdHyfluxshop (Shanghai) Co., LtdKunshan Eco Water Systems Co., LtdLangfang Hyflux NewSpring Co., LtdNingxia Hypow Bio-Technology Co., LtdSinolac (Huludao) Biotech Co., LtdTianjin Dagang NewSpring Co., LtdWuxi Hyflux NewSpring Sewage Disposal Co., Ltd

hong KongH.J. NewSpring LimitedHyflux Utility Water Limited Hyflux Utility (DF) LimitedHyflux Utility (HLD) LimitedHyflux Utility (LP) Limited Hyflux Utility (PJ) LimitedHyflux Utility (TJ) LimitedHyflux Utility (TY) LimitedHyflux Utility (WX) Limited Hyflux Utility (YK) Limited Hyflux Utility (YL) LimitedHyflux Utility WT (GCL) Limited Hyflux Utility WT (LY) Limited Hyflux Utility WT (MG) Limited Hyflux Utility WT (XC) LimitedHyflux Utility WT (YL) LimitedHyflux Utility WT (YKG) LimitedHyflux Utility WTP (GY) Limited Hyflux Utility WWT (BC) LimitedHyflux Utility WWT (GY) LimitedHyflux Utility WWT (MG) LimitedHyflux Utility WWT (XC) Limited Hyflux Utility WWT (YL) LimitedHyflux Utility WWT (YKG) LimitedHyflux Utility WWTP (GY) Limited

British virgin IslandsHyflux Advanced Technology LtdHyflux International LtdHyflux Utility LtdHyflux Water Projects LtdIndoSpring Utility LtdSinoSpring Utility LtdSpring China Utility LtdSpring Environment LtdSpring Utility Ltd

EuropeFranceTlemcen Desalination Investment Company SASHyflux France SAS

NetherlandsHyflux CEPAration B.V.Hyflux CEPAration Technologies (Europe) B.V.

Netherlands AntillesHyflux CEPAration N.V.

IndiaHyflux Technology India Private Limited (formerly known as Eflux Oil India Private Limited)Hyflux Engineering (India) Private LimitedHyflux Lifestyle Products (India) Private LimitedSwarnim DahejSpring Desalination Private Limited

MalaysiaHyflux (Malaysia) Sdn Bhd

MENAAlgeriaAlmiyah Attilemcania SPAHyflux Engineering Algeria EURLHyflux Operation & Maintenance Algeria EURLHyflux-TJSB Algeria SPATahlyat Myah Magtaa SPA

Saudi ArabiaLube Oil Re-refining Company

Cayman IslandsHyflux Asset Investment (CWF) LtdHyflux Asset Management (CWF) Ltd

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CORPORATE INFORMATION

BoArD oF DIrECTorS

Olivia Lum Ooi Lin (Executive Chairman and Group CEO)Teo Kiang Kok (Lead Independent Director)Lee Joo Hai (Non-Executive Independent Director)Gay Chee Cheong (Non-Executive Independent Director)Christopher Murugasu (Non-Executive Independent Director)Rajsekar Kuppuswami Mitta (Non-Executive Independent Director)Simon Tay (Non-Executive Independent Director)Gary Kee Eng Kwee (Non-Executive Non-Independent Director)

MANAGEMENT CoMMITTEE

Olivia Lum Ooi Lin (Chairman)Sam Ong Cho Wee PengWinnifred HeapOon Jin TeikAndrew NgiamPeter Wu

CoMpANy SECrETAry

Lim Poh Fong

rEGISTErED oFFICE

80 Bendemeer RoadHyflux Innovation CentreSingapore 339949Tel : 65 6214 0777Fax :65 6214 1211

AuDITorS

KPMG LLP16 Raffles Quay #22-00Hong Leong Building Singapore 048581

Partner-in-charge (since 2010):Lau Kam Yuen

rEGISTrAr

Boardroom Corporate & Advisory Services Pte Ltd50 Raffles Place#32-01 Singapore Land TowerSingapore 048623

BoArD CoMMITTEES:

Audit CommitteeLee Joo Hai (Chairman)Rajsekar Kuppuswami Mitta Gay Chee CheongGary Kee Eng Kwee

Nominating CommitteeTeo Kiang Kok (Chairman)Olivia Lum Ooi LinGay Chee CheongChristopher Murugasu

remuneration CommitteeGay Chee Cheong (Chairman)Teo Kiang KokLee Joo HaiChristopher Murugasu

risk Management CommitteeRajsekar Kuppuswami Mitta (Chairman)Teo Kiang KokLee Joo HaiSimon Tay

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CORPORATE INFORMATION

BANKErSAgricultural Bank of China Limited,Singapore Branch7 Temasek Boulevard#30-01/02/03 Suntec Tower 1Singapore 038987

Arab Bank Plc, Singapore80 Raffles Place#32-20 UOB Plaza 2Singapore 048624

Arab Banking Corporation (B.S.C)9 Raffles Place#60-03 Republic PlazaSingapore 048619

Australia and New ZealandBanking Group Limited, Singapore Branch10 Collyer Quay,#30-00 Ocean Financial CentreSingapore 049315

Bangkok Bank Public Company Limited180 Cecil StreetBangkok Bank BuildingSingapore 069546

Bank of China Limited, Singapore Branch4 Battery Road, 15th FloorBank of China BuildingSingapore 049908

Bank of Communications Co., Ltd,Singapore Branch50 Raffles Place#18-01 Singapore TowerSingapore 048623

Bank of Taiwan, Singapore Branch80 Raffles Place#28-20 UOB Plaza 2Singapore 048624

BNP Paribas, Singapore Branch10 Collyer Quay #34-01Ocean Financial CentreSingapore 049315

Chang Hwa Commercial Bank Ltd,Singapore BranchNo. 1 Finlayson Green, #08-00Singapore 049246

Chinatrust Commercial Bank Co., Ltd,Singapore Branch8 Marina View #33-02Asia Square Tower OneSingapore 018960

China International Capital Corporation (Singapore) Pte. Limited6 Battery Road #39-04Singapore 049909

CIMB Bank Berhad, Singapore Branch50 Raffles Place#09-01 Singapore Land TowerSingapore 048623

Citibank, N.A.8 Marina View#21-01 Asia Square Tower 1Singapore 018960

Credit Agricole Corporate & Investment Bank, Singapore Branch168 Robinson Road#22-01 Capital TowerSingapore 068912

DBS Bank Ltd12 Marina BoulevardDBS Asia Central @ Marina Bay Financial Centre Tower 3 Singapore 018982

First Commercial Bank, Singapore Branch77 Robinson Road #01-01Singapore 068896

ICICI Bank Limited9 Raffles Place #50-01Republic PlazaSingapore 048619

ING Bank N.V., Singapore Branch9 Raffles Place, #19-02 Republic Plaza,Singapore 048619

The Hongkong and Shanghai Banking Corporation Limited21 Collyer Quay #01-00 HSBC BuildingSingapore 049320

Japan Bank for International Cooperation9 Raffles Place #51-02Republic PlazaSingapore 048619

JPMorgan Chase Bank, N.A.168 Robinson Road, 17th FloorCapital Tower,Singapore 068912

Land Bank of Taiwan, Singapore Branch80 Raffles Place#34-01 UOB Plaza 1Singapore 048624

Malayan Banking Berhad2 Battery Road Maybank Tower Singapore 049907

Mega International Commercial Bank Co.,Ltd., Singapore Branch80 Raffles Place

#23-20 UOB Plaza IISingapore 048624

Mizuho Corporate Bank, Ltd.,Singapore Branch168 Robinson RoadCapital Tower #13-00Singapore 068912

Natixis, Singapore Branch50 Raffles Place#41-01 Singapore Land TowerSingapore 048623

Norddeutsche Landesbank Girozentrale,Singapore Branch6 Shenton Way #16-00DBS Building Tower 2Singapore 068809

Oversea-Chinese Banking CorporationLimited65 Chulia StreetOCBC CentreSingapore 049513

RHB Bank Berhad90 Cecil Street #03-00RHB Bank BuildingSingapore 069531

Standard Chartered Bank8 Marina Boulevard, Level 24Marina Bay Financial Centre (Tower 1)Singapore 018981

State Bank of India135 Cecil Street #01-00Singapore 069536

Sumitomo Mitsui Banking Corporation, Singapore Branch3 Temasek Avenue #06-01Centennial TowerSingapore 039190

The Bank of East Asia Limited,Singapore Branch137 Market StreetBEA BuildingSingapore 048943

The Bank of Tokyo-Mitsubishi UFJ, Ltd.Singapore Branch9 Raffles Place #01-01 Republic PlazaSingapore 048619

The Royal Bank of Scotland PlcLevel 23, One Raffles QuaySouth TowerSingapore 048583

United Overseas Bank Limited1 Raffles PlaceOUB CentreSingapore 048616

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Hyflux Ltd80 Bendemeer Road Hyflux Innovation CentreSingapore 339949www.hyflux.com Company reg. no.: 200002722Z

HYFLUX LTDCompany Registration No. 200002722Z(Incorporated in the Republic of Singapore with limited liability)

PROXY FORM(Please see notes overleaf before completing this Form)

I/We, (Name and NRIC No.)of (Address)being a member/members of Hyflux Ltd (the “Company”), hereby appoint:-

Name NRIC/Passport No. Proportion of Shareholdings No of Shares %

Address

and/or (delete as appropriate)

Name NRIC/Passport No. Proportion of Shareholdings No of Shares %

Address

or failing the person, or either or both of the persons, referred to above, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the Annual General Meeting (the “Meeting”) of the Company to be held on 25 April 2013 at 2.00 p.m. and at any adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the Meeting as indicated hereunder. If no specific direction as to voting is given or in the event of any other matter arising at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion. The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.

No. Resolutions To be used on ashow of hands

To be used in theevent of a poll

For* Against* No. of Votes For**

No. of Votes Against**

Ordinary Business1 Adoption of Directors’ Report and Audited Accounts2 Declaration of Dividends3 Re-election of Lee Joo Hai as Director4 Re-election of Gay Chee Cheong as Director5 Approval of Directors’ fees6 Re-appointment of AuditorsSpecial Business7 Authority to issue shares up to 50 per centum (50%) of

the issued ordinary shares in the capital of the Company8 Renewal of Preference Share Mandate9 Authority to issue shares under Hyflux Employees’ Share

Option Scheme 2001 and Hyflux Employees’ Share Option Scheme 2011

10 Renewal of Share Purchase Mandate

* Please indicate your vote “For” or “Against”, with an “X” within the box provided.** If you wish to exercise all your votes “For” or “Against”, please indicate with an “X” within the box provided. Alternatively, please

indicate the number of votes as appropriate.

Dated this ___________ day of ____________________ 2013

Signature(s) of Shareholder(s), Common Seal of Corporate Shareholder

IMPORTANT:

1. For investors who have used their CPF monies to buy Hyflux Ltd’s shares, this Report is forwarded to them at the request of the CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.

3. CPF investors who wish to attend the Meeting as an observer must submit their requests through their CPF Approved Nominees within the time frame specified. If they also wish to vote, they must submit their voting instructions to the CPF Approved Nominees within the time frame specified to enable them to vote on their behalf.

Total Number of Shares held

NOTES:

1. Please insert the total number of shares held by you. If you have Shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you only have Shares registered in your name in the Register of Members, you should insert that number of Shares. However, if you have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares held by you.

2. A Shareholder of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote instead of him. A proxy need not to be a Shareholder of the Company. Where a Shareholder appoints two proxies, the proportion of the shareholding concerned to be represented by each proxy shall be specified in the proxy form. If no percentage is specified, the first named proxy shall be deemed to represent 100 percent of the shareholding and the second named proxy shall be deemed to be an alternate to the first named proxy.

3. The instrument appointing a proxy or proxies must be deposited at the registered office of the Company at 80 Bendemeer Road, Hyflux Innovation Centre, Singapore 339949 not less than 48 hours before the time appointed for the Meeting.

4. The instrument appointing a proxy or proxies must be executed under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an officer or attorney duly authorised. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certified copy thereof must (unless previously registered with the Company) be lodged with the instrument of proxy, failing which, the instrument may be treated as invalid.

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

6. The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. In addition, in the case of Shareholders whose Shares are entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such Shareholders are not shown to have Shares entered against their name in the Depository Register 48 hours before the time appointed for the holding of the Annual General Meeting, as certified by The Central Depository (Pte) Limited to the Company.

7. Completion and return of this instrument appointing a proxy shall preclude a member from attending and voting at the Meeting. Any appointment of a proxy or proxies shall be deemed to be revoked if a member attends the meeting in person, and in such an event, the Company reserves the right to refuse to admit any person or persons appointed under the instrument of proxy to the Meeting.

The Company SecretaryHYFLUX LTD

80 Bendemeer RoadHyflux Innovation Centre

Singapore 339949

fold along this line (2)

fold along this line (1)

AffixPostageStamp


1

NOTICE OF ANNUAL GENERAL MEETING

NOTICE IS HEREBY GIVEN that the Annual General Meeting of Hyflux Ltd (“Company”) will be held at 80 Bendemeer Road, Hyflux Innovation Centre, Singapore 339949 on 25 April 2013 at 2.00 p.m. for the following purposes:

AS ORDINARY BUSINESS

Resolution 1

To receive and adopt the Directors’ Report and the Audited Accounts for the year ended 31 December 2012 together with the Auditors’ Report thereon.

Resolution 2

To declare a final dividend of 2.5 Singapore cents per ordinary share (one-tier tax exempt) for the year ended 31 December 2012 (previous year: 2.1 Singapore cents per ordinary share).

Resolution 3

To re-elect Mr. Lee Joo Hai who retires in accordance with Article 89 of the Company’s Articles of Association and who, being eligible, offers himself for re-election.

Resolution 4

To re-elect Mr. Gay Chee Cheong who retires in accordance with Article 89 of the Company’s Articles of Association and who, being eligible, offers himself for re-election.

Resolution 5

To approve the payment of Directors’ fees of S$550,000 for the year ended 31 December 2012 (previous year: S$540,795).

Resolution 6

To re-appoint Messrs KPMG LLP as external auditors and to authorise the Directors to fix their remuneration.

AS SPECIAL BUSINESS

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

Resolution 7

That pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited, (the “Listing Manual”) the Directors be authorised and empowered to:

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


2

NOTICE OF ANNUAL GENERAL MEETING (CONT’D)

(2) make or grant offers, agreements or options (collectively, “Instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) options, warrants, debentures or other instruments convertible into ordinary shares,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit; and

(b) issue ordinary shares in pursuance of any Instruments made or granted by the Directors while this Resolution was in force (notwithstanding the authority conferred by this Resolution may have ceased to be in force), provided that:

(1) the aggregate number of ordinary shares (including ordinary shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution) and Instruments to be issued pursuant to this Resolution shall not exceed fifty per centum (50%) of the issued ordinary shares in the capital of the Company (as calculated in accordance with sub-paragraph (2) below), of which the aggregate number of ordinary shares and Instruments to be issued other than on a pro rata basis to existing shareholders of the Company shall not exceed twenty per centum (20%) of the issued ordinary shares in the capital of the Company (as calculated in accordance with sub-paragraph (2) below);

(2) (subject to such calculation as may be prescribed by the Singapore Exchange Securities Trading Limited) for the purpose of determining the aggregate number of ordinary shares and Instruments that may be issued under sub- paragraph (1) above, the percentage of issued ordinary shares and Instruments shall be based on the number of issued ordinary shares in the capital of the Company (excluding treasury shares) at the time of the passing of this Resolution, after adjusting for:

(i) new ordinary shares arising from the conversion or exercise of the Instruments or any convertible securities;

(ii) new ordinary shares arising from the exercising of share options or vesting of share awards outstanding and subsisting at the time of the passing of this Resolution; and

(iii) any subsequent bonus issue consolidation or subdivision of ordinary shares.

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

(4) unless revoked or varied by the Company in a general meeting, such authority shall continue in force (i) until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the


3

Company is required by law to be held, whichever is earlier or (ii) in the case of ordinary shares to be issued in pursuance of the Instruments, made or granted pursuant to this Resolution, until the issuance of such ordinary shares in accordance with the terms of the Instruments.

Resolution 8

That:

(a) authority be and is hereby given to the Directors to:

(1) allot and issue preference shares referred to in Articles 8C and 8E of the Articles of Association of the Company in the capital of the Company whether by way of rights, bonus or otherwise; and/or

(2) make or grant offers, agreements or options that might or would require preference shares referred to in sub-paragraph (1) above to be issued, not being ordinary shares to which the authority referred to in Resolution 7 above relates,

at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit, and (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue preference shares referred to in sub-paragraph (1) above in pursuance of any offers, agreements or options made or granted by the Directors while this Resolution was in force; and

(b) (unless revoked or varied by the Company in a general meeting) the authority conferred by this Resolution shall continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

Resolution 9

That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors be authorised and empowered to:

(a) offer, grant, allot and issue options in accordance with the provisions of the Hyflux Employees’ Share Option Scheme 2011 (“2011 Scheme”); and

(b) continue to allot and issue from time to time such number of ordinary shares in the capital of the Company when such options are validly exercised pursuant to the terms and conditions of the Hyflux Employees’ Share Option Scheme 2001 (“2001 Scheme”),

and (notwithstanding the authority conferred by this Resolution may have ceased to be in force) to issue from time to time such number of ordinary shares in the capital of the Company as may be required to be issued pursuant to the exercise of options granted by the Company under the 2011 Scheme and 2001 Scheme, provided always that the aggregate number of additional ordinary shares to be allotted and issued respectively shall not exceed ten per centum (10%) of the issued ordinary shares in



4

the capital of the Company from time to time under the 2011 Scheme and shall not exceed fifteen per centum (15%) of the issued ordinary shares in the capital of the Company from time to time under the 2001 Scheme and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier.

Resolution 10

That the Directors of the Company be and are hereby authorised to exercise all the powers of the Company to make purchases of or otherwise acquire issued and fully-paid ordinary shares in the capital of the Company from time to time (whether by way of market purchases or off-market purchases on an equal access scheme) of up to ten per centum (10%) of the issued ordinary shares in the capital of the Company (ascertained as at the date of the passing of this Resolution, unless the Company has effected a reduction of the share capital of the Company in accordance with the applicable provisions of the Companies Act, Chapter 50 of Singapore (“Companies Act”), at any time during the Relevant Period (as defined below), in which event the issued ordinary share capital of the Company shall be taken to be the amount of the issued ordinary share capital of the Company as altered, but excluding any shares held by the Company as treasury shares from time to time) at the price of up to but not exceeding the Maximum Price (as defined in Appendix 2 to this Notice of Annual General Meeting (“Appendix 2”)) and in accordance with the Guidelines on Share Purchase set out in Appendix 2 (read with Appendix 1 to this Notice of Annual General Meeting) and otherwise in accordance with all other provisions of the Companies Act and the Listing Manual of the Singapore Exchange Securities Trading Limited as may from time to time be applicable, and this mandate shall, unless revoked or varied by the Company in general meeting, continue in force until the date on which the next Annual General Meeting of the Company is held or is required by law to be held (the “Relevant Period”), or the date on which the share purchases are carried out to the full extent mandated, whichever is earlier.

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

By Order of the Board

Lim Poh Fong Company Secretary Singapore, 10 April 2013



5


Explanatory Notes:

(1) A Member entitled to attend and vote at the Annual General Meeting (the “Meeting”) is entitled to appoint a proxy to attend and vote in his/her stead. A proxy need not be a Member of the Company. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 80 Bendemeer Road, Hyflux Innovation Centre, Singapore 339949 not less than 48 hours before the time appointed for holding the Meeting.

(2) In relation to Resolution 3, Mr. Lee Joo Hai, will upon re-election as a Director of the Company, remain as Chairman of the Audit Committee and a member of the Remuneration Committee and Risk Management Committee. Mr. Lee is considered a non-executive and independent director.

(3) In relation to Resolution 4, Mr. Gay Chee Cheong, will upon re-election as a Director of the Company, remain as Chairman of the Remuneration Committee, a member of the Audit Committee and Nominating Committee. Mr. Gay is considered a non- executive and independent director.

(4) Ordinary Resolution 7 has been proposed for voting annually at the Company’s Annual General Meeting since 2002. Pursuant to Section 161 of the Companies Act, Cap. 50 and Rule 806 of the Listing Manual of the Singapore Exchange Securities Trading Limited, and upon passing of this Ordinary Resolution 7, the Directors will be empowered from the date of this Meeting until the date of the next Annual General Meeting, or the date by which the next Annual General Meeting is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earliest, to issue ordinary shares, make or grant instruments convertible into ordinary shares and to issue ordinary shares pursuant to such instruments, up to a number not exceeding, in total, 50% of the issued ordinary shares in the capital of the Company, of which up to 20% may be issued other than on a pro rata basis to existing shareholders. In determining the aggregate number of ordinary shares that may be issued, the percentage of issued ordinary shares in the capital of the Company will be calculated based on the issued ordinary shares in the capital of the Company at the time this Ordinary Resolution 7 is passed after adjusting for new ordinary shares arising from the conversion or exercise of the instruments or any convertible securities, the exercise of share options or the vesting of share awards outstanding or subsisting at the time when this Ordinary Resolution 7 is passed and any subsequent bonus issue, consolidation or subdivision of ordinary shares.

(5) Ordinary Resolution 8 relates to the renewal of the preference share issue mandate, which was originally approved by the shareholders at the Extraordinary General Meeting held on 31 March 2011. Upon passing of this Ordinary Resolution 8, the Directors will be empowered from the date of this Meeting until the date of the next Annual General Meeting, or the date by which the next Annual General Meeting is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earliest, to issue new preference shares and/or make or grant offers, agreements or options that might or would require such preference shares to be issued, provided that the aggregate number of preference


6


shares does not exceed 20% of the total number of issued shares (excluding treasury shares) in the capital of the Company at the time of passing of this Ordinary Resolution 8 and such issue be on such other terms and condition as the Directors may deem fit.

(6) Ordinary Resolution 9 has been proposed for voting and passed annually since 2002. The 2001 Scheme has expired on 26 September 2011 and the 2011 Scheme was approved by the shareholders at the Extraordinary General Meeting held on 27 April 2011. The Directors believe that an appropriate remuneration package is required to recruit, retain and reward talent for performance. Pursuant to Section 161 of the Companies Act, Cap. 50 and upon passing of the Ordinary Resolution 9, the Directors will be empowered, from the date of this Meeting until the next Annual General Meeting, or the date by which the next Annual General Meeting is required by law to be held or such authority is varied or revoked by the Company in a general meeting, whichever is the earliest, to issue ordinary shares in the Company pursuant to the exercise of options granted or to be granted under the 2011 Scheme and 2001 Scheme, provided always that the aggregate number of additional ordinary shares to be allotted and issued respectively shall not exceed 10% of the issued ordinary shares in the capital of the Company from time to time under the 2011 Scheme and shall not exceed 15% of the issued ordinary shares in the capital of the Company from time to time under the 2001 Scheme.

(7) Ordinary Resolution 10 relates to the renewal of the share purchase mandate, which was originally approved by the shareholders at the Extraordinary General Meeting held on 25 April 2008 and last renewed at the Annual General Meeting held on 26 April 2012. Ordinary Resolution 10, if passed, will empower the Directors of the Company from the date of this Meeting until the next Annual General Meeting, or the date by which the next Annual General Meeting is required by law to be held, whichever is earlier, to purchase ordinary shares of the Company by way of market purchases or off-market purchases of up to 10% of the total number of issued ordinary shares in the capital of the Company at the Maximum Price as defined in Appendix 2. Please refer to Appendix 1 and Appendix 2 of this Notice of Annual General Meeting for further details.


7

NOTICE OF BOOKS CLOSURE

NOTICE IS HEREBY GIVEN that the Share Transfer Books and Register of Members of Hyflux Ltd (the “Company”) will be closed on 6 May 2013 for the preparation of dividend warrants.

Duly completed registrable transfers of ordinary shares received by the Company’s Share Registrar, Boardroom Corporate & Advisory Services Pte. Ltd., 50 Raffles Place, #32-01, Singapore Land Tower, Singapore 048623 up to 5.00 p.m. on 3 May 2013 will be registered to determine ordinary shareholders’ entitlements to the proposed dividend. Members whose Securities Accounts with The Central Depository (Pte) Limited are credited with the Company’s ordinary shares at 5.00 p.m. on 3 May 2013 will be entitled to the proposed dividend.

Payment of the dividend, if approved by the members at the Annual General Meeting to be held on 25 April 2013, will be made on 17 May 2013.

NOTICE OF BOOKS CLOSURE


8

APPENDIX 1

SUMMARY SHEET FOR RENEWAL OF SHARES PURCHASE MANDATE

The Singapore Exchange Securities Trading Limited (the “SGX-ST”) assumes no responsibility for the correctness of any of the statements made, reports contained or opinions expressed in this Appendix. If you are in doubt as to the action that you should take, you should consult your stockbroker or other professional adviser immediately.

(A) SHARES PURCHASED IN THE PREVIOUS TWELVE MONTHS

Pursuant to the Shares Purchase Mandate obtained at the Annual General Meeting on 26 April 2012, as at 20 March 2013 (the “Latest Practicable Date”), Hyflux Ltd (the “Company”) had purchased by way of market acquisition an aggregate of 22,949,000 ordinary shares in the capital of the Company (the “Shares”), which are held in treasury (“Treasury Shares”). The total consideration paid for the purchases was S$30,908,435 (inclusive of brokerage and clearing fees of S$62,773). The highest price paid for the purchases was S$1.50 per Share and the lowest price paid was S$1.21 per Share.

(B) RENEWAL OF THE SHARES PURCHASE MANDATE

The Ordinary Resolution No. 10, if passed at the Annual General Meeting, will renew the Shares Purchase Mandate approved by the shareholders of the Company from the date of the Annual General Meeting until the date that the next annual general meeting of the Company is held or is required by law to be held, whichever is the earlier.

(C) RATIONALE FOR THE SHARES PURCHASE MANDATE

Short-term speculation may at times cause the market price of the Company’s Shares to be depressed below the true value of the Company and the Group. The proposed Shares Purchase Mandate will provide the Directors with the means to restore investors’ confidence and to protect existing shareholders’ investments in the Company in a depressed share-price situation through judicious Shares purchases to enhance the earnings per Share and/or the net asset value per Share. The Shares purchases will enhance the net asset value per Share if the Shares purchases are made at a price below the net asset value per Share.

The proposed Shares Purchase Mandate will also provide the Company with an expedient and cost-effective mechanism to facilitate the return of surplus cash reserves to the shareholders.

The Directors will only make a Shares purchase as and when the circumstances permit and only if the Directors are of the view that such purchases are in the best interests of the Company and the shareholders. The Directors will decide whether to purchase Shares only after taking into account, among other things, the market conditions at such time and the Company’s financial condition. Shares purchases will only be made if the Directors believe that such purchases are likely to benefit the Company and increase economic value for shareholders.


9

The Directors will ensure that the Shares purchases will not have any effect on the listing of the Company’s securities including the Shares listed on the SGX-ST. Rule 723 of the Listing Manual of the SGX-ST requires at least ten per cent (10%) of any class of a company’s listed securities to be held by the public at all times. The Directors shall safeguard the interests of public shareholders before undertaking any Shares purchases. Before exercising the Shares Purchase Mandate, the Directors shall at all times take due cognisance of (a) the then shareholding spread of the Company in respect of the number of Shares held by substantial shareholders and by non-substantial shareholders and (b) the volume of trading on the SGX-ST in respect of the Shares immediately before the exercise of any Shares purchase.

As at the Latest Practicable Date, 378,269,282 Shares (45.83%) of a total of 825,414,739 Shares issued by the Company are held by 16,937 public shareholders. The Company is of the view that there is a sufficient number of Shares in issue held by public shareholders which would permit the Company to undertake Shares purchases of up to ten per cent (10%) of its issued ordinary share capital without affecting the listing status of the Shares on the SGX-ST. The Company will ensure that the Shares purchases will not cause market illiquidity or affect orderly trade.

(D) FINANCIAL IMPACT OF THE PROPOSED SHARES PURCHASES

1. The purchased Shares shall be cancelled immediately on purchase or acquisition unless held in treasury in accordance with Section 76H of the Companies Act (Cap. 50) (the “Act”). Section 76H of the Act allows purchased Shares to be:

(i) held by the Company; or

(ii) dealt with, at any time, in accordance with Section 76K of the Act, as Treasury Shares.

Section 76K of the Act allows the Company to:

(i) sell the Shares (or any of them) for cash;

(ii) transfer the Shares (or any of them) for the purposes of or pursuant to an employees’ share scheme;

(iii) transfer the Shares (or any of them) as consideration for the acquisition of shares in or assets of another company or assets of a person; or

(iv) cancel the Shares (or any of them).

The aggregate number of Shares held as Treasury Shares shall not at any time exceed ten per cent (10%) of the total number of Shares at that time. Any Shares in excess of this limit shall be disposed of or cancelled in accordance with Section 76K of the Act within six (6) months.

APPENDIX 1 (CONT’D)


10

Any Shares purchase will:

(i) reduce the amount of the Company’s share capital where the Shares were purchased or acquired out of the capital of the Company;

(ii) reduce the amount of the Company’s profits where the Shares were purchased or acquired out of the profits of the Company; or

(iii) reduce the amount of the Company’s share capital and profits proportionately where the Shares were purchased or acquired out of both the capital and the profits of the Company;

by the total amount of the purchase price paid by the Company for the Shares cancelled.

The Company cannot exercise any right in respect of Treasury Shares. In particular, the Company cannot exercise any right to attend or vote at meetings and for the purposes of the Act, the Company shall be treated as having no right to vote and the Treasury Shares will be treated as having no voting rights.

2. The financial effects on the Company and the Group arising from the proposed purchases of the Company’s Shares which may be made pursuant to the proposed Shares Purchase Mandate will depend on, inter alia, the aggregate number of Shares purchased and the consideration paid at the relevant time.

3. Based on the existing issued and paid-up share capital of the Company as at the Latest Practicable Date, the proposed purchases by the Company of up to a maximum of ten per cent (10%) of its issued share capital (excluding Treasury Shares) under the Shares Purchase Mandate will result in the purchase of 82,541,474 Shares.

4. An illustration of the impact of Shares purchases by the Company pursuant to the Shares Purchase Mandate on the Group’s and the Company’s financial position is set out below based on the following assumptions:

(a) audited accounts of the Group and the Company as at 31 December 2012;

(b) in full exercise of the Shares Purchase Mandate, 82,541,474 Shares were purchased;

(c) the maximum price for the market purchases is S$1.4889 per Share, which is five per cent (5%) above the average closing prices of the Shares over the last five market days preceding the Latest Practicable Date on which the transactions in Shares were recorded on the SGX-ST; and

(d) the maximum amount of funds required for the Shares purchases in aggregate is S$122,896,000.



11

Market Purchases and Off-Market Purchases and held as Treasury Shares or cancelled

Group before Shares

purchase(S$’000)

Groupafter

Shares purchase(S$’000)

Company before Shares

purchase(S$’000)

Companyafter

Shares purchase(S$’000)

As at 31 December 2012

Shareholders’ funds 860,593 737,697 666,034 543,138

Net asset value 877,029 754,133 666,034 543,138

Current assets 914,916 792,020 666,844 543,948

Current liabilities 391,792 391,792 47,681 47,681

Cash and cash equivalents 541,232 418,336 176,216 53,320

Number of shares (’000) 825,223 742,682 825,223 742,682

Financial Ratios

Net asset value per share (cents)

55.81 45.47 32.24 19.27

Earnings per share (cents) 4.43 4.91 9.23 10.24

Gearing (times) 0.67 0.95 1.11 1.59

Current ratio 2.34 2.02 13.99 11.41

5. Shareholders should note that the financial effects set out above are based on the audited financial accounts of the Group and the Company for the financial year ended 31 December 2012 and are for illustration only. The results of the Group and the Company for the financial year ended 31 December 2012 may not be representative of future performance.

6. The Company intends to use its internal sources of funds to finance its purchases of the Shares. The Company does not intend to obtain or incur any borrowings to finance its purchases of the Shares. The Directors do not propose to exercise the Shares Purchase Mandate in a manner and to such extent that the working capital requirements of the Group would be materially affected.

7. The Company will take into account both financial and non-financial factors, among other things, the market conditions at such time, the Company’s financial condition, the performance of the Shares and whether such Shares purchases would represent the most efficient and cost-effective approach to enhance the Share value. Shares purchases will only be made if the Board believes that such purchases are likely to benefit the Company and increase economic value for shareholders.



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(E) CONSEQUENCES OF SHARES PURCHASES UNDER THE SINGAPORE CODE ON TAKE-OVERS AND MERGERS

1. In accordance with The Singapore Code on Take-overs and Mergers (the “Take-over Code”), a person will be required to make a general offer for a public company if:

(a) he acquires 30 per cent (30%) or more of the voting rights of the company; or

(b) he already holds between 30 per cent (30%) and 50 per cent (50%) of the voting rights of the company, and he increases his voting rights in the company by more than one per cent (1%) in any six-month period.

2. As at the Latest Practicable Date and before the proposed Shares Purchase Mandate, the substantial shareholders’ and Directors’ interests are as follows:

Ordinary Shareholdings

Direct Interest Deemed Interest Total Interest

DirectorsNumber

of Shares %Number

of Shares %Number

of Shares %

Olivia Lum Ooi Lin 267,351,211 32.39 - - 267,351,211 32.39

Teo Kiang Kok - - 375,000 0.04 375,000 0.04

Lee Joo Hai - - - - - -

Gay Chee Cheong 1,000,000 0.12 - - 1,000,000 0.12

Christopher Murugasu 926,718 0.11 180,000 0.02 1,106,718 0.13

Rajsekar Kuppuswami Mitta - - - - - -

Simon Tay - - - - - -

Gary Kee Eng Kwee - - - - - -

NOTES:

(1) Teo Kiang Kok is deemed interested in the Shares held by Citibank Nominees Singapore Pte Ltd.

(2) Christopher Murugasu is deemed interested in the Shares held by his spouse, Bernadette Oei Lian Hua.



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Class A Preference Shareholdings1

Direct Interest Deemed Interest Total Interest

DirectorsNumber

of Shares %Number

of Shares %Number

of Shares %

Olivia Lum Ooi Lin 8,020 0.2 - - 8,020 0.2

Teo Kiang Kok 3,000 0.075 - - 3,000 0.075

Lee Joo Hai - - - - - -

Gay Chee Cheong 12,000 0.3 - - 12,000 0.3

Christopher Murugasu 1,000 0.025 - - 1,000 0.025

Rajsekar Kuppuswami Mitta - - 20,000 0.5 20,000 0.5

Simon Tay - - - - - -

Gary Kee Eng Kwee - - - - - -

NOTES:

(1) Rajsekar Kuppuswami Mitta is deemed interested in the preference shares held by Bank of Singapore Nominees Pte Ltd.

In the event the Company undertakes Shares purchases of up to ten per cent (10%) of the issued share capital of the Company as permitted by the Shares Purchase Mandate, the shareholdings and voting rights of Ms Olivia Lum Ooi Lin may be increased from 32.39% to 35.99%. Ms Olivia Lum Ooi Lin’s shareholdings and voting rights may thus be increased by more than one per cent (1%) within a six-month period. Accordingly, Ms Olivia Lum Ooi Lin may be required to make a general offer to the other shareholders under Rule 14.1(b) of the Take-over Code.

3. Pursuant to paragraph 3(a) of Appendix 2 to the Take-over Code, Ms Olivia Lum Ooi Lin and parties acting in concert with her will be exempted from the requirement to make a general offer under Rule 14.1(b) of the Take-over Code after any Shares purchase, subject to the following conditions:

(a) this Appendix contains advice to the effect that by voting for the resolution to approve the Shares Purchase Mandate, shareholders are waiving their right to a general offer at the required price from Ms Olivia Lum Ooi Lin and parties acting in concert with her, if any; and the names of Ms Olivia Lum Ooi Lin

1 Pursuant to a preference share issue mandate obtained at an extraordinary general meeting of the Company held on 31 March 2011, the Company had also issued 4,000,000 6% cumulative non-convertible non-voting perpetual Class A Preference Shares of up to S$400,000,000 in aggregate liquidation preference.



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and her concert parties, if any, and the voting rights of such persons at the time of the resolution and after the proposed Shares Purchases are disclosed in this Appendix;

(b) the resolution to approve the Shares Purchase Mandate is approved by a majority of those shareholders present and voting at the meeting on a poll who could not become obliged to make an offer for the Company as a result of the Shares Purchase;

(c) Ms Olivia Lum Ooi Lin and her concert parties, if any, do not vote for and/or recommend shareholders to vote in favour of the resolution to approve the Shares Purchase Mandate;

(d) within 7 days after the passing of the resolution to approve the Shares Purchase Mandate, Ms Olivia Lum Ooi Lin to submit to the Council a duly signed form as prescribed by the Council; and

(e) Ms Olivia Lum Ooi Lin and her concert parties, if any, have not acquired and will not acquire any Shares between the date on which they know that the announcement of the approval of the Shares Purchase Mandate is imminent and the earlier of:

(i) the date on which the Shares Purchase Mandate expires; and

(ii) the date the Company announces that it has bought back such number of Shares as authorised under the Shares Purchase Mandate or the date the Company decides to cease buying back its Shares, as the case may be,

if such acquisitions, taken together with shares bought by the Company under the Shares Purchase Mandate, would cause their aggregate voting rights in the Company to increase by more than 1% in the any six–month period.

The Directors hereby confirm that the substantial shareholders are not acting in concert with any other person to assist any shareholder (or his concert party or parties) to obtain or consolidate control of the Company and that the proposed Shares Purchases are not for any such purpose.

It should be noted that approving the Shares Purchase Mandate will constitute a waiver by the shareholders in respect of their rights to receive a general offer by the substantial shareholders and parties acting in concert with the substantial shareholders at the required price, which shall be determined in accordance with the relevant provisions of the Take-over Code.

For the purpose of the Shares Purchase Mandate, parties acting in concert comprise individuals or companies who, pursuant to an agreement or understanding (whether formal or informal), cooperate, through the acquisition by any of them of shares in the Company, to obtain or consolidate effective control of the Company.



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(F) MISCELLANEOUS

1. Any Shares purchases undertaken by the Company shall be at a price of up to but not exceeding the Maximum Price. The Maximum Price is a sum which shall not exceed the sum constituting five per cent (5%) above the average closing price of the Shares over the period of five (5) trading days in which transactions in the Shares on the SGX-ST were recorded, in the case of a Market Purchase, before the day on which such purchase is made, and, in the case of an Off-Market Purchase, immediately preceding the date of offer by the Company, as the case may be, and adjusted for any corporate action that occurs after the relevant five (5) day period.

2. In making Share purchases, the Company will comply with the requirements of the SGX-ST Listing Manual, in particular, Rule 886 with respect to notification to the SGX- ST of any Shares purchases. Rule 886 is reproduced below:

“(1) An issuer must notify the Exchange of any share buy-back as follows:

(a) In the case of a market acquisition, by 9.00 am on the market day following the day on which it purchased shares,

(b) In the case of an off market acquisition under an equal access scheme, by 9.00 am on the second market day after the close of acceptances of the offer.

(2) Notification must be in the form of Appendix 8.3.1 (or 8.3.2 for an issuer with a dual listing on another stock exchange).”

3. Shares purchases will be made in accordance with the “Guidelines on Shares Purchases” as set out in Appendix 1 of the Company’s Circular to shareholders dated 4 April 2008, a copy of which is annexed hereto as Appendix 2. All information required under the Act relating to the Shares Purchase Mandate is contained in the said Guidelines. With reference to:

(a) Paragraph 1(b) of Appendix 2, the Shares Purchase Mandate will expire on the earliest of any of the circumstances set out in sub-paragraphs (i) to (iii) unless prior thereto, Shares purchases are carried out to the full extent mandated;

(b) Paragraph 6(a) of Appendix 2, the offer document to be issued to all Shareholders in the case of an Off-Market Purchase shall also contain information on whether the Shares purchased by the Company will be cancelled or kept as treasury shares; and

(c) Paragraph 10(b) of Appendix 2, for the avoidance of doubt, as the Company is required to announce quarterly financial statements, the Company may not effect any repurchases of Shares on the SGX-ST during the period commencing two weeks before the announcement of the Company’s financial statements for each of the first three quarters of its financial year, or one month before the full financial year, as the case may be, and ending on the date of announcement of the relevant results.



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4. The SGX-ST Listing Manual does not expressly prohibit any purchase of shares by a listed company during any particular time or times. However, as a listed company would be considered an “insider” in relation to any proposed purchase or acquisition of its shares, the Company will undertake not to purchase or acquire Shares pursuant to the proposed Share Purchase Mandate at any time after a price sensitive development has occurred or has been the subject of a decision until the price sensitive information has been publicly announced. In particular, the Company will not purchase or acquire any Shares during the period commencing two weeks before the announcement of the Company’s financial statements for each of the first three quarters of its financial year, or one month before the full financial year, as the case may be, and ending on the date of announcement of the relevant results.

(G) DIRECTORS’ RESPONSIBILITY STATEMENT

The Directors of the Company collectively and individually accept full responsibility for the accuracy of the information given in this Appendix and confirm after making all reasonable enquiries that, to the best of their knowledge and belief, this Appendix constitutes full and true disclosure of all material facts about the Shares Purchase Mandate, the Company and its subsidiaries, and the Directors of the Company are not aware of any facts the omission of which would make any statement in this Appendix misleading. Where information in this Appendix has been extracted from published or otherwise publicly available sources or obtained from a named source, the sole responsibility of the Directors of the Company has been to ensure that such information has been accurately and correctly extracted from those sources and/or reproduced in this Appendix in its proper form and context.

(H) SHAREHOLDERS WHO WILL ABSTAIN FROM VOTING

Ms Olivia Lum Ooi Lin and her concert parties will abstain from voting at the Annual General Meeting in respect of Ordinary Resolution 10 relating to the Shares Purchase Mandate, and will not act as proxies in respect of Ordinary Resolution 10 unless voting instructions have been given by the appointing Shareholder(s).

(I) DIRECTORS’ RECOMMENDATION

The Directors of the Company, other than Ms Olivia Lum Ooi Lin who has abstained from making any recommendation, are of the opinion that the renewal of the proposed Shares Purchase Mandate is in the best interests of the Company. Accordingly, the Directors of the Company recommend that shareholders vote in favour of Ordinary Resolution 10.

(J) TAXATION

Shareholders who are in doubt as to their respective tax positions or any tax implications, or who may be subject to tax in a jurisdiction outside Singapore, should consult their own professional tax advisers.


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(K) DOCUMENTS FOR INSPECTION

Copies of the following documents may be inspected at the registered office of the Company at 80 Bendemeer Road, Hyflux Innovation Centre, Singapore 339949 during normal business hours up to and including the date of the Annual General Meeting:

(a) the Memorandum and Articles of Association of the Company; and

(b) the audited financial statements of the Company for the financial year ended 31 December 2012.


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APPENDIX 2

GUIDELINES ON SHARES PURCHASES

1. SHAREHOLDERS’ APPROVAL

(a) Purchases of Shares by the Company must be approved in advance by the Shareholders at a general meeting of the Company, by way of a general mandate.

(b) A general mandate authorising the purchase of Shares by the Company representing up to ten per cent (10%) of the issued ordinary shares in the capital of the Company (excluding any Shares held as Treasury Shares) will expire on the earlier of:

(i) the conclusion of the next annual general meeting of the Company;

(ii) the expiration of the period within which the next annual general meeting of the Company is required by law to be held; or

(iii) the time when such mandate is revoked or varied by an ordinary resolution of the Shareholders of the Company in general meeting.

(c) The authority conferred on the Directors by the Shares Purchase Mandate to purchase Shares shall be renewed at the next annual general meeting of the Company.

(d) When seeking Shareholders’ approval for the renewal of the Shares Purchase Mandate, the Company shall disclose details pertaining to the purchases of Shares made during the previous 12 months, including the total number of Shares purchased, the purchase price per Share or the highest and lowest price for such purchases of Shares, where relevant, and the total consideration paid for such purchases.

2. MODE OF PURCHASE

Shares Purchases can be effected by the Company in either one of the following two ways or both:

(a) by way of market purchases of Shares on the Official List of SGX-ST, which means a purchase transacted through the ready market; or

(b) by way of off-market acquisitions on an equal access scheme in accordance with Section 76C of the Act.

3. FUNDING OF SHARES PURCHASES

(a) In purchasing the Shares, the Company may only apply funds legally permitted for such purchase in accordance with its Articles of Association, and the relevant laws and regulations enacted or prescribed by the relevant competent authorities in Singapore.


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(b) Any purchase by the Company may be made out of capital or profits that are available for distribution as dividends, so long as the Company is solvent (as defined by Section 76F(4) of the Act) .

(c) The Company may not purchase its Shares on the Official List of SGX-ST for a consideration other than cash or for settlement otherwise than in accordance with the trading rules of SGX-ST.

4. TRADING RESTRICTIONS

The number of Shares which can be purchased pursuant to the Shares Purchase Mandate is such number of Shares which represents up to a maximum of ten per cent (10%) of the issued ordinary shares in the capital of the Company (excluding Treasury Shares) as at date of the last annual general meeting of the Company.

5. PRICE RESTRICTIONS

Any Shares Purchase undertaken by the Company shall be at the price of up to but not exceeding the Maximum Price.

“Maximum Price” means the maximum price at which the Shares can be purchased pursuant to the Shares Purchase Mandate, which shall not exceed the sum constituting five per cent (5%) above the average closing price of the Shares over the period of five (5) trading days in which transactions in the Shares on SGX-ST were recorded, in the case of a Market Purchase, before the day on which such purchase is made, and, in the case of an Off-Market Purchase, immediately preceding the date of offer by the Company, as the case may be, and adjusted for any corporate action that occurs after the relevant five (5) day period.

6. OFF-MARKET PURCHASES

(a) For purchases of Shares made by way of an Off-Market Purchase, the Company shall issue an offer document to all Shareholders. The offer document shall contain, inter alia, the following information:

(i) the terms and conditions of the offer;

(ii) the period and procedures for acceptances;

(iii) the reasons for the proposed Shares Purchase;

(iv) the consequences, if any, of Shares purchased by the Company that will arise under the Take-overs and Mergers or any other applicable take-over rules;

(v) whether the purchase of Shares, if made, would have any effect on the listing of the Company’s securities on the Official List of SGX-ST; and



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(vi) details of any purchase of Shares made by the Company in the previous 12 months whether through Market Purchases or Off-Market Purchases, including the total number of Shares purchased, the purchase price per Share or the highest and lowest prices paid for such purchases of Shares, where relevant, and the total consideration paid for such purchases.

(b) All Offeree Shareholders shall be given a reasonable opportunity to accept any offer made by the Company to purchase their Shares under the Shares Purchase Mandate.

(c) The Company may offer to purchase Shares from time to time under the Shares Purchase Mandate subject to the requirement that the terms of any offer to purchase Shares by the Company shall be pari passu in respect of all Offeree Shareholders save under the following circumstances:

(i) where there are differences in consideration attributable to the fact that an offer relates to Shares with different dividend entitlements;

(ii) where there are differences in consideration attributable to the fact that an offer relates to Shares with different amounts remaining unpaid; and

(iii) where there are differences in an offer introduced solely to ensure that every Shareholder is left with a whole number of Shares in board lots of 1,000 Shares after the Shares Purchases, in the event there are Offeree Shareholders holding odd numbers of Shares.

7. STATUS OF PURCHASED SHARES

The purchased Shares shall be cancelled immediately on purchase or acquisition unless held in treasury in accordance with Section 76H of the Act. Section 76H of the Act allows purchased Shares to be:

(i) held by the Company; or

(ii) dealt with, at any time, in accordance with Section 76K of the Act, as Treasury Shares.

Section 76K of the Act allows the Company to:

(i) sell the Shares (or any of them) for cash;

(ii) transfer the Shares (or any of them) for the purposes of or pursuant to an employees’ share scheme;

(iii) transfer the Shares (or any of them) as consideration for the acquisition of shares in or assets of another company or assets of a person; or

(iv) cancel the Shares (or any of them).

The aggregate number of Shares held as Treasury Shares shall not at any time exceed


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ten per cent (10%) of the total number of Shares at that time. Any Shares in excess of this limit shall be disposed of or cancelled in accordance with Section 76K of the Act within six (6) months.

Any Shares Purchase will:

(i) reduce the amount of the issued shares in the capital of the Company where the Shares were purchased or acquired out of the capital of the Company;

(ii) reduce the amount of the Company’s profits where the Shares were purchased or acquired out of the profits of the Company; or

(iii) reduce the amount of the Company’s share capital and profits proportionately where the Shares were purchased or acquired out of both the capital and the profits of the Company;

by the total amount of the purchase price paid by the Company for the Shares cancelled.

The Company cannot exercise any right in respect of Treasury Shares. In particular, the Company cannot exercise any right to attend or vote at meetings and for the purposes of the Act, the Company shall be treated as having no right to vote and the Treasury Shares will be treated as having no voting rights.

8. NOTIFICATION TO ACCOUNTING AND CORPORATE REGULATORY AUTHORITY (“ACRA”)

(a) Within thirty (30) days of the passing of a Shareholders’ resolution to approve any purchase of Shares, the Company shall lodge a copy of such resolution with ACRA.

(b) The Company shall notify ACRA within thirty (30) days of a purchase of Shares. Such notification shall include details of the date of the purchase, the total number and nominal value of Shares purchased by the Company, the issued shares in the capital of the Company as at the date of the Shareholders’ resolution approving the purchase, the Company’s issued shares in the capital after the purchase and the amount of consideration paid by the Company for the purchase.

9. NOTIFICATION TO THE SGX-ST

(a) For purchases of Shares made by way of an Off-Market Purchase, the Company shall notify the SGX-ST in respect of any acquisition or purchase of Shares in the relevant form prescribed by the SGX-ST from time to time, not later than 9.00 a.m. on the second trading day after the close of acceptances of an offer, or within such time period that may be prescribed by the SGX-ST from time to time.


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(b) For purchases of Shares made by way of a Market Purchase, the Company shall notify the SGX-ST in respect of any acquisition or purchase of Shares in the relevant form prescribed by the SGX-ST from time to time, not later than 9.00 a.m. on the trading day following the date of market acquisition by the Company, or within such time period that may be prescribed by the SGX-ST from time to time.

10. SUSPENSION OF PURCHASE

(a) The Company may not undertake any Shares Purchase prior to the announcement of any price-sensitive information by the Company, until such time as the price sensitive information has been publicly announced or disseminated in accordance with the requirements of the Listing Manual.

(b) The Company may not effect any repurchases of Shares on the SGX-ST during the period commencing two weeks before the announcement of the Company’s financial statements for each of the first three quarters of its financial year, or one month before half year or financial year, as the case may be, and ending on the date of announcement of the relevant results.



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Documents

TABLE OF CONTENTSinvestors.hyflux.com/misc/ar2012.pdf · 1 Vision & Mission 2 Group Financial Highlights 4 Message from Executive Chairman & Group CEO 8 Board of Directors 11 International