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Reinventing Ourselves Touching Lives

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					Reinventing Ourselves
Touching Lives
Hyflux Ltd
Annual Report 2007
Contents
03     Message from Group CEO, President and Managing Director
06     Our Global Presence
08     About Hyflux
10     Board of Directors
14     Corporate Senior Management
16     Business Units Senior Management
18     Financial Highlights & Review
24     Corporate Social Responsibility
25     The Year in Review
28     Human Capital
30     Awards & Accolades
32     Our Water Business
38     Our Industrial Manufacturing Processes Business
40     Our Specialty Materials Business
42     Our Energy Business
46     Our Research & Development



Financial Report 2007
49     Directors’ Report
55     Statement by Directors
56     Independent Auditors’ Report
57     Consolidated Income Statement
58     Balance Sheets
60     Statements of Changes in Equity
63     Consolidated Cash Flow Statement
67     Notes to the Financial Statements
131    Corporate Governance Statement
141    Supplementary Information
143    Statistics of Shareholdings
144    Substantial Shareholders
145    Notice of Annual General Meeting
149    Notice of Books Closure
       Proxy form
       Corporate Information




Cover Image (from left to right)
Top Row: Freddy Ong (Facilities, Security & Administration), Fadelah Ibrahim
(Membrane Production).
Middle Row:Joseph Almaraj (Technology, Non-Water), Benedict Lim (Finance),
Gerald Manceau (O&M), Tracy Chia (EPC).
Bottom Row: Gursharon Kaur (Human Resources), Esther New (CEO Office).
OUR VISION                             OUR VALUES
To be the leading company that         Boldness
the world seeks for innovative and     Dare to dream, dare to do and dare
effective environmental solutions.     to excel.


OUR MISSION                            Entrepreneurship
                                       Nurture the entrepreneurial spirit,
                                       embrace challenge and master change.
To provide efficient and cost-
effective solutions to meet our
                                       Satisfaction
clients’ needs through innovation      Exceed internal and external customer
and technological advancement.         satisfaction, take pride in work and
                                       deliver excellence.

                                       Testimony
                                       Be the face behind the brand, excel in
                                       business conduct and embrace best
                                       practices in corporate governance.




Reinventing Ourselves Touching Lives                       Hyflux Ltd Annual Report 2007   1
Reinventing Ourselves
Touching Lives
Since we started our business 19 years ago, we have evolved
from selling water treatment systems, to building NEWater plants,
raw water treatment plants, and seawater desalination plants, to
providing a complete suite of turnkey project solutions.

We have also reinvented ourselves. In new ventures like our
energy business, we tap on the experience we have gained from
our membrane-based solutions for our water business.

Through our integrated solutions, our products and services, we
touch the lives of many people, customers and stakeholders,
directly and indirectly, in both emerging and mature markets.




2   Hyflux Ltd Annual Report 2007                 Reinventing Ourselves Touching Lives
Message from Group CEO,
President and Managing Director

“We have to make visible the Hyflux values not seen by others
so that we can attract and retain the best people to join us,
and deliver what we promise to our shareholders. We will keep
pushing the boundary and stretching our limits as we reinvent
ourselves to become a global player.”

                                                          REINVENTINg OURSELVES
                                                          The year 2007 was an exciting year for Hyflux as we
                                                          laid the essential building blocks in human capital,
                                                          technology platforms and effective capital structures
                                                          to manage anticipated higher growth. We built on
                                                          the momentum gained in 2006 in our water and oil
                                                          recycling businesses, as well as our asset-light strategy.
                                                          We are glad that we have created significant milestones
                                                          in these areas in 2007.

                                                          Thank you for staying with us on this journey as we grew
                                                          from a modest three-staff company in 1989 to what
                                                          we are today with over 1,000 staff. Hyflux was the first
                                                          water company listed in Singapore in January 2001
                                                          with a market capitalisation of just over S$50 million.
                                                          We have since grown more than 30 times. We remain
                                                          committed to growing shareholder value. In December
                                                          2007, we listed the first pure play business trust - Hyflux
                                                          Water Trust - to focus on water projects, with an initial
                                                          portfolio of 13 China projects. We are glad to share
                                                          with shareholders that Hyflux Water Trust has been
                                                          nominated for the 2008 Global Water Intelligence Deal
                                                          of the Year.

                                                          Our business environment remains very positive
                                                          especially in water. To date, we have a robust pipeline
                                                          of about 40 plants.

                                                          With the rapid industrialisation of Asia and the Middle
                                                          East and North Africa (MENA) region and growing
                                                          awareness to handle environment issues, we are well
                                                          positioned for further growth. I am pleased that several
                                                          new colleagues have joined our management team in
                                                          the last year bringing their depth and experience to fuel
                                                          our growth. More importantly, they share my vision and
                                                          passion for Hyflux and are committed to bring Hyflux to
                                                          greater heights.



Message from group CEO, President and Managing Director                                 Hyflux Ltd Annual Report 2007   3
In strengthening initiatives in our oil recycling business
launched in 2006, we have since collaborated and
                                                             “Our order book has doubled
formed joint ventures with major players in Singapore,
China, Saudi Arabia, and Vietnam.
                                                             to S$863 million in 2007
                                                             and the Group has long-term
We will continue to set new benchmarks as we
expand in our four business pillars: water, industrial       operation and maintenance
manufacturing processes, specialty materials and
energy. As we enlarge our overseas footprints, we will       contracts that generate
continue to try out new things and new ways of doing
things, with the same energy, nimbleness and passion.
                                                             recurring income for the next
We have to make visible the Hyflux values not seen
by others so that we can attract and retain the best
                                                             25 to 30 years.”
people to join us, and deliver what we promise to our
shareholders. We will keep pushing the boundary and          government placing more emphasis in building water
stretching our limits as we reinvent ourselves to become     treatment plants throughout the cities.
a global player.
                                                             Since our early pioneering efforts in the China municipal
FINANCIAL PERFORMANCE                                        market in 2004, we have today more than 30 projects,
2007 saw the progressive reaping of the fruits of our        covering wastewater treatment and water recycling
labour planted in 2006. We fulfilled our commitment          across China. In line with today’s trend of government
of unlocking the value of our water assets with the          utilities seeking design-build-operate as well as design-
divestment of the SingSpring desalination plant in the       build-finance-operate expertise, we are well positioned
beginning of the year and the launch of our Hyflux Water     to provide our integrated environmental solutions from
Trust in year-end.                                           membrane technology to EPC to financing to installation
                                                             to operation for the burgeoning China market.
Our revenue in 2007 jumped by 35% to S$192.8
million with net earnings of S$32.9 million, compared to     On the industrial front, we have also been active in the
S$142.4 million in revenue with net earnings of S$15.5       biotechnology, chemical, electronics, petrochemical,
million in 2006.                                             and pharmaceutical sectors in 26 provinces for more
                                                             than 12 years, serving some 500 clients. In addition
Operating expenses – personnel and development costs         to having two L-lactic acid manufacturing facilities in
– in 2007 increased in line with our growth. We will         China, we are also building used oil recycling centres in
continue to invest in human capital which is necessary       the country.
to support the Group’s expansion plans as well as
research and development activities. While we seek           We will continue to expand our presence and success in
aggressive growth, we practise prudent spending across       China, where we have made a name for ourselves.
the company amidst increasing costs of goods and
fierce competition around the world.                         Revenue from Middle East & North Africa (MENA) and
                                                             other regions contributed 12% of the Group’s revenue,
Our order book has doubled to S$863 million in               close to a two-fold increase from 2006. We expect
2007 and the Group has long-term operation and               strong growth from this region. We entered into a joint
maintenance contracts that will generate recurring           venture (jointly with Malakoff Berhad) with Algerian
income for the next 25 to 30 years.                          Energy Company to design, develop, finance, construct,
                                                             operate and maintain a seawater desalination plant of
PUSHINg BOUNDARIES                                           200,000 m3/day at Tlemcen, Algeria for a period of 25
Our municipal sales increased by 96% to S$89 million         years, making this the largest plant to date for Hyflux.
in 2007 compared to S$45.3 million in 2006. We               This project achieved financial close in January 2008.
also registered steady growth in the industrial sector
with revenue of S$102.3 million in 2007 compared to          SUCCESS IN OUR ENERgy BUSINESS PILLAR
S$90.1 million in 2006. China continues to be the key        Leveraging on the success of our membrane
growth driver, contributing 81% of the total revenue as      technologies, 2007 was a year of building a strong
compared to 74% in the previous year, with the Chinese       foundation for our used oil recycling business.




4      Hyflux Ltd Annual Report 2007                                             Reinventing Ourselves Touching Lives
                                                            We will leverage on our technology applications, human
                                                            talent and financial capabilities, and build long-term
                                                            shareholder value to drive sustainable growth in our key
                                                            markets to give us the competitive edge.

                                                            TOUCHINg LIVES
                                                            At Hyflux, we persist with our ideas and aspirations. The
                                                            spirit of Hyflux goes beyond the conventional as we have
                                                            demonstrated over the years. But, what sets us apart is
                                                            our passion. We always do things with passion.

                                                            Even as we grow regionally, we remain rooted in our core
                                                            values as we continue to touch the lives of the millions of
                                                            people across the globe directly and indirectly benefiting
                                                            from the solutions we provide.

                                                            yOUR PARTNERSHIP IS PARAMOUNT
                                                            We are optimistic about the overall environment on
                                                            the water, wastewater and used oil recovery sectors in
                                                            China, India, South East Asia and the MENA region as
                                                            countries are increasingly seeking solutions to address
                                                            their environmental and water issues.

                                                            Our established track record, know-how and
                                                            differentiated capabilities and your partnership will
                                                            provide us with a strong platform to continue our growth
We forged a collaboration with BP International Ltd         in the municipal and industrial sectors.
and the Dalian Institute of Chemical Physics to jointly
develop and commercialise the use of zeolite dewatering     I would like to express my heartfelt appreciation to
membranes in the production of biofuels.                    each of you – our shareholders, directors, partners
                                                            and customers. I would also like to thank Mr Rajnish
Together with Saudi Economic Development Company            Gopinath, who served as Executive Director with Hyflux
(SEDCO) and Lube Oil Re-refining Co (LUBREC), we            in 2006. We are proposing a final exempt (one-tier)
invested S$45 million in a 24,000 tonnes/year used oil      dividend of 1.89 cents per share.
recycling plant in Jeddah, Saudi Arabia. This marks the
first membrane-based oil recycling plant in Saudi Arabia    To our Hyflux staff, I thank each one of you for your
that treats used oil from power, petrochemical, marine      dedication and for living out the Hyflux spirit. Your zeal
and automotive industries to recover high grade base oil.   and contributions will be the foundation upon which we
We expect to deliver revenue from this joint venture        will achieve our vision of becoming the leading company
in 2008.                                                    that the world looks to for innovative and effective
                                                            environmental solutions.
An additional joint venture was formed with Success
Blossom Environment Vietnam Joint Stock Company of
Vietnam, amounting to more than S$14 million worth of       Olivia Lum Ooi Lin
oil recycling projects.                                     Group CEO, President and Managing Director

RESEARCH AND DEVELOPMENT
As a technology company, research and development
will continue to play a significant role as we strive
towards more commercialisation of technologies,
bringing new environmental solutions to meet
customers’ needs. We will seek strategic alliances that
will complement our technologies and know-how to
make our solutions more affordable and efficient.



Message from group CEO, President and Managing Director                                   Hyflux Ltd Annual Report 2007   5
Our Global Presence




    Water
    Industrial Manufacturing Processes
    Specialty Materials
    Energy
    Water Project Partners / JVs
    Industrial Manufacturing Processes Project Partners / JVs
    Specialty Materials Project Partners / JVs
    Energy Project Partners / JVs



Singapore Offices:                     Malaysia Office:           China Offices:                 Algeria Office:
Headquarters @ Hyflux                  B11-LG-2, Block B,         99 Ju Li Road                  Rue HALES Said
Building                               Megan, Corporate Park,     Zhangjiang High-Tech Park      No. 47, La Redoute,
202 Kallang Bahru                      Jalan 1/125E, Taman Desa   Pudong Area                    Property 33, No. 21
Singapore 339339                       Petaling, 57100            Shanghai 201203 PRC            Municipality of EL Mouradia
                                       Kuala Lumpur                                              Algiers
5 Changi South                                                    1517 Central Plaza
Singapore 486793                                                  188 Jiefangbei Road
                                                                  Heping District
                                                                  Tianjin 300042 PRC


6      Hyflux Ltd Annual Report 2007                                                    Reinventing Ourselves Touching Lives
Hyflux’s humble beginnings can be traced back to nearly two decades ago. Today, we have evolved into a
leading player in the global arena, providing novel environmental solutions using membrane technology.
We have international operations and projects in Singapore and Southeast Asia, China, India, as well as in
the Middle East and North Africa regions.




                                                                                                         Not to scale.



Dubai Office:              India Office:               The Netherlands Office:
PO box 261475              Unit 7A & 7B                Lage Djik 29B
Office No. LB10 106        Doshi Towers                5705 BX Helmond
Jebel Ali                  156 Poonamallee High Road   PO Box 2128
Dubai, U.A.E               Kilpauk Chennai 600010      5700 DA Helmond
                           India                       The Netherlands




global Presence                                                                   Hyflux Ltd Annual Report 2007          7
About Hyflux


“Hyflux’s fundamentals remain strong…the company is making
good progress on its oil recycling venture in Saudi Arabia and
that it is optimistic on China, where it had been awarded 20
municipal water treatment plant projects and is developing
another 30 municipal and industrial projects.”
– The Business Times, 16 May 2007




8    Hyflux Ltd Annual Report 2007
  Water. Industrial Manufacturing Processes. Specialty Materials. Energy.
These are just some of the many areas in which Hyflux        In 2001, Hyflux became the first water treatment
has a strong presence.                                       specialist to be listed on the Singapore Stock Exchange.
                                                             In 2007, we marked another first on the Singapore
Headquartered in Singapore, Hyflux’s expertise in            Stock Exchange by listing the Hyflux Water Trust (HWT)
harnessing membrane technologies has gained                  on the mainboard. HWT is the first pure-play global
international recognition as Asia’s leading company to       water trust to be listed in Asia. It offers investors a
provide innovative and effective environmental solutions     financial platform to invest in water infrastructure assets
to the world. We continue to establish our footprints        in China, India, the MENA region, and other high-growth
globally, in addition to our operations and projects         markets globally.
spanning across China, India, the Middle East and North
Africa region as well as Singapore and Southeast Asia.       Hyflux’s strength as a membrane technology company
                                                             has enabled it to identify niche applications in several
Founded in 1989 by Ms Olivia Lum Ooi Lin, Group CEO,         sectors other than water – moving into the fields of
President and Managing Director, Hyflux has grown from       clean energy in environmental applications such as
a fledging company into what it is today. Hyflux initially   the recycling of used oil, processing of bioethanol as
started as Hydrochem (S) Pte Ltd to sell water treatment     well as in the production of bio-based materials, such
systems with a modest start-up capital of S$20,000 and       as lactic acid.
three staff, including Olivia herself.
                                                             Hyflux will continue to capitalise on the global market
As a leading integrated solutions provider, we offer         growth in offering environmental solutions in the four
services that cover the whole spectrum of research           business pillars, through R&D, technologies, human
and development, process design and development,             capital, technical know-how and strategic partnerships.
manufacturing and systems assembly, engineering,
procurement and construction (EPC), and financing,
operation and maintenance of a wide range of water
treatment and liquid separation projects.


About Hyflux                                                                               Hyflux Ltd Annual Report 2007   9
Board of Directors




PROFESSOR              gAy CHEE CHEONg   TEO KIANg KOK     OLIVIA          LEE JOO HAI      CHRISTOPHER       RAJ MITTA
TAN TECK MENg          Non-Executive     Non-Executive     LUM OOI LIN     Non-Executive    MURUgASU          Non-Executive
Non-Executive          Independent       Non-Independent   Group CEO,      Independent      Non-Executive     Independent
Independent            Director          Director          President and   Director         Non-Independent   Director
Director                                                   Managing                         Director
                                                           Director




10     Hyflux Ltd Annual Report 2007                                               Reinventing Ourselves Touching Lives
OLIVIA LUM OOI LIN                                          TEO KIANg KOK
group CEO, President and Managing Director                  Non-Executive Non-Independent Director
Ms Lum started corporate life as a chemist with Glaxo       Mr Teo has been a Non-Executive Non-Independent
Pharmaceutical and left in 1989 to start up Hydrochem       Director of Hyflux Ltd since December 2000. He is
(S) Pte Ltd, the precursor to Hyflux Ltd.                   also a member of the company’s Nominating, Audit,
                                                            Remuneration, Risk Management and Executive
Managing the Group for 19 years now, Ms Lum is the          Committees.
driving force behind Hyflux’s growth and business
expansion, responsible for policy and strategy              A lawyer with more than 20 years, Mr Teo is a senior
formulation and corporate direction.                        partner of Shook Lin & Bok, a firm of advocates and
                                                            solicitors. He is currently the finance partner and head
A former Nominated Member of Parliament, Ms Lum             of corporate finance and China practice groups in Shook
holds several positions in the public service. Presently,   Lin & Bok. His main areas of practice are corporate
she sits on the board of a number of companies. She         finance, international finance and securities. He has
is a Member of the NUS Board of Trustees and serves         advised listed companies extensively on corporate law
as a Director for Singapore Exchange Ltd, Temasek           and compliance requirements.
Life Sciences Laboratory Limited as well as National
University Health System. In addition to her                Mr Teo serves on the boards of a number of other
commitments in Hyflux, Ms Lum is also the President         companies including Memtech International Limited,
of the Singapore Water Association as well as a member      Jadason Enterprises Ltd, Ocean Sky International Ltd
of Singapore-Tianjin Economic & Trade Council,              and Unisteel Technology Limited.
Singapore-Liaoning Economic & Trade Council, and
Singapore-Jiangsu Cooperation Council.                      Mr Teo holds an Honours degree in Law from the
                                                            University of Hull and is a Barrister-at-Law from
Among the many accolades Ms Lum has received for            Lincoln’s Inn.
her entrepreneurial achievements are: the Winner of
the Regional Growth Award by Nihon Keizai Shimbun at        LEE JOO HAI
the 11th Nikkei Asia Prize 2006, and most recently the      Non-Executive Independent Director
Rising Asia - The Next 10 Years Award by the Singapore      Mr Lee has been a Non-Executive Independent Director
Institute of International Affairs (SIIA) and AXN ASIA.     of Hyflux Ltd since December 2000. He is also the
She was also awarded Asiamoney’s Corporate Executive        Chairman of the Audit Committee and a member of
of the Year 2005 in Singapore.                              the Nominating, Remuneration, Risk Management and
                                                            Executive Committees.
Ms Lum holds an Honours degree in Science from the
National University of Singapore.                           Mr Lee is a CPA and a member of both the Institute
                                                            of Certified Public Accountants of Singapore and the
                                                            Institute of Chartered Accountants in England and
                                                            Wales. He is currently a partner in a public accounting
                                                            firm in Singapore and has more than 20 years of
                                                            experience in accounting and auditing.




Board of Directors                                                                       Hyflux Ltd Annual Report 2007   11
Mr Lee also sits on the board of other listed companies,     Mr Gay holds Honours degrees in Electronics
including Lung Kee (Bermuda) Holdings Ltd and                Engineering from the Royal Military College of Science,
Unisteel Technology Limited.                                 Shrivenham United Kingdom, and in Economics
                                                             from University of London. He also has a Masters of
gAy CHEE CHEONg                                              Business Administration from the National University
Non-Executive Independent Director                           of Singapore.
Mr Gay has been a Non-Executive Independent
Director of Hyflux Ltd since August 2001. He is also         CHRISTOPHER MURUgASU
the Chairman of the Remuneration and Nominating              Non-Executive Non-Independent Director
Committees and a member of the Audit and Executive           Mr Murugasu has been a Non-Executive Non-
Committees. He also serves on the Boards of Raffles          Independent Director of Hyflux Ltd since February 2005.
Education Corporation Limited and Midas Holdings
Limited.                                                     Mr Murugasu is also the Chairman of the Risk
                                                             Management Committee and a member of the
Mr Gay co-founded and was the CEO of 2G Capital              Remuneration Committee.
Private Limited, a private investment company investing
in equities and private companies in the Asia Pacific        Previously Senior Vice President for Corporate Services
economies. The company was awarded Highest Net               at Hyflux Ltd, he was responsible for the Group’s human
Profit in 2006 and Net Profit Excellence in 2007 in the      resources, procurement and general administration
annual SME 500 ranking.                                      functions. Prior to joining Hyflux, Mr Murugasu had
                                                             accumulated over 15 years of experience in the public
Mr Gay was the Group Executive Director of JIT               sector as well as with a foreign bank.
Electronics Pte Ltd for four years responsible for
corporate development, business strategy and                 He holds an Honours degree in Computing Science
investments of the JIT Group. He established operational     from Imperial College, United Kingdom, and a Master’s
subsidiaries in Singapore, China and Hungary and             degree from the London School of Economics, United
served concurrently as their respective Managing             Kingdom.
Directors. He initiated and was responsible for the public
listing of JIT Electronics in November 1997 and the          RAJ MITTA
subsequent merger of JIT with Flextronics International      Non-Executive Independent Director
valued at $1.16 billion in August 2000.                      Mr Raj Mitta has been a Non-Executive Independent
                                                             Director of Hyflux since April 2007. He is also a member
Mr Gay was awarded the Singapore Armed Forces                of the Risk Management Committee.
Overseas Training Award (Graduating) and attended
the Royal Military Academy (RMA), Sandhurst and the          Mr Mitta is currently the Chairman of Essential
Royal Military College of Science, Shrivenham, United        Value Associates Pte Ltd, a boutique high-powered
Kingdom. At RMA, Sandhurst, Mr Gay won the Nigeria           consultancy firm, providing hands-on personal
Prize for Best Overseas Student Officer and at the           counselling on issues of managing change and strategic
Singapore Command and Staff College, the Top                 implementation with the result of driving lasting change
Student Prize.                                               in organisations and developing high growth businesses
                                                             with quality governance and sustainability.




12    Hyflux Ltd Annual Report 2007                                              Reinventing Ourselves Touching Lives
Mr Mitta has advised some of the world’s best consumer        University. He chairs the Singapore National Council
goods and customer-intensive companies, technology-           for Pacific Economic Cooperation (SINCPEC), K K
intensive corporations and regional governments. His          Women & Children Hospital’s Medifund Committee and
client list includes multinationals like PepsiCo, Gillette,   the Advisory Committee of Meridian Junior College. In
Kelloggs, and the Governments of Singapore, Malaysia,         October 2007, he was appointed as a Council Member
Indonesia, Philippines, Australia and India. He has also      of the Accounting Standard Council.
worked with regional conglomerates like Hutchisons
(HK), Jardines (HK), Bakrie Group (Indonesia), Reliance       Professor Tan also sits on the board of a number
(India), Amex, Citicorp, British Airways and telecom          of companies including: Singapore Reinsurance
operators like Optus, Orange, Singapore Telecom and           Corporation Limited; Kim Eng Holdings Limited;
Deutsche Telekom.                                             Singapore Shipping Corporation Ltd; k1 Ventures Ltd;
                                                              Raffles Education Corporation; and Oriental Century
Prior to his experience of over 14 years in consulting,       Limited.
Mr Mitta worked in senior marketing roles with Pepsico
(US and Cyprus) and Mars Inc. (UK).                           Professor Tan has a Bachelor of Accountancy (BAcc)
                                                              Degree from the University of Singapore and a Masters
Mr Mitta is a seasoned negotiator and deal maker with         of Commerce (MCom) (Honours) from the University of
well developed cross cultural sensitivity developed           New South Wales in Australia. In 1996, he was awarded
through living and working across diverse countries and       an Honorary PhD by Liaoning University (China). In
consulting with an expansive list of clients. His main        1997, he became the first Singaporean to garner the
areas of professional interest is in strategy development     (US-based) Wilford L. White Award.
and value extraction through enhancing marketing and
sales effectiveness, the competitive repositioning of         He holds Fellowships in the Institute of Certified Public
brands/services and issues relating to managing change        Accountants of Singapore (FCPA), Australian Society
within organisations.                                         of CPAs (FCPA), Institute of Chartered Secretaries and
                                                              Administrators (FCIS), and Chartered Management
Mr Mitta holds a Bachelors degree in Chemical                 Institute, UK (FCMI).
Engineering from the University of Bombay, India and
a Masters in Business Administration from the Indian
Institute of Management, Ahmedabad.

PROFESSOR TAN TECK MENg
Non-Executive Independent Director
Professor Tan has been a Non-Executive Independent
Director of Hyflux Ltd since April 2007. He is also a
member of Audit and Remuneration Committees.

Professor Tan is currently Professor of Accounting in
the School of Accountancy at Singapore Management




Board of Directors                                                                          Hyflux Ltd Annual Report 2007   13
Corporate
Senior Management




CHO WEE PENg               LIM LAI CHINg            SAM ONg ENg KEANg           OLIVIA          FOO HEE KIANg      FONg CHUN HOE
Senior Vice President,     Senior Vice President,   Group Deputy CEO            LUM OOI LIN     Senior Advisor     Group Executive
Group Treasurer &          Group Financial          & Chief Financial Officer   Group CEO,                         Vice President &
Investment Director        Controller                                           President and                      Chief Technology
                                                                                Managing                           Officer
                                                                                Director




14      Hyflux Ltd Annual Report 2007                                                           Reinventing Ourselves Touching Lives
FREDDy SOON              gU JIA LONg      yANg AI CHIAN            HOE KUM yOKE   LESLIE CHAPPLE           JENNIFER HOALIM
HOCK CHOONg              Senior Advisor   Senior Vice President,   Advisor        Group Technology         General Manager,
Senior Vice President,                    Legal & Company                         Director                 Head of Membrane
Group Communications                      Secretary                                                        Production
& Relations




Corporate Senior Management                                                                 Hyflux Ltd Annual Report 2007   15
Business Units
Senior Management




gIREESH BHAT              KANg THIAN JIAN       POH TECK HEOK           BENJAMIN             ALLAN               yEOW KOK KON
General Manager,          Managing Director,    Managing Director,      TAN ENg SENg         TOH KHOON WAI       General Manager,
Head of India             Head of Electrical,   Head of Oil Recycling   Managing Director,   General Manager,    Head of Specialised
Industrial Products       Instrumentation &     Business                Head of MENA         Head of Southeast   Industrial Products
                          Control and System                                                 Asia Industrial
                          Manufacturing                                                      Products




16    Hyflux Ltd Annual Report 2007                                                      Reinventing Ourselves Touching Lives
PETER WU              gE WEN yUE            SAUD SIDDIQUE       gRACE gOH                  WONg KHAI THEEN            gOH ENg KWANg
SIU KIN               Managing Director,    CEO, Hyflux Water   BEE KHENg                  Managing Director,         Managing Director,
Managing Director,    Head of China         Trust Management    Chief Financial Officer,   Head of EPC                Infrastructure & EPC
Head of China         Industrial Products   Pte Ltd             Chief Investment Officer                              (Asia)
Structured Projects                                             & Company Secretary,
                                                                Hyflux Water Trust
                                                                Management Pte Ltd




  Business Units Senior Management                                                                      Hyflux Ltd Annual Report 2007   17
                                                                       Group Revenue by Country
                                                                                                                                                             157.0
              160


              Financial Highlights
              140


              & Review
              120
                                                                                                                                104.8

              100
SGD million




               80                                                  72.9                            73.5
              KeY FinanciaL Data
               60                 48.4

              S$’ 000                      32.1                              FY2003       34.0   FY2004                   FY2005             FY2006                  FY2007
               40                                                                                                           27.0
                                                                                                            24.0                                                     23.0
               20                                                                                                                        10.6142,37912.8
              Revenue                         9.1        81,172
                                                       6.7                                         88,655                 131,504                                    192,786
                                     0.7
              Profit Before Tax and
                0
                 Minority Interests
                             FY03                 FY04 19,941                                     28,844
                                                                                                 FY05                      50,374
                                                                                                                               FY06           20,178 FY07 38,693
              Minority Interests                            246                                     1,772                   2,910               (116)      3,696
              Profit Attributable to Shareholders        19,510                                    26,104                  46,393             15,473      32,949
                            Singapore
                           China
              Shareholders’ Equity                                            85,479             112,647                  189,563            199,601                 238,772
              Total Assets Others                                            115,854             300,131                  401,087            443,398                 563,781
              Net Assets                                                      85,479             112,647                  197,286            218,066                 247,067

              Net Asset Value per share (cents)                                  27.35              35.68                   38.30              38.43                     45.70
              Earnings per share (cents)                                          5.08               5.55                    9.24               3.00                      6.32
              Dividend per share (cents)                                          0.70               1.27                    1.35               1.35                      1.89

              Return on Revenue (%)                                              24.0%             29.4%                   35.3%              10.9%                   17.1%
              Return on Equity (%)                                               22.8%             23.2%                   24.5%               7.8%                   13.7%


              GROUP ReVenUe BY cOUntRY

                            160                                                                                                                                   157.0

                            140


                            120
                                                                                                                                     104.8
                            100
              SGD million




                             80                                           72.9                            73.5

                             60
                                         48.4
                             40                   32.1                                           34.0
                                                                                                                   24.0       27.0                                          23.0
                             20                                                                                                                            12.8
                                                                 9.1              6.7                                                        10.6
                                                         0.7
                              0
                                                FY03                   FY04                             FY05                         FY06                         FY07


                                            Singapore          China             Others



              18             Hyflux Ltd Annual Report 2007                                                                              Reinventing Ourselves touching Lives
      PROFIT ATTRIBUTABLE TO SHAREHOLDERS                           EARNINgS PER SHARE

          50,000                     46,393                                10.00                         9.24
          45,000                                                            9.00
          40,000                                                            8.00
          35,000                                       32,949               7.00                                               6.32
          30,000            26,104                                          6.00                5.55



                                                                S$ Cents
SGD'000




                                                                                        5.08
          25,000                                                            5.00
                   19,510
          20,000                              15,473                        4.00
                                                                                                                    3.00
          15,000                                                            3.00
          10,000                                                            2.00
           5,000                                                            1.00
               0                                                            0.00
                    FY03    FY04      FY05    FY06     FY07                             FY03    FY04    FY05       FY06       FY07



      RETURN ON EQUITy                                              NET ASSET VALUE PER SHARE

          25.0%                      24.5%                                 50.00
                   22.8% 23.2%                                                                                                45.70
                                                                           45.00
          20.0%                                                            40.00                        38.30      38.43
                                                                                                35.68
                                                                           35.00
          15.0%                                        13.7%               30.00       27.35
                                                                S$ Cents




                                                                           25.00
          10.0%                               7.8%                         20.00
                                                                           15.00
           5.0%                                                            10.00
                                                                            5.00
           0.0%                                                             0.00
                    FY03    FY04      FY05    FY06     FY07                             FY03    FY04    FY05       FY06       FY07



      FINANCIAL REVIEW

      S$’mil                                                                         Fy2007               Fy2006                Increase

      Revenue                                                                          192.8                142.4                      35%
      Operating Profit                                                                   35.4                 22.0                     61%
      Profit before tax                                                                  38.7                 20.2                     92%
      PATMI                                                                              32.9                 15.5                    112%
      EPS - basic                                                                  6.32 cents           3.00 cents                    111%
      Net Debt-to-Equity Ratio                                                           0.32                 0.43




      Financial Review & Highlights                                                                     Hyflux Ltd Annual Report 2007   19
(a) Overview
For 2007, net profit for the Group increased by 112% to S$32.9 million. Basic earnings per share have increased by
111% to 6.32 cents.

(b) Revenue
The Group’s revenue increased by 35% to S$192.8 million for the year ended 31 December 2007, compared to
S$142.4 million for the previous year.

Municipal sales were higher by 96% to S$89.0 million for this financial year from S$45.3 million for the previous year
mainly due to higher municipal revenue from China and the Middle East and North Africa (“MENA”).

Industrial sales were higher by 14% to S$102.3 million from S$90.1 million, mainly contributed by our strong China
industrial sector.


gROUP REVENUE By SEgMENT/COUNTRy

                                       Others                                            Others
                                        1%                                                5%




                                                 Municipal                                                 Municipal
                                                   46%                                                       32%

                                  FY2007                                            FY2006



  Industrial                                                 Industrial
    53%                                                        63%




China continued to be the main revenue driver, contributing 81% of total revenue for the year as compared to 74%
in the previous year. MENA accounted for 12% of total revenue in this financial year as compared to 7% in the
previous year.

The fundamentals of environmental and water industries remain favorable and the Group is expected to benefit
from these strong industry fundamentals. The Group will continue to leverage on our proprietary membrane
technologies and integrated environmental solutions to focus on our growth plan in target markets such as China,
India and the MENA.




20     Hyflux Ltd Annual Report 2007                                             Reinventing Ourselves Touching Lives
gROUP REVENUE By SEgMENT/COUNTRy

                  MENA/Others                                                  MENA/Others
                     12%                                                          7%


      Singapore                                                 Singapore
         7%                                                        19%



                            FY2007                                                    FY2006




                                          China                                                           China
                                          81%                                                             74%



China remains to be a significant market for the Group. Our established track record, know-how and differentiated
capabilities provide us with a strong platform to continue our growth in this key market. To date in China, we see a
steady pipeline of 31 municipal projects which comprise a total of 39 water treatment plants in China. In addition,
the Group has long-term operation and maintenance contracts which will generate recurring income for the next
25-30 years.

In the MENA region, the Group has achieved financial close for the seawater desalination plant project in Tlemcen,
establishing our footprint in this region. The Engineering, Procurement and Construction (“EPC’) works estimated
at US$213 million (approximately S$304 million) will be undertaken by wholly owned subsidiaries of the Group.
The construction of the Project is expected to complete within 24 months from financial close.

The orders from the Industrial sector remain robust and provide steady revenue contribution to the Group. Our
used-oil recycling projects in China, Saudi Arabia and Vietnam continue to make good progress.

Our technology and research and development activities will continue to play a significant role in our overall business
strategy and innovation efforts.

The Group delivers another milestone through the launch of the Hyflux Water Trust (“HWT”). With HWT, the Group
will be able to continuously enhance shareholder value through our growing pipeline and portfolio of water projects.




Financial Review & Highlights                                                                Hyflux Ltd Annual Report 2007   21
COSTS AND ExPENSES
Raw materials and consumables increased by 36% to S$106.0 million from S$77.8 million in line with the sales
volume.

Personnel expenses increased by 54% to S$30.7 million from S$20.0 million for the previous year as the Group
continues to invest in human capital which is necessary to support the Group’s expansion plans and research and
development activities.

In February 2007, the Group recorded a S$8.2 million gain on partial sale of its 50% joint venture, SingSpring Pte
Ltd (“SingSpring”) which owns a seawater desalination plant. Subsequent to the divestment, the Group holds 30%
interest in the desalination plant via SingSpring Trust. As a result, the investment is classified as investment in
associates as at 31 December 2007.

The finance income decreased mainly due to the decrease in interest income earned. The fair value loss on derivative
financial instruments arose mainly from the transfer of approximately S$3.2 million of the hedging reserve to the profit
and loss account upon the divestment of SingSpring in February 2007.

For the year ended 31 December 2007, the Group recognized a negative goodwill amounting to approximately S$2.6
million arising from acquisition of a business.

Foreign exchange gain in 2007 was mainly due to the translation of a loan facility denominated in US dollar as a
result of the weakening US dollar.

The effective tax rate of the Group of approximately 5% was lower than the statutory tax rate due to tax exemptions
on certain income for the year and tax incentives enjoyed by certain entities of the Group.

Overall, the net impact of the above resulted in profit after tax and minority interests for the Group of S$32.9 million
for the financial year ended 31 December 2007.

EARNINgS PER SHARE
The increase in basic earnings per share and fully diluted earnings per share as compared to the previous year was
due to the higher profit for the financial year ended 31 December 2007.

BALANCE SHEETS REVIEW
The Group’s shareholders’ equity increased from S$199.6 million in 2006 to S$239.8 million in 2007. The increase
was mainly attributable to the profits for the year. This was partly offset by a total dividend payout of S$7.0 million in
2007.

Non-current assets decreased from S$249.3 million as at 31 December 2006 to S$224.2 million as at 31 December
2007. This was mainly due to the divestment of the SingSpring desalination plant in February 2007 and the sale
of the Group’s 13 plants in China to Hyflux Water Trust in December 2007. These have resulted in a decrease in
financial and lease receivables of S$147.4 million. The decrease in financial and lease receivables was offset by an
increase in investment in associates of S$93.1 million, mainly due to the Group’s new investment in Hyflux Water




22     Hyflux Ltd Annual Report 2007                                                Reinventing Ourselves Touching Lives
Trust in December 2007 representing 31.5% investment, as well as the reclassification of the Group’s investment in
the SingSpring plant from a joint venture to an associate in February 2007. In addition, book value of property, plant
and equipment increased by S$29.2 million mainly due to the expansion of overseas operations.

Non-current liabilities increased to S$196.3 million as at 31 December 2007 from S$119.5 million as at 31
December 2006. The increase was mainly due to the additional drawdown of bank loans during the financial year to
support the Group’s expansion.

CASHFLOW AND LIQUIDITy
The Group’s cash position was S$121.0 million, up by S$65.2 million compared to 2006. In 2007, the Group
generated cash from its operations of S$77.8 million mainly due to improvement in working capital.

Cash used in investing activities for this financial year was mainly on the acquisition of property, plant and equipment
and investments in subsidiaries and associates.

The increase in cash generated from financing activities as compared to the previous year was due to the additional
bank loan drawn down.

Note: Certain comparative figures have been restated to reflect the adoption of new and revised accounting standards.




Financial Review & Highlights                                                               Hyflux Ltd Annual Report 2007   23
Corporate Social
Responsibility

Corporate citizenship is one of Hyflux’s core values        We also believe in the importance of providing
because we believe in making a distinctive contribution     inspiration and encouragement to budding
to society, academic, industry and business                 entrepreneurs and leaders. In line with this, Hyflux’s
communities.                                                Group CEO, President and Managing Director, Ms Olivia
                                                            Lum Ooi Lin, together with her management members
We focus on three Es:                                       take time off from their schedule to participate in public
•	 Environment	and	Water                                    speaking engagements or sharing sessions. These
                                                            sessions focus on topics relating to entrepreneurship
•	 Education	and	Community	                                 and leadership. We also continue to host representatives
•	 Entrepreneurship                                         from local and overseas academic institutions at our
                                                            SingSpring plant and corporate headquarters.
We work closely with major industry players such as
the Singapore Water Association (SWA), International
Desalination Association, International Water Association
and PUB in promoting environmental awareness and
solutions in appropriate platforms locally and overseas.

In reaching out to the less fortunate in Singapore, we
support a number of charitable organisations and fund-
raising events. Some of these beneficiaries include:
Community Chest, Singapore Red Cross Society, Club
Rainbow, President’s Charity Challenge as well as
National Day Parade.


“Hyflux’s support in a series
of educational and community
performances on water conservation                          “Their (the physically challenged) smiles
creates a big impact on the awareness                       and gratitude shown on their faces alone
and the acknowledgement on this                             are worth waking up early that morning...”
                                                            - Allan Toh Khoon Wai, General Manager,
environmental issue…On the whole,                             Head of Southeast Asia Industrial Products
we are very glad that we have joined                          (participant of the HeartStrings Walk
Hyflux in this process of educating the                       organised by the Community Chest)
youths on a very important message.”
- Benny Lim, Artistic Director of
  The Fun Stage Limited
                                                            “During my visit to (SingSpring
                                                            Desalination Plant), I found high
“Thank you Hyflux for your contribution
                                                            technology being used to produce
to ecological civilisation and world
                                                            desalination water with efficient
harmony.”
                                                            energy consumption.”
- Mr Zhao Yang, Secretary of Tangshan
                                                            - Dr Mohammed Saeed Al Kindi, Minister of
  Municipal Party Committee
                                                              Environment & Water, United Arab Emirates

24    Hyflux Ltd Annual Report 2007                                             Reinventing Ourselves Touching Lives
The Year in Review


                                                           FEBRUARy
                                                           Successful completion of the restructuring and
                                                           divestment of Hyflux’s equity interest in SingSpring
                                                           Pte Ltd to CitySpring Infrastructure Trust.

                                                           MARCH
                                                           Hyflux clinched seven water treatment projects in
                                                           China – Jiangsu, Jiangxi, Heibei provinces and Tianjin
                                                           city – worth S$115 million, with a daily capacity of
                                                           290,000 m3.

                                                           Hyflux and Malakoff Berhad entered into a joint
                                                           venture agreement with the Algerian Energy Company
                                                           (the government company handling power and water
                                                           privatisation exercise in Algeria) to form a project
JANUARy                                                    company to design, develop, finance, construct,
Hyflux teamed up with Marmon Water LLC - one of            operate and maintain a seawater desalination plant of
the world’s largest manufacturers of residential and       200,000 m³/day at Tlemcen, Algeria for a period of
commercial water treatment systems – to establish two      25 years.
joint ventures (JVs) and licensing agreements on water
treatment products. With a joint investment sum of S$80
million, the two JVs (R&D and manufacturing JVs) will
focus on developing innovative and affordable products
and technologies for both residential and commercial
applications, and the manufacturing of residential water
treatment and filtration products for worldwide markets
respectively.




The year in Review                                                                       Hyflux Ltd Annual Report 2007   25
APRIL
Hyflux re-configured the water treatment plant for ISK
Singapore Pte Ltd’s titanium dioxide plant at Tuas to
supply deionised water from the intake of NEWater.
The works include a five-year operations and
maintenance contract.




MAy
Hyflux formed a joint venture with Saudi Economic
                                                           JULy
Development Company (SEDCO) and Lube Oil Re-
                                                           Hyflux held a groundbreaking ceremony for the second
refining Co (LUBREC) to jointly invest S$45 million to
                                                           wastewater treatment plant (with a daily capacity of
build and own a used oil recycling plant in Jeddah,
                                                           50,000m3) in Beichen Science and Technology Park in
Saudi Arabia. This will be the first membrane-based
                                                           Tianjin.
oil recycling plant in Saudi Arabia that treats used oil
from the power, petrochemical, marine and automotive
industries to recover high grade base oil.                 AUgUST
                                                           Hyflux secured about S$59 million worth of water
JUNE                                                       treatment projects in China in Hebei and Jiangsu
Hyflux was awarded two water treatment projects in         provinces. The plants collectively can supply a daily
China – Shandong Province and Tianjin City – worth         capacity of 180,000m3.
about S$46 million, with a daily capacity of 130,000m3.




26      Hyflux Ltd Annual Report 2007                                          Reinventing Ourselves Touching Lives
                                                           recycling plant near Hanoi, capital of Vietnam which will
                                                           engage in the collection, treatment and recovery of used
                                                           oil into high grade base oil for sale in Vietnam and other
                                                           export markets such as Laos and Cambodia.


                                                           NOVEMBER
                                                           Hyflux secured about RMB 291 million (approximately
                                                           S$ 57.3 million) worth of water projects in China’s
                                                           Shandong and Jiangsu provinces. The five plants
                                                           collectively can supply a daily capacity of 130,000 m3.




SEPTEMBER
Hyflux participated in the 10th China International
Membrane and Water Treatment Technology and
Equipment Exhibition held in the Wuhan International
Exhibition Centre in China. The exhibition was
strongly supported by China’s Ministry of Science and
Technology, Ministry of Water Resources, Ministry of       DECEMBER
Construction and the State Environmental Protection        Hyflux successfully launched the first pure-play global
Administration.                                            water trust, listed on a securities exchange in Asia.
                                                           It offers investors an opportunity to invest in water-
                                                           related infrastructure assets in China, India, Middle
OCTOBER
                                                           East and North Africa region and other high-growth
Hyflux, BP International Ltd and the Dalian Institute of
                                                           markets globally.
Chemical Physics will jointly develop and commercialise
the use of zeolite dewatering membranes in the
production of biofuels.

Hyflux entered into a joint venture agreement with
Success Blossom Environment Vietnam Joint Stock
Company to invest US$10.5 million (approximately
S$14.5 million) to build a state-of-the-art used oil




                                                                                         Hyflux Ltd Annual Report 2007   27
Human Capital


“We are a melting pot of talent and expertise working together to
build Hyflux further. Every bright idea and contribution counts.
No one should be left out so long as one has the passion and the
perseverance to want to succeed.”
- Olivia Lum Ooi Lin, Group CEO, President and Managing Director


WORKFORCE & BUSINESS gROWTH

                           200                                                                                            1400
                                                                                                          192.80

                           180
                                                                                                                   1228   1200
                           160
                                                                                          142.40
                                                                                                                          1000
                           140
                                                                           131.50
                           120
     Revenue (S$Million)




                                                                                                    797                   800

                           100                                                                                                   Total Headcount
                                                             88.70                  682
                                               81.20                                                                      600
                            80
                                                                     514
                                                       495
                            60   45.30                                                                                    400
                                         352
                            40
                                                                                                                          200
                            20


                             0                                                                                            0
                                 2002          2003          2004          2005            2006            2007


                                   Revenue

                                   Workforce




28   Hyflux Ltd Annual Report 2007                                                                Reinventing Ourselves Touching Lives
From left to right: Susan Lee (Assistant Vice President, Human Resources), Joyce Ong (Vice President, Finance), Linden Ng (Vice President,
Internal Controls & Compliance), Dan Tan (Vice President, Treasury & Investor Relations), Nah Tien Liang (Vice President, Investment), Doreen
Houghton (Vice President, Purchasing & Logistics), Peggy Lim (Vice President, Legal) and Kelly Leong (Vice President, Finance).


At Hyflux, we are committed to attracting, developing and retaining the best talent to propel our growth and
development. Over the past few years, our workforce has expanded in tandem with our increased operations.
In 2007, our total headcount stands at 1,228 – a 54% jump from 797 in 2006.

Hyflux will continue to work on strengthening our presence in the growth economies of China, India, the Middle
East and North Africa as well as Singapore and Southeast Asia. We are currently building up our teams worldwide
to manage, execute, and take on more projects.

EDUCATIONAL QUALIFICATION                                                  EDUCATIONAL QUALIFICATION
(AS AT 31 DEC 2006)                                                        (AS AT 31 DEC 2007)
                                   PhD
                                    PhD                                                                     PhD
                                                                                                             PhD
                                   3%
                                    3%       Masters
                                             Masters                                                        2% Masters
                                                                                                             2% Masters
                                               9%
                                                9%                                                               5%
                                                                                                                  5%
                                                                                    Below Dip
                                                                                     Below Dip
                                                                                      23%
                                                                                       23%




Below Dip
 Below Dip                                                  Degree
                                                             Degree                                                                       Degree
                                                                                                                                           Degree
  52%
   52%                                                       25%
                                                              25%                                                                          33%
                                                                                                                                            33%




                                           Diploma
                                            Diploma                                  Diploma
                                                                                      Diploma
                                             11%
                                              11%                                      37%
                                                                                        37%

Employees are our biggest and most important asset. As Hyflux continues to flex our wings overseas, we will ensure
that people with the relevant competencies will assume greater responsibilities to support our global operations.


Our Human Capital                                                                                              Hyflux Ltd Annual Report 2007    29
Awards & Accolades


TECHNOLOgICAL INNOVATION                                     global Water
                                                             Awards 2006 -
                                                             Distinction Award
                                                             for Desalination
                                                             Plant of the year
                                                             In 2006, the
                                                             SingSpring
                                                             Desalination Plant
                                                             was awarded
Frost and Sullivan – Technology Innovation of the year       the Distinction
Award 2007, Desalination Technologies (Asia Pacific)         Award for Desalination Plant of the Year at the Global
Hyflux garnered this prestigious award for the               Water Awards given by Global Water intelligence, UK, an
superior development of our pioneering KristalTM             international recognition of the contribution made by the
membrane technology. This award further augments             SingSpring plant to the advancement of the desalination
our technological standing as a leading company that         industry. The judges’ verdict: “The Tuas plant is a brilliant
specialises in membrane technology.                          work of engineering which has challenged the global
                                                             perception that desalination is a high cost source of
                                                             water.”

                                                                                  International Aquatech Innovation
                                                                                  Awards 2006, Category Winner
                                                                                  Hyflux CEPAration, one of Hyflux’s
                                                                                  joint ventures in Europe, was the
                                                                                  winner for the Water Treatment/Point
Frost and Sullivan – Technology Innovation of the year                            of Use category, for its InoCEPTM
Award 2007, Residential Water Treatment Equipment                                 ceramic membrane. Selected by an
Market (Southeast Asia)                                      international jury of experts, InoCEPTM won amidst strong
Hyflux was recognised for our unique development of          competition from Europe, North America and Asia for its
the Aquavate ‘air-to-water’ technology which has been        originality, practicality (technical, economical, feasibility)
commercialised into a lifestyle consumer product known       and sustainability (environment, security, energy and
as dragon-flyTM that provides drinking water from the air,   efficiency).
treated by our proprietary filtration technology.
                                                             BUSINESS ExCELLENCE
global Water
Awards 2006 –
                                                             SIAS Investors’ Choice Awards –
Water Company of
                                                             Most Transparent Company Award 2004, 2005,
the year
                                                             2006 & 2007
Hyflux won the
                                                             For four consecutive years, Hyflux was honoured at the
highest honour in
                                                             Securities Investors Association of Singapore (SIAS)
the Global Water
                                                             annual Investors’ Choice Awards 2007 for achieving a
Awards as Water
                                                             high level of corporate governance and transparency to
Company of the
                                                             enable investors to make informed decisions on their
Year. This award,
                                                             investments.
given by Global Water Intelligence, UK, recognised the
significant contribution of Hyflux to the private water
industry. The judges’ verdict: “Hyflux has brought a
professionalism and entrepreneurial spirit to the water
industry which sets a new standard for competitors
worldwide.”
30    Hyflux Ltd Annual Report 2007                                               Reinventing Ourselves Touching Lives
Forbes Asia – Best under                                Singapore Business Awards – Enterprise Award 2003
a Billion 2005 & 2006                                   Hyflux was accorded the Enterprise Award 2003 at The
For two consecutive                                     Singapore Business Awards presented by The Business
years, Hyflux made it                                   Times and DHL.
among Forbes Asia’s
top 200 small & midsize
companies. Forbes
Asia’s annual “Best
under a Billion” selection
showcases the region’s
most dynamic publicly
traded firms with sales
under US$1 billion a
year with a track record
of sustained growth and
profitability.

Fastest growing 50 – Fastest growing 50 Certification
Awards 2005
Hyflux was saluted as one of the 50 fastest growing
companies in Singapore at the Fastest Growing 50        Asiamoney – Best Small Company in Singapore 2002
Certification Awards 50, ranked by DP Information       Hyflux was named Best Small Company in Singapore
Group, and supported by Ernst & Young, IE Singapore,    2002 by Asiamoney, a Euromoney institutional
and SPRING Singapore.                                   investment company.

                              Euromoney – Water Deal    COMMUNITy
                              of the year 2003 (Asia
                              Pacific)                  Friend of the Arts Award 2007
                              The project financing     Hyflux received the Friend of the Arts Award given by
                              for the SingSpring        the National Arts Council in 2007 in recognition of our
                              Desalination Plant was    contributions towards the promotion, organisation, and
                              named the Asia Pacific    participation of artistic activities.
                              Water Deal of the Year
                              2003 by Euromoney
                              Project Finance
                              Magazine.




Awards & Accolades                                                                   Hyflux Ltd Annual Report 2007   31
Our Water
Business


“Hyflux has brought
a professional and
entrepreneurial spirit to
the water industry which
sets a new standard for
competitors worldwide.”
- Judges’ verdict for Hyflux being
  honoured as the Water Company
  of the Year in the Global Water
  Awards 2006




32   Hyflux Ltd Annual Report 2007   Reinventing Ourselves Touching Lives
As a technology company, Hyflux value-                         HyFLUx – AN INTEgRATED ONE-STOP SOLUTIONS
                                                               PROVIDER FOR WATER-RELATED CHALLENgES
adds to the entire water value chain with                      In Singapore, Hyflux is a key player, supporting
our technological expertise, in areas                          the government’s plan to ensure a diversified and
ranging from water and wastewater                              sustainable supply of water for the country. Hyflux is
                                                               treating some 35% of Singapore’s current water needs
treatment and recycling to seawater                            through landmark projects secured with the Public
desalination.                                                  Utilities Board (PUB) namely, two NEWater plants
                                                               at Bedok and Seletar, the raw water treatment plant
Our beginnings in the water business can be traced             at Chestnut Avenue Waterworks and the SingSpring
back to our early days of supplying equipment to smaller       Desalination Plant in Tuas.
plants to achieving a breakthrough in securing projects
to install NEWater plants to building desalination plants      SINgSPRINg DESALINATION PLANT, SINgAPORE
to the listing of our pure-play water business trust.          For Singapore’s first public private partnership, PUB
                                                               awarded Hyflux the project to build, own and operate
Today, as an integrated one-stop solutions provider, we        (BOO) Singapore’s first seawater desalination plant in
are a partner of choice for design-and-build projects          Tuas. The S$200 million plant was completed in 2005,
for turnkey plants and treatment systems in countries          some three months ahead of schedule. It now supplies
such as China, Southeast Asia and in the MENA region.          some 136,380 m3/day of desalinated water to meet
Backed by a well-rounded range of R&D, in-house                approximately 10% of Singapore’s water needs.
EPC expertise, capital and financing capabilities, and
engineering track, we have a robust pipeline of about
40 plants. Water will continue to remain a focal point
for us and the numerous people whose lives have been
touched by our technology.




       Research                    Design      Manufacturing                      Overall             Operations
                                                               Systems
           &                          &             of                            Project                 &
                                                               Assembly
      Development                Development    Components                      Management           Maintenance




   Our full suite of expertise


Our Water Business                                                                           Hyflux Ltd Annual Report 2007   33
The judges’ verdict: “The Tuas plant is a brilliant work of
engineering which has challenged the global perception that
desalination is a high cost source of water.”
The SingSpring Desalination Plant uses advanced
cost-and-energy-efficient reverse osmosis (RO)
technology and was the largest membrane-based
seawater desalination plant in the world at the time of its
completion. It also has the largest single-RO trains in the
world. The BOO project was financed by a consortium of
five international banks, led by DBS Bank. The financing
was awarded the Euromoney Asia Pacific Water Deal of
the Year in 2003.

In 2006, the SingSpring Desalination Plant was awarded
the Distinction Award for Desalination Plant of the
Year at the Global Water Awards given by Global Water
intelligence UK, a peer recognition of the contribution
made by SingSpring Desalination Plant to the
advancement of the desalination industry internationally.
                                                              phase capacity of 100,000m3/day and a second phase
We hosted more than 1,600 visitors at our SingSpring          capacity of 150,000m3/day, employs Hyflux’s proprietary
Desalination Plant in 2007, a 15% increase from               ultra-filtration technology. When completed, it will supply
2006. Among the distinguished guests were United              desalinated water to the district of Dagang in Tianjin for
Arab Emirates Minister of Environment & Water,                an initial period of 30 years.
Dr Mohammed Saeed Al Kindi; US Ambassador to
Singapore, Mrs Patricia L. Herbold; Minister-President,       SEAWATER DESALINATION PLANT, ALgERIA
State of Bavaria, Germany, Dr Edmund Stoiber;                 Marking a significant breakthrough in the MENA market,
Australian Capital Territory Electricity & Water (ACTEW)      Hyflux was awarded the contract by Algeria Energy
Chief Minister, Jon Stanhope; and many high ranking           Company to design, develop, finance, construct, operate
Chinese officials.                                            and maintain a 200,000 m³/day seawater desalination
                                                              plant at Tlemcen, Algeria in October 2006.
SEAWATER DESALINATION PLANT, CHINA
Marking our first entry into China’s municipal market         The plant will supply desalinated water to L’Algerienne
in 2004, Hyflux is building one of the country’s largest      Des Eaux, the state-owned national water entity of
seawater desalination plants in Tianjin. The S$155            Algeria and Sonatrach SPA, the national oil company of
million membrane-based desalination plant, with first-        Algeria for a period of 25 years. The total project cost is
                                                              estimated at S$380 million and Hyflux is undertaking
                                                              the engineering, procurement and construction (EPC)
                                                              works for S$328 million. This is the largest seawater
                                                              desalination project undertaken by the Group. In
                                                              January 2008, Hyflux achieved financial close of this
                                                              project following successful project financing from
                                                              Banque Nationale d’Algerie.




34    Hyflux Ltd Annual Report 2007                                                Reinventing Ourselves Touching Lives
OUR LIFESTyLE FILTRATION PRODUCTS
Besides serving the industrial and commercial markets worldwide, our technologies have led
to the development of a comprehensive range of lifestyle filtration products:




eLife Water Tap                                                                                           Hyflux Central Water Filtration System
eLife Shower Filter                                                                                       A point-of-entry product, the Hyflux Central Water
Our eLife range of products utilise a unique element                                                      Filtration System offers filtered water in the homes
conversion technology consisting of high energy                                                           with little or no drop in water pressure with much
magnetizers and active energy rocks. Water that                                                           convenience.
passes through these materials becomes “activated”
with smaller water molecules. Drinking activated water                                                    gurgle F38
improves energy levels and enhances mental alertness.                                                     This award-winning lifestyle home
This technology is also extended to the development of                                                    filtration product effectively removes
eLife Shower Filter, that reduces chlorine and hydrates                                                   turbidity and retains essential minerals,
skin and hair.                                                                                            making it a healthy drink all year round.

dragon-fly                                                                                                Hyflux Reverse Osmosis Drinking Water System
Unlike other water dispensers, our proprietary                                                            This state-of-the-art filter will improve the quality of water
technology extracts drinking water                                                                        from wells or municipal water supplies. These units
from the atmosphere and keeps the                                                                         reduce substances such as chlorine, sediment, nitrates,
water fresh by continual re-circulation                                                                   lead, cysts and detergents.
through Hyflux’s advanced membrane
technology and ultra-violet (UV)                                                                          Pitcher P18
purification.                                                                                             Hyflux Pitcher P18 provides the simplest and most
                                                                                                          popular way of filtering drinking water. Complete with
K18 Track Membrane Filter                                                                                 3-stage filtration, it effectively removes contaminants,
           Hyflux’s K18 Track                                                                             heavy metals and reduces chlorine and turbidity.
           Membrane filter is a revolutionary product
           that solves worldwide water problem.                                                                                      Hyflux Water Softener
           Improving the water quality from various                                                                                  Hard water can cause build up on
           water sources, it offers filtered water without                                                                           glassware and damage due to scale
           use of elaborate and expensive water                                                                                      in pipes and appliances. This water
           treatment systems. It is the preferred choice                                                                             softener is an effective and cost-saving
           for humanitarian purposes, disaster relief                                                     solution to              hard water problem.
           and crisis operations.



Disclaimer: The information is meant for general information purposes only. It is not to be construed as implying any representation and/or warranty of any kind, whether expressed or implied,
including without limitation, warranties of accuracy of information, warranties of merchantability, fitness for a particular purpose or performance of any products listed herein. Hyflux Ltd hereby
disclaims to the fullest extent allowable by law, all responsibility for loss, damage, injury, claim or liability of any kind arising from or in connection with (a) any errors or omissions including but not
limited to technical inaccuracies and typographical errors; or (b) the reader’s use of the information.

Our Water Business                                                                                                                                            Hyflux Ltd Annual Report 2007             35
 “Combining Hyflux’s and
Marmon’s strong international
capabilities and respective
technical strengths is a great
strategic match…”
-    Mr John Goody, President of Marmon Water LLC


OUR COLLABORATION WITH MARMON
A strategic partner for Hyflux is Marmon Water LLC, one
of the world’s largest manufacturers of residential and
commercial water treatment systems. In 2007, Hyflux
teamed up with Marmon Water to set up a joint R&D
Centre in Singapore and a manufacturing facility for
consumer products in China. Under the joint venture,
Hyflux and Marmon will jointly develop new products to
provide clean, filtered and conditioned water for Asian
homes. In addition, the partnership with Marmon will
allow us to manufacture residential water treatment
and filtration products for worldwide markets.

                                                          HyFLUx WATER TRUST
                                                          As Hyflux moves into our next chapter of growth, we
                                                          sponsored the establishment of the first pure-play global
                                                          water business trust listed on a securities exchange, the
                                                          Hyflux Water Trust (HWT). HWT provides investors with
                                                          an opportunity to invest in water-related infrastructure
                                                          assets in China, India, the Middle East and North Africa
                                                          region, and other high-growth markets globally.

                                                             HWT is a business trust sponsored by Hyflux and
                                                              managed by Hyflux Water Trust Management Pte
                                                               Ltd, a wholly-owned subsidiary of Hyflux.

                                                                 HWT was listed on the Main Board of SGX on
                                                                 3 December 2007, raising S$234 million from an
                                                                 Initial Public Offering (IPO). A number of well-
                                                                 known institutional investors subscribed into the
                                                                  IPO, including Fidelity Investments Management
                                                                  (Hong Kong) Limited as a cornerstone investor.
                                                                  Hyflux retains a 31.5% stake in HWT.




                                                               From left to right: Michael Repasky (Product Manager, Hyflux Marmon),
                                                               Steve Dakolios (Vice President & General Manager, Hyflux Marmon).


36      Hyflux Ltd Annual Report 2007
A PORTFOLIO OF HIgH QUALITy ASSETS                                           demand for waste water treatment. Construction
HWT’s initial portfolio consists of 13 plants, comprising                    of the expansion plant is expected to begin in the
three water treatment plants (WTPs), eight wastewater                        second quarter of 2008, and operation is expected to
treatment plants (WWTPs) and two water recycling                             commence in mid 2009.
plants (WRPs), giving a total design capacity of
445,000m3/day. These plants are strategically located                        SyNERgISTIC BUSINESS MODELS OF HyFLUx AND
in high growth, coastal provinces in China. The plants                       HWT – TOgETHER, A STRONg FUTURE
operate under long-term concession agreements, giving                        The establishment of HWT is an important part of
them exclusive rights to provide water-related services                      Hyflux’s asset-light strategy, allowing Hyflux to recycle
to industrial and municipal users in their respective                        our capital and to expand and develop our business.
concession areas. These assets in HWT’s initial portfolio                    HWT provides us with an additional avenue of
generate cash flows which will provide long-term, regular                    investment as it enables HWT to access our Hyflux’s
and predictable distribution to unit holders.                                established network, market reach and experience,
                                                                             know-how and membrane technologies.
WELL POSITIONED FOR gROWTH
In addition to providing long-term regular and                               The overall outlook on the global water sector, and the
predictable cash flow for unit holders, HWT is also well                     market fundamentals of China’s water sector, remain
positioned to grow its portfolio of assets by making yield-                  very strong. The synergistic business models ensure
accretive investments. Pursuant to a ROFOAR Deed,                            that Hyflux and HWT remain at the forefront to capitalise
HWT has certain rights of first offer and first refusal to                   on market opportunities, and to participate in the
purchase from Hyflux, existing and future water-related                      exciting growth of the global and water sectors in China.
infrastructure assets subject to satisfaction of the terms
and conditions under the ROFOAR Deed. The pipeline
of assets currently comprises over 20 water plants with
total design capacity in excess of 760,000m3/day.




From left to right (HWT): Wong Heng Hwie (Vice President, Finance), Daniel
Yeung (Vice President, Investment), Joscelyn Tan (Vice President, Legal).


In addition, HWT may also seek to acquire water-
related infrastructure assets from third parties, as well
as expanding its existing assets. As an example, in the
first month after its IPO, HWT secured a project to the
value of RMB 50 million to expand the Waste Water
Treatment Plant in the Yangzhou Industrial Park, China.
The expansion is required to meet growing industrial




                                                                                                            Hyflux Ltd Annual Report 2007   37
Our Industrial Manufacturing
Processes Business


                                     Hyflux’s proprietary membrane
                                     system has replaced many
                                     traditional stream separation
                                     methods for partners in various
                                     industries. It addresses the
                                     challenges which conventional
                                     treatment methods are unable
                                     to overcome.




38   Hyflux Ltd Annual Report 2007             Reinventing Ourselves Touching Lives
In the field of industrial                                  in the expanding industry. Our clients hail from the
                                                            biopharmaceutical, food, water treatment, chemical fibre
manufacturing processes, Hyflux’s                           and electronic wastewater industries.
membrane systems are used by                                We also have an established presence in Europe
companies in the management                                 through our subsidiary, Hyflux CEPAration BV, formed
                                                            through a joint venture with CEPAration BV, a spin-off
of wastewater treatment, clean                              from the Netherlands Organization for Applied Scientific
water requirements, process                                 Research (TNO).

stream separation, concentration,
and purification. Our technology
is applicable to industries
dealing with petrochemicals,
chemicals, textiles, biotechnology,
pharmaceutical products, foods,
fermentation, paper pulp and
electronics.
In China, our subsidiaries, Hydrochem Engineering
(Shanghai) Co. Ltd. and Hyflux Filtech Shanghai
Co. Ltd., are responsible for the development of our
industrial manufacturing processing business and have
been active in these industries, serving some 500 clients




                                                            From left to right: Dr Shieh Jyh-Jeng (Vice President, Research),
                                                            Dr Venkidachalam (Vice President, Development & Technology).




                                                                                                      Hyflux Ltd Annual Report 2007   39
Our Specialty
Materials Business


Hyflux’s proprietary
advanced membrane
technology ensures that
the lactic acid is entirely
free of reducing sugars
and of a high L(+) purity
level, utilising more
environmentally-friendly
processing techniques.




40   Hyflux Ltd Annual Report 2007   Reinventing Ourselves Touching Lives
Specialty Materials is a new pillar
of growth for Hyflux. With our
membrane technology, we develop
and commercialise polymers and
specialty materials (Lactic Acid
and Polylactic Acid) from natural
resources like corn and sugarcane.
These polymers are widely used
in cosmetics, pharmaceuticals,
                                                           Unlike traditional methods, our breakthrough processing
food and beverages, textiles, food                         techniques produce high quality products with less
packaging, and fibre industries.                           energy consumption. Moving into this emerging field of
                                                           material science highlights our company’s commitment
Hyflux’s first joint venture company to design and build   in addressing global environmental issues and in
a L-lactic acid production facility in China is Sinolac    promoting environmental sustainability.
(Huludao) Biotech Co., Ltd. Planned in anticipation of
increased demand in polylactic acid in the near future,
the Sinolac plant (20,000 tonnes/year capacity) has
successfully begun operations in late 2007 and has
obtained Halal and Kosher certifications. Following this
success, Hyflux entered into a subsequent joint venture,
namely Ningxia Hypow Bio-technology Co., Ltd to build
another L-lactic acid plant in China with an even larger
capacity of 30,000 tonnes/year.




Our Specialty Materials Business                                                       Hyflux Ltd Annual Report 2007   41
Our Energy
Business


                                     Hyflux’s proprietary
                                     technology gives high
                                     recovery efficiencies
                                     and high product
                                     quality. This is critical
                                     given the world’s
                                     insatiable hunger
                                     for energy and the
                                     escalating price of
                                     crude oil.




42   Hyflux Ltd Annual Report 2007        Reinventing Ourselves Touching Lives
Many industrial processing including      Leveraging on our success in the water business,
                                          we entered the energy business in 2006 through the
those in the marine, petrochemical,       formation of Eflux Singapore Pte Ltd, our wholly owned
power, automobile, construction and       subsidiary. Using our cutting-edge technologies, Hyflux
                                          aims to provide a total solution for used oil management,
airlines generate large quantities of     through recycling of used oil while ensuring minimal
used oil, which is considered as toxic    environmental impact, optimising societal benefits and
industrial material. Yet, such used oil   stakeholder interests.
contains more than 80% of base oil        A joint venture – Eflux SK Pte Ltd – was formed with
that can be recovered as a high value     SK Oilchem Management Pte Ltd to collect, recycle and
                                          treat waste oil in Singapore using our Hyflux Advanced
resource.                                 Membrane System (HAMS). HAMS can recycle used
                                          oil into high commercial base oil of which the product
                                          quality is comparable to that of virgin base oil. The plant
                                          started operations in end 2006. Eflux SK has the licence



Our Energy Business                                                     Hyflux Ltd Annual Report 2007   43
                   Clean Energy Projected growth
                   2006 - 2016 ($US Billions)

      Biofuels                                                       $80.9
                                  $20.5                                                                                  2006
          Wind                                       $60.8
                                                                                                                         2016
         Power
                                 $17.9
          Solar
         Power                                               $69.3
                               $15.6
           Fuel                $15.6
           Cells
                        $1.4

                   $0             $25         $50             $75            $100        $125       $150       $175        $200        $225


         TOTAL                                                                                                                    $226.5
                                                    $55.4

                   Source: Clean Edge, 2007



from the Singapore National Environment Agency (NEA)
to collect and treat used oil using the HAMS. On an
average, Singapore attracts some 140,000 vessel calls
annually, which provides a strong base for the provision
of oil recycling service. This reinforces our commitment
in protecting the environment while enhancing
stakeholder value.

MORE USED OIL RECyCLINg PLANTS WERE BUILT
IN 2007
We formed a joint venture with Saudi Economic
Development Company (SEDCO) and Lube Oil Re-
refining Co (LUBREC) to jointly invest S$45 million to
build and own a used-oil recycling plant in Jeddah,
Saudi Arabia.

This became the first membrane-based oil recycling
plant in Saudi Arabia and will treat and recover used
oil from the power, petrochemical and automotive
industries. With the high oil prices and acute lube oil                             12,000 tonnes of feed used oil per year, and recover into
deficit in the Middle East and North Africa (MENA)                                  high grade base oil for sale in Vietnam and other export
region, we are strategically poised to harness the vast                             markets like Laos and Cambodia.
market potential. Saudi Arabia is one of the largest (per
capita) consumers of lubricants. In 2006, its population                            Hyflux will also be looking at other countries such as
of 24 million consumed some 350,000 metric tonnes of                                China and India where the demand for high grade
lubricants.                                                                         lube oil is increasing. The supply of base oil has been
                                                                                    aggravated further by the closure of several base
In Vietnam, Hyflux entered into a joint venture with                                oil refineries worldwide. The scarcity of base oil has
Success Blossom Environment Vietnam Joint Stock                                     continuously driven up oil prices.
Company to invest close to US$10.5m (approximately
S$15 million) to build a state-of-the-art used oil recycling
plant near Hanoi. The plant can collect and treat up to



44     Hyflux Ltd Annual Report 2007
According to market reports Clean Energy Trends 2007
and Biofuel Market Worldwide (2006), global markets
for biofuels are projected to grow to US$80.9 billion
(approximately S$112.4 billion) by 2016. By 2020, the
estimated global demand of bioethanol is estimated to
reach 120,000 million litres.

Our success in lube oil was also mirrored in the field
of biofuels. We collaborated with BP International Ltd
and the Dalian Institute of Chemical Physics (DICP) to
jointly develop and commericialise the use of zeolite
dewatering membranes in the production of biofuels.

Zeolite membrane technology has proven to be
      especially cost-effective in the dewatering process
        and offers significant energy savings when
                                                            From left to right: Lim Choon Noi (General Manager, Oil Recycling Business),
         compared with conventional processes. Our          Dr Tan Yi (Vice President, Technology Development), Willy Yeo (Assistant Vice
          first project would involve the dewatering of     President, CEO Office).
                     bioethanol using zeolite membranes.




                                                                                                     Hyflux Ltd Annual Report 2007      45
Our Research &
Development


Hyflux is a leading
technology company
that is fully committed to
developing new technology
applications and intellectual
property as our long-term
competitive advantage.




46   Hyflux Ltd Annual Report 2007   Reinventing Ourselves Touching Lives
In 2004, we launched our membrane and materials                                                                 wastewater treatment, chemical/oil,
technology centre - the largest in Asia, outside Japan,                                                         biopharmaceutical/life sciences, metal/surface
to spearhead development in cutting-edge membrane                                                               engineering, food & beverage/sugar, industrial
technology and environmental engineering solutions.                                                             chemicals recycling, milk & diary.
We maintain more than 10 research and development
laboratories in Singapore, including a knowledge centre,                                                  •	 FerroCepTM Stainless Steel MF Tubular
an innovative process development centre, a materials                                                        Membranes
and membrane products development centre as well as                                                             It is the membrane of choice for handling difficult
advanced machining, prototyping and industrial design                                                           industrial streams with high viscosity and solid
functions to support the Hyflux’s status as a leading                                                           contents under extreme conditions. Most ideal for
provider of environmental solutions. Our R&D teams                                                              various fermentation broths like amino acids,
have been trained in the design and development of                                                              antibiotics, vitamins and clarification of other
state-of-the-art membranes. Several patent applications                                                         hydrolytes and plant extracts.
have been filed and publications have been presented
at international conferences. In addition, our R&D                                                        •	 KristalTM UF/MF Polymer Hollow Fibre
efforts have led to the commercialisation of our range                                                       Membranes
of environmentally–friendly membrane products and                                                               It ensures consistent and strict filtrations, resulting
systems. A huge variety of products are presently under                                                         in a robust membrane process with higher permeate
market tests.                                                                                                   quality; higher permeate flux; higher throughput, and
                                                                                                                higher system recovery.
To tap expertise outside Hyflux, we collaborate with
world-renowned research institutions and companies
                                                                                                          •	 PoroCepTM Polypropylene Hollow Fibre
to develop and enhance our research programmes,
expand areas of membrane applications, improve                                                               Membranes
existing technologies and processes as well as                                                                  This membrane is the preferred choice for
commercialise novel technologies. Partners include the                                                          microfiltration, where both performance and cost are
National University of Singapore, CEPAration BV (a spin-                                                        critical. It combines higher particle retention with
off from leading Dutch technology institute, Netherlands                                                        higher flux, excellent permeate quality and minimal
Organization for Applied Scientific Research), Marmon                                                           pressure drop in a small compact design.
Water LLC (North America’s largest manufacturer of
residential and commercial water treatment systems)                                                       •	 Hyflux Advanced Membrane System (HAMS)
and the Dalian Institute of Chemical Physics.                                                                   Our proprietary Hyflux Advanced Membrane System
                                                                                                                (HAMS) has been developed as a “green” solution
HyFLUx MEMBRANE APPLICATIONS                                                                                    and is adopted to recover base oil from used oil.
Our R&D efforts have led to the commercialisation of a                                                          It is able to substantially reduce energy consumption
range of environmentally-friendly membrane products                                                             generated during the treatment process and yet treat
and systems.                                                                                                    recycled used oil into high-grade commercial base
                                                                                                                oil suitable for sale.
•	 InoCEPTM Ceramic Hollow Fibre Membranes
     The award-winning InoCEPTM is able to tolerate
     high temperatures and extreme pH conditions as
     well as high solids content, making it ideal for waste/




Disclaimer: The information is meant for general information purposes only. It is not to be construed as implying any representation and/or warranty of any kind, whether expressed or implied,
including without limitation, warranties of accuracy of information, warranties of merchantability, fitness for a particular purpose or performance of any products listed herein. Hyflux Ltd hereby
disclaims to the fullest extent allowable by law, all responsibility for loss, damage, injury, claim or liability of any kind arising from or in connection with (a) any errors or omissions including but not
limited to technical inaccuracies and typographical errors; or (b) the reader’s use of the information.


Our Research & Development                                                                                                                                    Hyflux Ltd Annual Report 2007             47
                                      Financial
                                     Report 2007




48   Hyflux Ltd Annual Report 2007
                                            HyfLux LTD AnD iTs subsiDiARies

                                         DIRECTORS’ REPORT
                                    Financial year ended 31 December 2007


The directors are pleased to present their report to the members together with the audited consolidated financial
statements of Hyflux Ltd (the “Company”) and its subsidiaries (collectively, the “Group”) and the balance sheet and
statement of changes in equity of the Company for the financial year ended 31 December 2007.

DiRecTORs
The directors of the Company in office at the date of this report are:

Lum Ooi Lin                        Group CEO, President and Managing Director
Teo Kiang Kok
Lee Joo Hai
Gay Chee Cheong
Christopher Murugasu
Raj Mitta                          (appointed on 28 April 2007)
Professor Tan Teck Meng            (appointed on 28 April 2007)

Professor Tan Teck Meng and Raj Mitta are due for retirement in accordance with Article 88 of the Company’s Articles
of Association, and being eligible, have agreed to stand for re-election. In accordance with Article 89 of the Company’s
Articles of Association, Lee Joo Hai and Gay Chee Cheong are due for retirement, and, being eligible, have agreed to
stand for re-election.

ARRAngemenTs TO enAbLe DiRecTORs TO AcquiRe sHARes OR DebenTuRes
Except for share options granted under the Hyflux Employees’ Share Option Scheme as described below, 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 object is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares or
debentures of the Company or any other body corporate.




Reinventing Ourselves Touching Lives                                                        Hyflux Ltd Annual Report 2007   49
                                            HyfLux LTD AnD iTs subsiDiARies

                                         DIRECTORS’ REPORT
                                      Financial year ended 31 December 2007


DiRecTORs’ inTeResTs in sHARes OR DebenTuRes
The following directors, who held office at the end of the financial year, had, according to the register of directors’
shareholdings required to be kept under Section 164 of the Singapore Companies Act, Cap. 50, an interest in shares
and share options of the Company and related corporations (other than wholly-owned subsidiaries) as stated below:

                                                           Direct interest                       Deemed interest
                                                         As at                                 As at
                                                    1.1.2007                              1.1.2007
                                                    or date of             As at          or date of             As at
name of director                                  appointment      31.12.2007           appointment      31.12.2007

Ordinary shares of the Company

Lum Ooi Lin                                      154,609,141      124,984,141           22,500,000         52,500,000

Gay Chee Cheong                                      450,000           450,000                     –                   –

Christopher Murugasu                                 469,375           469,375              120,000            120,000

Professor Tan Teck Meng                                      –          10,000                     –            51,000

Share options of the Company

Lum Ooi Lin                                        5,625,000         5,250,000                     –                   –

Teo Kiang Kok                                        250,000           250,000                     –                   –

Lee Joo Hai                                          250,000           250,000                     –                   –

Gay Chee Cheong                                      200,000           200,000                     –                   –

Christopher Murugasu                                 360,937           360,937                     –                   –


There was no change in any of the abovementioned interests between the end of the financial year and 21 January
2008.

By virtue of Section 7 of the Singapore Companies Act, Cap. 50, Ms Lum Ooi Lin is deemed to have an interest in the
shares held by the Company in all its subsidiaries.

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

DiRecTORs’ cOnTRAcTuAL benefiTs
Since the end of the previous financial year, no director of the Company 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 the director is a member, or with a company in which the director has a substantial financial interest, except
as disclosed in the accompanying financial statements and in this report, and except that Ms Lum Ooi Lin has an
employment relationship with a subsidiary, and has received remuneration in that capacity.




50    Hyflux Ltd Annual Report 2007                                                Reinventing Ourselves Touching Lives
                                                 HyfLux LTD AnD iTs subsiDiARies

                                              DIRECTORS’ REPORT
                                         Financial year ended 31 December 2007


OpTiOns AnD wARRAnTs

(a)       employees’ share Option scheme:

          The Hyflux Employees’ Share Option Scheme (the “Scheme”) was approved by the members of the Company at
          an Extraordinary General Meeting held on 27 September 2001. The Scheme provides an opportunity for employees
          and directors of the Company and its subsidiaries, other than substantial shareholders of the Company, to
          participate in the equity of the Company.

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

          The Scheme is administered by a committee (the “Committee”) comprising four directors. It shall continue to be
          in force at the discretion of the Committee for a period of 10 years from 27 September 2001. However, the period
          may be extended with the approval of members at a general meeting of the Company and of any relevant authorities
          which may then be required.

          Details of the options to subscribe for ordinary shares of the Company granted to directors of the Company
          pursuant to the Scheme are as follows:
                                                       Aggregate options
                                       Options         granted (including           Aggregate options                  Aggregrate
                                       granted        bonus issue) since              exercised since                     options
                                    during the         commencement of              commencement of                outstanding as
                                     financial      the scheme to end of         the scheme to end of                    at end of
           name of Director               year             financial year               financial year              financial year

           Lum Ooi Lin                       –                 6,375,000                  (1,125,000)                   5,250,000

           Teo Kiang Kok                     –                   250,000                             –                     250,000

           Lee Joo Hai                       –                   250,000                             –                     250,000

           Gay Chee Cheong                   –                   200,000                             –                     200,000

           Christopher Murugasu              –                   862,500                     (501,563)                     360,937

           Total                             –                 7,937,500                  (1,626,563)                   6,310,937

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

	     	    •	 No	options	have	been	granted	to	the	controlling	shareholders	of	the	Company	and	their	associates;

	     	    •	 No	participant	has	received	5%	or	more	of	the	options	available	under	the	Scheme;

	     	    •	 No	options	have	been	granted	to	directors	and	employees	of	the	holding	company	and	its	subsidiaries;

	     	    •	 No	options	that	entitle	the	holder	to	participate,	by	virtue	of	the	options,	in	any	share	issue	of	any	other	
	     	    	 corporation	have	been	granted;	and

	     	    •	 The	excercise	price	of	the	options	is	set	at	the	market	price,	as	defined	in	the	Scheme,	at	the	time	of	grant.	
              No options have been granted at a discount.



Reinventing Ourselves Touching Lives                                                              Hyflux Ltd Annual Report 2007   51
                                                                                                            HyfLux LTD AnD iTs subsiDiARies




52
                                                                                                         DIRECTORS’ REPORT
                                                                                                      Financial year ended 31 December 2007
                                       OpTiOns AnD wARRAnTs (cOnT’D)

                                       (a) employees’ share Option scheme (cont’d)

                                          At the end of the financial year, details of all the options granted under the Scheme on the unissued ordinary shares of the Company were as follows:




  Hyflux Ltd Annual Report 2007
                                          Date of grant    balance as         Options      Options           Options          balance as         no. of holders         exercise                  exercisable
                                          of options      at 1.1.2007         granted     forfeited        exercised      at 31.12.2007        as at 31.12.2007            price                       period
                                                                                                                                                                              s$

                                          15.10.2001       1,678,312               –       (1,250)        (1,188,500)           488,562               55                 0.2688      15.10.2002 - 27.09.2011
                                          11.01.2002          12,750               –            –            (12,000)               750                1                 0.4123      11.01.2003 - 27.09.2011
                                          28.03.2002          60,906               –            –            (34,000)            26,906                2                 0.5436      28.03.2003 - 27.09.2011
                                          08.04.2002          18,750               –            –            (10,000)             8,750                1                 0.5401      08.04.2003 - 27.09.2011
                                          13.05.2002          94,500               –         (500)           (94,000)                 –                1                 0.5504      13.05.2003 - 27.09.2011
                                          08.07.2002          18,750               –            –            (18,000)               750                1                 0.5664      08.07.2003 - 27.09.2011
                                          01.08.2002         235,125               –            –           (234,000)             1,125                1                 0.5888      01.08.2003 - 27.09.2011
                                          16.09.2002         190,875               –            –           (190,000)               875                5                 0.4869      16.09.2003 - 27.09.2011
                                          07.01.2003         433,250               –      (26,750)          (213,000)           193,500                4                 0.5995      07.01.2004 - 27.09.2011
                                          07.04.2003         337,750               –            –           (188,000)           149,750                3                 0.7253      07.04.2004 - 27.09.2011
                                          16.10.2003       1,010,500               –            –           (279,000)           731,500                9                 1.0581      16.10.2004 - 27.09.2011
                                          08.12.2003       1,575,000               –            –           (525,000)         1,050,000                2                 1.0197      08.12.2004 - 27.09.2011
                                          29.12.2003         625,000               –      (15,500)          (164,000)           445,500               15                 1.0627      29.12.2004 - 27.09.2011
                                          14.05.2004         360,000               –            –           (120,000)           240,000                1                 0.9600      14.05.2005 - 27.09.2011
                                          07.02.2005       3,408,500               –     (183,500)          (640,000)         2,585,000               39                 1.8600      07.02.2006 - 27.09.2011
                                          03.05.2005         300,000               –            –           (120,000)           180,000                1                 2.3227      03.05.2006 - 27.09.2011
                                          09.05.2005       4,500,000               –            –                  –          4,500,000                1                 2.3067      09.05.2006 - 27.09.2011
                                          01.06.2005          75,000               –            –            (30,000)            45,000                2                 2.5493      01.06.2006 - 27.09.2011
                                          08.06.2005          45,000               –            –                  –             45,000                1                 2.6507      08.06.2006 - 27.09.2011
                                          28.03.2006       2,430,000               –     (360,000)          (222,000)         1,848,000               16                 2.6620      28.03.2007 - 27.09.2011
                                          18.10.2006       1,800,000               –     (100,000)          (100,000)         1,600,000                4                 2.3620      18.10.2007 - 27.09.2011
                                          07.12.2006       3,480,000               –     (310,000)          (114,000)         3,056,000               65                 2.3720      07.12.2007 - 27.09.2011
                                          05.04.2007               –         970,000     (240,000)                 –            730,000                6                 2.6240      05.04.2008 - 27.09.2011
                                          23.05.2007               –       1,180,000     (200,000)                 –            980,000                5                 2.6080      23.05.2008 - 27.09.2011
                                          25.09.2007               –       3,430,000            –                  –          3,430,000               42                 2.7920      25.09.2008 - 27.09.2011




Reinventing Ourselves Touching Lives
                                                          22,689,968       5,580,000 (1,437,500)          (4,495,500)       22,336,968               283
                                             HyfLux LTD AnD iTs subsiDiARies

                                          DIRECTORS’ REPORT
                                     Financial year ended 31 December 2007


OpTiOns AnD wARRAnTs (cOnT’D)

(b)   warrants:

      On 23 November 2004, the Company entered into a Warrant Subscription Agreement with Istithmar PJSC
      (“Istithmar”), a company incorporated in Dubai, United Arab Emirates, in which Istithmar is entitled to subscribe
      for equity shares equal to 10% of the diluted share capital of the Company as adjusted under the terms of the Warrant
      Subscription Agreement. This was approved by the shareholders of the Company on 8 April 2005 at an Extraordinary
      General Meeting.

      Pursuant to an agreement with Istithmar as announced on 18 March 2006, Istithmar’s entitlement to the warrant
      subscription was reduced from 10% to 7.5% of the diluted share capital of the Company on the date in which the
      warrants are exercised, subject to terms of the Warrant Subscription Agreement.

      The exercise price is equivalent to the higher of (a) S$1.95 and (b) the lower of 70% of the volume-weighted average
      price for trades in the Company’s shares done on Singapore Exchange on the market day immediately preceding
      the exercise date or in the 30 calendar day period immediately preceding the exercise date.

      The exercise period is from April 2008 to April 2010.

Except as disclosed above, no other options or warrants to take up unissued shares of the Company or its subsidiaries
were granted and no other shares were issued by virtue of the exercise of options or warrants to take up unissued
shares of the Company or its subsidiaries.

AuDiT cOmmiTTee
The Audit Committee (“AC”) comprises the following members at the date of this report:

Mr Lee Joo Hai                      (Chairman)
Mr Teo Kiang Kok
Mr Gay Chee Cheong
Professor Tan Teck Meng

The members of the AC, collectively, backed with legal, accounting, financial management expertise or business
experience are qualified to discharge the AC’s responsibilities.

The primary functions of the AC are as follows:

(a)	 assist	the	Board	in	discharging	its	statutory	responsibilities	on	financial	and	accounting	matters;	

(b)	 review	the	financial	and	operating	results	and	accounting	policies	of	the	Group;

(c)   review significant financial reporting issues and judgements relating to financial statements for each financial year,
	     quarterly	and	annual	results	announcement	before	submission	to	the	Board	for	approval;	

(d)   review the adequacy of the Company’s internal control (financial and operational) and risk management policies and
	     systems	established	by	the	management;

(e)   review the audit plans and reports of the external and internal auditors and consider the effectiveness of the actions
	     taken	by	management	on	the	auditors’	recommendations;

(f)   appraise and report to our Board on the audits undertaken by the external and internal auditors, the adequacy of the
	     disclosure	of	information,	and	the	appropriateness	and	quality	of	the	system	of	management	and	internal	controls;	
      and

(g)   review the independence of external auditors annually and consider the appointment or re-appointment of external
      auditors and matters relating to the resignation or removal of the auditors and approve the remuneration and terms
      of engagement of the external auditors.

Reinventing Ourselves Touching Lives                                                           Hyflux Ltd Annual Report 2007   53
                                              HyfLux LTD AnD iTs subsiDiARies

                                           DIRECTORS’ REPORT
                                       Financial year ended 31 December 2007


AuDiT cOmmiTTee (cOnT’D)

The AC held four meetings during the year. The AC has reviewed the non-audit services provided by the external
auditors, including the fees paid for these services during the year, and is satisfied that the nature and extent of such
services would not affect the independence of the external auditors. The AC has also reviewed the services provided by
the Independent Directors’ firms and is satisfied that the provision of such services did not affect their independence.

The AC has full access to the external auditors and will hold meetings with them at least once a year without the
presence of Management. The AC has authority to access all personnel, records, and other information to enable it to
properly discharge its function. It has full authority and discretion to invite any Director or executive officer to attend its
meetings.

The Audit Committee has recommended to the Board of Directors the nomination of Messrs KPMG in place of
Messrs Ernst & Young as external auditors of the Company at the forthcoming Annual General Meeting.



On behalf of the board of directors,




Lum Ooi Lin
Group CEO, President and Managing Director




Teo Kiang Kok
Director




Singapore
14 March 2008




54     Hyflux Ltd Annual Report 2007                                                   Reinventing Ourselves Touching Lives
                                              HyfLux LTD AnD iTs subsiDiARies

                                     STATEMENT BY DIRECTORS


We, Lum Ooi Lin and Teo Kiang Kok, being two of the directors of Hyflux Ltd, do hereby state that, in the opinion of the
directors,

(i)    the accompanying balance sheets, consolidated income statement, statements of changes in equity and
       consolidated cash flow statement together with notes thereto 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 2007, and the results of the business,
       changes in equity and cash flows of the Group and the changes in equity of the Company for the financial year
       then ended, and

(ii)   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.



On behalf of the board of directors:




Lum Ooi Lin
Group CEO, President and Managing Director




Teo Kiang Kok
Director




Singapore
14 March 2008




Reinventing Ourselves Touching Lives                                                           Hyflux Ltd Annual Report 2007   55
                                             HyfLux LTD AnD iTs subsiDiARies

                                       INDEPENDENT AUDITORS’ REPORT
                                       TO ThE MEMBERS OF hYFlUx lTD

We have audited the accompanying financial statements of Hyflux Ltd (the “Company”) and its subsidiaries (collectively,
the “Group”) set out on pages 57 to 130, which comprise the balance sheets of the Group and the Company as at
31 December 2007, the statements of changes in equity of the Group and the Company, the income statement
and cash flow statement of the Group for the year then ended, and a summary of significant accounting policies and
other explanatory notes.

DiRecTORs’ RespOnsibiLiTy fOR THe finAnciAL sTATemenTs
The Company’s directors are responsible for the preparation and fair presentation of these financial statements
in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and Singapore Financial
Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant
to the preparation and fair presentation of financial statements that are free from material misstatement, whether due
to	fraud	or	error;	selecting	and	applying	appropriate	accounting	policies;	and	making	accounting	estimates	that	are	
reasonable in the circumstances.

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 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 and fair presentation of the financial statements 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 directors, 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,

(i) the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the
    Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting
    Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December
    2007 and the results, changes in equity and cash flows of the Group and the changes in equity of the Company for
	 the	year	ended	on	that	date;	and

(ii) 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.




eRnsT & yOung
Certified Public Accountants

Singapore
14 March 2008



56     Hyflux Ltd Annual Report 2007                                                 Reinventing Ourselves Touching Lives
                                           HyfLux LTD AnD iTs subsiDiARies

                             CONSOlIDATED INCOME STATEMENT
                               for the financial year ended 31 December 2007


                                                                             notes            2007                  2006
                                                                                             s$’000               s$’000
                                                                                                                (Restated)

Revenue                                                                       3            192,786                142,379

Other income/(expenses) - net                                                 4                108                   (314)
Raw materials and consumables                                                             (105,998)               (77,767)
Personnel expenses                                                            5            (30,721)               (20,042)
Cost of share-based payment                                                   5             (3,131)                (3,150)
Depreciation and amortisation                                                               (7,198)                (4,969)
Net (loss)/gain on sale of property, plant and equipment                                        (4)                    52
Gain on sale of a subsidiary and an associate                                                    –                  1,655
Gain on sale of partial interest in a joint venture                                          8,185                      –
Finance income                                                                6              2,548                  5,534
Finance expenses                                                              7             (8,878)                (9,078)
Fair value (loss)/gain on derivative financial instruments                                  (3,532)                   115
Share of profit/(loss) of associates                                                         1,277                   (910)
Other operating expenses                                                      8             (9,369)               (17,166)
Negative goodwill on acquisitions of subsidiaries/businesses                                 2,620                  3,839

profit before taxation                                                                       38,693                20,178
Tax expense                                                                   9              (2,048)               (4,821)

profit for the year                                                                          36,645                15,357

Attributable to:
Shareholders of the Company                                                                  32,949                15,473
Minority interests                                                                            3,696                  (116)

                                                                                             36,645                15,357

earnings per share (cents)                                                    10
- Basic                                                                                          6.32                    3.00
- Fully diluted                                                                                  6.23                    2.97




The accompanying accounting policies and explanatory notes form an integral part of the financial statements.


Reinventing Ourselves Touching Lives                                                     Hyflux Ltd Annual Report 2007     57
                                       HyfLux LTD AnD iTs subsiDiARies

                                       BAlANCE ShEETS
                                        as at 31 December 2007


                                                                         group                       company
                                                 notes         2007            2006              2007       2006
                                                              s$’000         s$’000             s$’000    s$’000
                                                                           (Restated)

non-current assets

Property, plant and equipment                      11         62,573         33,403              7,612       4,347
Investment property                                12          2,373          2,502                  –           –
Intangible assets                                  13         40,499         38,982              4,182       3,408
Investments in subsidiaries                        14              –              –            134,377     104,654
Investments in joint venture                       15              –              –              1,125      20,000
Investments in associates                          16        100,064          6,962             12,277           –
Long-term investments                              17          7,917          5,997                899         899
Financial and lease receivables                    18          9,570        156,990                  –           –
Other receivables                                  22              –          3,979                  –           –
Due from related parties (non-trade)               22              –              –             18,833      14,515
Deferred tax assets                                29          1,218            505                  –           –

Total non-current assets                                     224,214        249,320            179,305     147,823

current assets

Gross amount due for contract work                 19         93,257         48,907              9,527      14,031
Inventories                                        20         20,641         11,193             17,498       8,506
Trade receivables                                  21         46,110         30,734              1,148       1,165
Financial and lease receivables                    18            187            757                  –           –
Other receivables and deposits                     22         31,740         20,059              3,377       1,842
Prepayments                                                    6,582          5,571              1,327       1,608
Due from related parties (trade)                   21         15,216         15,741             22,673      15,929
Due from related parties (non-trade)               22          4,787          1,433            155,412      31,145
Short-term loans                                   23              –             98                  –           –
Derivative financial instruments                   36              –          3,758                  –         228
Cash and fixed deposits                            24        121,047         55,827              6,074       4,694

Total current assets                                         339,567        194,078            217,036      79,148




58    Hyflux Ltd Annual Report 2007                                              Reinventing Ourselves Touching Lives
                                          HyfLux LTD AnD iTs subsiDiARies

                                      BAlANCE ShEETS (CONT’D)
                                           as at 31 December 2007


                                                                            group                        company
                                                                   2007           2006               2007       2006
                                                     notes        s$’000        s$’000              s$’000    s$’000
                                                                              (Restated)

current liabilities

Derivative financial instruments                      36              –          4,995                  –                 –
Trade payables                                        25         55,022         35,277              1,172             1,012
Other payables and accruals                           26         17,747         13,884              3,216             2,030
Progress payments from customers                      25         25,989          3,358              2,080             2,062
Interest-bearing loans and borrowings                 27          5,245         33,663              5,000            30,902
Finance lease liabilities                             28            104            244                  –                 –
Deferred income                                                  14,281         12,196                 88                 –
Due to related parties (trade)                        25              –              –                845                30
Due to related parties (non-trade)                    26          1,796          1,273             36,741             9,952
Tax payable                                                         202            973                  –                 –

Total current liabilities                                       120,386        105,863             49,142            45,988

net current assets                                              219,181         88,215            167,894            33,160

non-current liabilities

Interest-bearing loans and borrowings                 27        193,266        115,001            190,596            36,518
Finance lease liabilities                             28            187            332                  –                 –
Deferred tax liabilities                              29          2,875          4,136                159               159

Total non-current liabilities                                   196,328        119,469            190,755            36,677

net assets                                                      247,067        218,066            156,444          144,306

equity attributable to shareholders
of the company

Share capital                                         30         95,820         91,142             95,820            91,142
Capital reserves                                      31          1,064            987                  –                 –
Foreign currency translation reserve                             (1,815)        (4,550)                 –                 –
Hedging reserve                                       32         (4,222)        (7,839)                 –               563
Employee share option reserve                         30          9,419          6,288              9,419             6,288
Revenue reserve                                                 139,506        113,573             51,205            46,313

                                                                239,772        199,601            156,444          144,306
minority interests                                                7,295         18,465                  –                –

Total equity                                                    247,067        218,066            156,444          144,306




The accompanying accounting policies and explanatory notes form an integral part of the financial statements.


Reinventing Ourselves Touching Lives                                                       Hyflux Ltd Annual Report 2007   59
                                                                                                         HyfLux LTD AnD iTs subsiDiARies




60
                                                                                       STATEMENTS OF ChANGES IN EQUITY
                                                                                              for the financial year ended 31 December 2007

                                                                                                                 Attributable to equity holders of the company
                                                                                                                       foreign                   employee
                                                                                                                     currency                         share
                                                                                             share       capital   translation      Hedging          option   Revenue                minority      Total




  Hyflux Ltd Annual Report 2007
                                       group – 2007                                         capital    reserves        reserve       reserve        reserve    reserve      Total   interests     equity
                                                                                            s$’000      s$’000         s$’000        s$’000         s$’000     s$’000     s$’000      s$’000     s$’000

                                       At 1.1.2007                                          91,142         987        (4,550)       (7,839)       6,288      115,054     201,082     18,553     219,635
                                       Adoption of INT FRS 112                                   –           –             –             –            –       (1,481)     (1,481)       (88)     (1,569)

                                       As restated                                          91,142         987        (4,550)       (7,839)       6,288      113,573     199,601     18,465     218,066
                                       Recognised in income statement on
                                          maturity of financial instruments                       –           –            –         3,617             –            –      3,617           –      3,617
                                       Foreign currency translation differences                   –           –        2,735             –             –            –      2,735          33      2,768

                                       net income recognised directly in equity                   –           –        2,735         3,617             –           –       6,352         33       6,385
                                       Profit for the year                                        –           –            –             –             –      32,949      32,949      3,696      36,645

                                       Total recognised income for the year                       –           –        2,735         3,617             –      32,949      39,301      3,729      43,030
                                       Issue of shares for cash under
                                          Employees’ Share Option Scheme                      4,678          –              –              –          –             –      4,678          –       4,678
                                       Cost of share-based payment                                –          –              –              –      3,131             –      3,131          –       3,131
                                       Transfer to capital reserve                                –         77              –              –          –             –         77          –          77
                                       Acquisition of a subsidiary                                –          –              –              –          –             –          –    (14,899)    (14,899)
                                       Dividends                                                  –          –              –              –          –        (7,016)    (7,016)         –      (7,016)

                                       At 31.12.2007                                        95,820       1,064        (1,815)       (4,222)       9,419      139,506     239,772      7,295     247,067




                                       The accompanying accounting policies and explanatory notes form an integral part of the financial statements.




Reinventing Ourselves Touching Lives
                                                                                                          HyfLux LTD AnD iTs subsiDiARies

                                                                                  STATEMENTS OF ChANGES IN EQUITY (CONT’D)
                                                                                              for the financial year ended 31 December 2007

                                                                                                                  Attributable to equity holders of the company
                                                                                                                        foreign                   employee
                                                                                    issued                            currency                         share
                                                                                     share    share       capital   translation      Hedging          option   Revenue                minority      Total
                                       group – 2006 (Restated)                     capital   capital    reserves        reserve       reserve        reserve    reserve      Total   interests     equity
                                                                                   s$’000    s$’000      s$’000         s$’000        s$’000         s$’000     s$’000     s$’000      s$’000     s$’000




Reinventing Ourselves Touching Lives
                                       At 1.1.2006                                 25,728    62,693         987          (617)       (7,143)       2,852      105,063     189,563      7,723     197,286
                                       Net fair value loss on derivative
                                           financial instruments                        –          –           –            –          (696)            –            –       (696)         –        (696)
                                       Foreign currency translation differences         –          –           –       (3,933)            –             –            –     (3,933)      (291)     (4,224)

                                       net expense recognised directly in equity        –          –           –       (3,933)         (696)            –           –      (4,629)      (291)     (4,920)
                                       Profit for the year                              –          –           –            –             –             –      15,473      15,473       (116)     15,357

                                       Total recognised income/
                                           (expense) for the year                      –           –           –       (3,933)         (696)            –      15,473      10,844       (407)     10,437
                                       Effects of Companies (Amendment)
                                           Act 2005                               62,407     (62,407)          –             –              –           –            –          –           –          –
                                       Issue of shares for cash under
                                           Employees’ Share Option Scheme          3,007       (286)           –             –              –        286             –      3,007           –      3,007
                                       Cost of share-based payment                     –          –            –             –              –      3,150             –      3,150                  3,150
                                       Acquisition of a subsidiary                     –          –            –             –              –          –             –          –      7,114       7,114
                                       Reduction of minority interests
                                           due to disposal of a subsidiary             –           –           –             –              –           –            –          –     (3,044)     (3,044)
                                       Capital contribution by minority interests      –           –           –             –              –           –            –          –      7,079       7,079
                                       Dividends                                       –           –           –             –              –           –       (6,963)    (6,963)         –      (6,963)

                                       At 31.12.2006                               91,142          –        987        (4,550)       (7,839)       6,288      113,573     199,601     18,465     218,066




  Hyflux Ltd Annual Report 2007
                                       The accompanying accounting policies and explanatory notes form an integral part of the financial statements.




61
                                                                                                          HyfLux LTD AnD iTs subsiDiARies




62
                                                                                   STATEMENTS OF ChANGES IN EQUITY (CONT’D)
                                                                                                 for the financial year ended 31 December 2007
                                                                                                                                                                  employee
                                                                                                                                                                      share
                                                                                                                              share            share   Hedging       option   Revenue
                                       company – 2007                                                                        capital        premium     reserve     reserve    reserve      Total
                                                                                                                             s$’000          s$’000     s$’000      s$’000     s$’000     s$’000




  Hyflux Ltd Annual Report 2007
                                       At 1.1.2007                                                                           91,142               –        563       6,288     46,313    144,306
                                       Recognised in income statement on maturity of financial instruments                        –               –       (563)          –          –       (563)

                                       net expense recognised directly in equity                                                   –              –       (563)          –          –       (563)
                                       Profit for the year                                                                         –              –          –           –     11,908     11,908

                                       Total recognised income/(expense) for the year                                              –              –       (563)          –     11,908     11,345
                                       Issue of shares for cash under Employees’ Share Option Scheme                           4,678              –          –           –          –      4,678
                                       Cost of share-based payment                                                                 –              –          –       3,131          –      3,131
                                       Dividends                                                                                   –              –          –           –     (7,016)    (7,016)

                                       At 31.12.2007                                                                         95,820               –          –       9,419     51,205    156,444

                                       company – 2006

                                       At 1.1.2006                                                                           25,728          62,693        379       2,852     56,570    148,222
                                       Net fair value gain on derivative financial instruments                                    –               –        184           –          –        184

                                       net income recognised directly in equity                                                    –              –        184           –          –        184
                                       Loss for the year                                                                           –              –          –           –     (3,294)    (3,294)

                                       Total recognised income/(expense) for the year                                             –               –        184           –     (3,294)    (3,110)
                                       Effects of Companies (Amendment) Act 2005                                             62,407         (62,407)         –           –          –          –
                                       Issue of shares for cash under Employees’ Share Option Scheme                          3,007            (286)         –         286          –      3,007
                                       Cost of share-based payment                                                                –               –          –       3,150          –      3,150
                                       Dividends                                                                                  –               –          –           –     (6,963)    (6,963)

                                       At 31.12.2006                                                                         91,142               –        563       6,288     46,313    144,306


                                       The accompanying accounting policies and explanatory notes form an integral part of the financial statements.




Reinventing Ourselves Touching Lives
                                               HyfLux LTD AnD iTs subsiDiARies

                        CONSOlIDATED CASh FlOW STATEMENT
                                 for the financial year ended 31 December 2007


                                                                                          2007                    2006
                                                                                         s$’000                 s$’000
                                                                                                              (Restated)

cash flows from operating activities:
Profit before taxation                                                                  38,693                   20,178
Adjustments:
   Cost of share-based payment                                                            3,131                    3,150
   Fair value loss/(gain) on derivative financial instruments                             3,532                     (115)
   Gain on sale of partial interest in a joint venture                                   (8,185)                       –
   Gain on sale of a subsidiary and an associate                                              –                   (1,655)
   Net loss/(gain) on sale of property, plant and equipment                                   4                      (52)
   Share of (profit)/loss of associates                                                  (1,277)                     910
   Depreciation and amortisation                                                          7,198                    4,969
   Finance expenses                                                                       8,878                    9,078
   Finance income                                                                        (2,548)                  (5,534)
   Negative goodwill on acquisitions of subsidiaries/businesses                          (2,620)                  (3,839)
   Impairment of trade and other receivables                                                 45                    1,433
   Provision for inventory obsolescence and inventory written down                          657                    1,252
   Goodwill arising from acquisition of interests from minority interests written-off       242                        –
   Exchange differences                                                                   1,139                   (5,355)

Operating cash flows before working capital changes                                     48,889                   24,420

Working capital changes:
  Inventories                                                                           (10,105)                 (1,118)
  Gross amount due for contract work                                                    (44,834)                (10,096)
  Trade receivables                                                                     (12,925)                   (620)
  Financial and lease receivables                                                        65,261                 (29,435)
  Other receivables, deposits and prepayments                                           (13,572)                  4,858
  Due from related parties                                                               (2,153)                 11,753
  Trade payables                                                                         20,165                 (25,440)
  Other payables and accruals                                                             4,341                     338
  Progress payments from customers                                                       22,631                  (5,042)
  Deferred income                                                                         2,084                     (21)
  Derivative financial instruments                                                          111                     166

Total working capital changes                                                           31,004                  (54,657)

Cash generated from/(used in) operating activities                                      79,893                  (30,237)
Tax paid                                                                                (2,138)                  (1,582)

net cash from/(used in) operating activities                                            77,755                  (31,819)




Reinventing Ourselves Touching Lives                                                    Hyflux Ltd Annual Report 2007   63
                                                HyfLux LTD AnD iTs subsiDiARies

                  CONSOlIDATED CASh FlOW STATEMENT (CONT’D)
                                       for the financial year ended 31 December 2007


                                                                                            2007              2006
                                                                                           s$’000           s$’000
                                                                                                          (Restated)

cash flows from investing activities:
Purchase of property, plant and equipment                                                  (30,393)         (19,040)
Acquisition of intangible assets                                                              (278)         (11,000)
Acquisitions of subsidiaries/businesses, net of cash acquired (Note A)                     (36,012)         (10,871)
Cash outflow from sales of a subsidiary and an associate (Note B)                                –           (4,521)
Sale of a joint venture, net of cash disposed (Note C)                                      16,059                –
Proceeds from sale of property, plant and equipment                                             78              129
Long-term investments                                                                       (1,919)               –
Short-term investments                                                                           –            2,000
Acquisition of associates                                                                  (91,875)          (4,309)
Interest received                                                                            2,047            1,649

net cash used in investing activities                                                    (142,293)          (45,963)

cash flows from financing activities:
Proceeds from issuance of new shares under Employees’ Share Option Scheme                   4,678            3,007
Proceeds from borrowings (net)                                                            140,759           39,276
Repayment of lease liabilities                                                               (286)             (10)
Interest paid                                                                              (8,878)          (9,078)
Interest received from derivatives                                                            501            3,886
Minority shareholders’ contribution                                                             –            7,079
Payments of dividends                                                                      (7,016)          (6,963)

net cash from financing activities                                                        129,758           37,197

net increase/(decrease) in cash and cash equivalents                                       65,220           (40,585)
Cash and cash equivalents at beginning of the financial year                               55,827            96,412

cash and cash equivalents at end of the financial year (note 24)                          121,047           55,827




64     Hyflux Ltd Annual Report 2007                                              Reinventing Ourselves Touching Lives
                                             HyfLux LTD AnD iTs subsiDiARies

               CONSOlIDATED CASh FlOW STATEMENT (CONT’D)
                                 for the financial year ended 31 December 2007


note A

The fair value of the identifiable assets and liabilities of subsidiaries/businesses acquired were as follows:

                                                                                                2007                    2006
                                                                                               s$’000                  s$’000

Cash                                                                                            4,594                   3,332
Current assets                                                                                 36,231                  14,073
Non-current assets                                                                             24,228                  37,730
Current liabilities                                                                            (9,516)                (26,057)
Non-current liabilities                                                                       (12,553)                 (6,834)
Minority interests                                                                                  –                  (7,114)

Fair value of net assets acquired                                                              42,984                  15,130
Positive goodwill                                                                                 242                   3,969
Negative goodwill                                                                              (2,620)                 (3,839)

Purchase consideration                                                                         40,606                  15,260
Less: Deposits paid                                                                                 –                  (1,057)
Less: Cash of subsidiaries acquired                                                            (4,594)                 (3,332)

Net cash outflow on acquisitions of subsidiaries/businesses                                    36,012                  10,871

note b

The values of assets and liabilities of a subsidiary and an associate disposed were as follows:

                                                                                                2007                    2006
                                                                                               s$’000                  s$’000

Current assets                                                                                         –               23,505
Non-current assets                                                                                     –                7,218
Current liabilities                                                                                    –              (17,128)
Non-current liabilities                                                                                –                   (5)
Minority interests                                                                                     –               (3,044)

Net assets disposed                                                                                    –               10,546
Gain on sale of a subsidiary and an associate                                                          –                1,655
Professional fee incurred                                                                              –                  104

Cash proceeds from sale                                                                                –               12,305
Less: Cash in subsidiary and associate                                                                 –              (16,722)
Less: Professional fees incurred                                                                       –                 (104)

Net cash outflow on disposal of a subsidiary and an associate                                          –                (4,521)




Reinventing Ourselves Touching Lives                                                          Hyflux Ltd Annual Report 2007   65
                                                  HyfLux LTD AnD iTs subsiDiARies

                    CONSOlIDATED CASh FlOW STATEMENT (CONT’D)
                                         for the financial year ended 31 December 2007


note c

The value of assets and liabilities of joint venture disposed were as follows:

                                                                                              2007             2006
                                                                                             s$’000           s$’000

Current assets                                                                                 4,248                –
Non-current assets                                                                            39,667                –
Current liabilities                                                                           (2,827)               –
Non-current liabilities                                                                      (31,699)               –

Net assets sold                                                                                9,389                –
Gain on partial disposal                                                                       8,185                –
Professional fees incurred                                                                       143                –

Cash proceeds from sale                                                                      17,717                 –
Less: Professional fees incurred                                                               (143)                –
Less: Cash in a joint venture                                                                (1,515)                –

Cash inflow on partial sale of interest in a joint venture                                   16,059                 –




The accompanying accounting policies and explanatory notes form an integral part of the financial statements.


66       Hyflux Ltd Annual Report 2007                                              Reinventing Ourselves Touching Lives
                                             HyfLux LTD AnD iTs subsiDiARies

                        NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007


1.   cORpORATe infORmATiOn

     Hyflux Ltd (the “Company”) is a limited liability company, which is incorporated and domiciled in the Republic of
     Singapore, and publicly traded on the Singapore Exchange.

     The registered office and principal place of business of the Company is located at Hyflux Building, 202 Kallang
     Bahru, Singapore 339339.

     The principal activities of the Company are investment holding and manufacturing of membrane systems.

     The principal activities of its subsidiaries comprise of the following:

	    •	   water
          - Seawater desalination, raw water purification, wastewater cleaning, water recycling, water reclamation and
            ultra pure water production for municipal and industrial clients as well as home consumer filtration and
	    	    	 purification	products;

          -   Design, build and sale of water treatment plants, wastewater treatment plants and water recycling plants
	    	    	   under	concession	arrangements;

	    •	   industrial manufacturing processes - Separation, concentration and purification treatments for manufacturing
	    	    process	streams;

	    •	   speciality materials - Development and commercialisation of specialty materials utilising membrane technology,
	    	    such	as	lactic	acid	from	natural	renewable	resources	like	corn	and	sugar	cane;	and

	    •	   energy - Development of membrane applications in resource recovery, waste recycling and energy reclamation
          such as used oil recovery and recycling.

     There have been no significant changes in the nature of these activities during the financial year.

2.   summARy Of significAnT AccOunTing pOLicies

2.1 bAsis Of pRepARATiOn

     The consolidated financial statements of the Group and the balance sheet and statement of changes in equity of
     the Company have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”).

     The financial statements have been prepared on a historical cost basis except as disclosed in the accounting
     policies below.

     The financial statements are presented in Singapore Dollars (“S$”) and all values are rounded to the nearest
     thousand (“S$’000”) except when otherwise indicated.




Reinventing Ourselves Touching Lives                                                        Hyflux Ltd Annual Report 2007   67
                                               HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                                    31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.2 cHAnges in AccOunTing pOLicies

     The accounting policies have been consistently applied by the Group and the Company and are consistent with
     those used in the previous financial year, except for the changes in accounting policies discussed below:

     (a) Adoption of new and revised fRs

          On 1 January 2007, the Group and the Company adopted the following standards effective for annual financial
          periods beginning on or after 1 January 2007:

          (i) Amendments to FRS 1, Presentation of financial statements (Capital disclosures)

               The amendments to FRS 1 require the Group to make new disclosures to enable users of the financial
               statements to evaluate the Group’s objectives, policies and processes for managing capital.

               The required disclosures have been made accordingly in Note 37 of the financial statements.

          (ii) FRS 40 Investment Property

               Previously, the Group had accounted for its investment properties under FRS 16 Property, Plant and
               Equipment. Under FRS 16, property, plant and equipment are recorded at cost less accumulated
               depreciation and accumulated impairment losses. FRS 40 requires investment properties which represent
               the Group’s interests in leasehold buildings that are held for long term rental yields and/or capital appreciation
               to be classified and accounted for as investment properties. FRS 40 also requires companies to measure
               investment properties using either the fair value or cost method. The Group has elected to measure
               investment properties under the cost method. Investment properties are stated at cost less accumulated
               depreciation and accumulated impairment losses.

               The adoption of FRS 40 does not have any significant impact on these financial statements.

          (iii) FRS 107 Financial Instruments: Disclosures

               FRS 107 introduces new disclosures to improve the information about financial instruments. It requires
               the disclosure of qualitative and quantitative information about exposure to risks arising from financial
               instruments, including specified minimum disclosures about credit risk, liquidity risk and market risk.

               The required disclosures have been made accordingly in Notes 35 and 36 of the financial statements.




68    Hyflux Ltd Annual Report 2007                                                     Reinventing Ourselves Touching Lives
                                             HyfLux LTD AnD iTs subsiDiARies

                        NOTES TO ThE FINANCIAl STATEMENTS
                                                  31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.2 cHAnges in AccOunTing pOLicies (cOnT’D)

     (b) fRs and inT fRs not yet effective

          At the date of authorisation of these financial statements, the following FRS and INT FRS were issued but
          not yet effective:
                                                                                                       effective date
                                                                                                     (annual periods
                                                                                                        beginning on
                                                                                                             or after)

          INT FRS 111          Group and Treasury Share Transactions                                           1 March 2007
          INT FRS 112          Service Concession Arrangements                                                1 January 2008
          FRS 23               Amendment to FRS 23, Borrowing costs                                           1 January 2009
          FRS 108              Operating Segments                                                             1 January 2009

          The Group has early adopted INT FRS 112. The effect of the change in this accounting policy is disclosed
          in Note 2.2(c).

          The directors expect that the adoption of the other pronouncements above will have no material impact to the
          financial statements in the period of initial application.

          FRS 108 requires the Group to disclose segment information based on the information reviewed by the
          Group’s chief operating decision maker. The impact of this standard on the other segment disclosures is
          still to be determined. As this is a disclosure standard, it will have no impact on the financial position or
          financial performance of the Group when implemented in 2009.

          FRS 23 Borrowing costs has been revised to require capitalisation of borrowing costs when such costs relate
          to a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get
          ready for its intended use or sale. In accordance with the transitional requirements in the Standard, the
          Group will adopt this as a prospective change. Accordingly, borrowing costs will be capitalised on qualifying
          assets with a commencement date after 1 January 2009. No changes will be made for borrowing costs
          incurred to this date that have been expensed.

     (c) early adoption of inT fRs 112 service concession Arrangements

          On 1 January 2007, the Group and the Company adopted INT FRS 112 Service Concession Arrangements
          which is effective for annual financial periods beginning on or after 1 January 2008:

          INT FRS 112 requires the recognition of construction revenue and the corresponding financial receivable
          and/or intangible asset for public-to-private service concession arrangement if:

	    	    •	 the	party	that	grants	the	service	arrangement	(the	“grantor”)	controls	or	regulates	what	services	the	entity	
             (the “operator”) must provide with the infrastructure asset, to whom it must provide them, and at what
	    	    	 price;	and

	    	    •	 the	 grantor	 controls,	 through	 ownership,	 beneficial	 entitlement	 or	 otherwise,	 any	 significant	 residual	
             interest in the infrastructure asset at the end of the term of the arrangement.




Reinventing Ourselves Touching Lives                                                            Hyflux Ltd Annual Report 2007   69
                                               HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                                   31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.2 cHAnges in AccOunTing pOLicies (cOnT’D)

     (c) early adoption of inT fRs 112 service concession Arrangements (cont’d)

          (i) Recognition of financial receivables

               The Group recognises a financial receivable if it has a contractual right under the concession agreements to
               receive a fixed and determinable amount of payments during the Concession Period irrespective of the
               usage of the plants. The financial receivable is measured on initial recognition at its fair value. Subsequent to
               initial recognition, the financial receivable is measured at amortised cost using the effective interest
               method.

               When the Group receives a payment during the Concession Period, it will apportion such payment between
               (i) a repayment of the financial receivable (if any), which will be used to reduce the carrying amount of the
               financial receivable on the balance sheet, (ii) interest income, which will be recognised as finance income in
               its income statement and (iii) revenue from operating the plants in its income statement.

          (ii) Recognition of intangible assets

               The Group recognises an intangible asset if it does not have any contractual right under the concession
               agreements to receive a fixed and determinable amount of payments during the Concession Period. The
               intangible asset is recognised to the extent that the Group has a right to charge fees for the usage of the
               plants and is amortised over the Concession Period from commencement of the operations of the
               plants.

          The change in accounting policy is applied retrospectively. The financial effects of adoption to the balance
          sheet and income statement items are as follows:
                                                                                                      2007             2006
                                                                                                     s$’000           s$’000

          consolidated balance sheet
          Increase/(decrease) in:

          Property, plant and equipment                                                               (7,954)        (13,003)
          Financial and lease receivables                                                              9,757          15,653
          Intangible assets                                                                             (267)              –
          Gross amounts due for contract work                                                          2,838          (1,817)
          Other payables and accruals                                                                      –           2,403
          Foreign currency translation reserve                                                             *              (1)
          Revenue reserve                                                                              3,143          (1,481)
          Minority interests                                                                               –             (88)

          consolidated income statement
          Increase/(decrease) in:

          Revenue                                                                                    19,070           12,542
          Raw materials and consumables                                                              15,234           13,435
          Finance income                                                                               (136)               *
          Finance expense                                                                               743                –
          Personnel expenses                                                                              4              389
          Depreciation and amortisation                                                                (206)              16
          Other operating expenses                                                                       16              271

          *    Balance less than S$1,000.

70    Hyflux Ltd Annual Report 2007                                                     Reinventing Ourselves Touching Lives
                                              HyfLux LTD AnD iTs subsiDiARies

                         NOTES TO ThE FINANCIAl STATEMENTS
                                                   31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.3 significAnT AccOunTing esTimATes AnD juDgemenTs

     The preparation of the Group’s financial statements requires management to make judgements, estimates and
     assumptions that affect the reported amounts of revenue, expenses, assets and liabilities, and the disclosure of
     contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could
     result in outcomes that could require a material adjustment to the carrying amount of the asset or liability affected
     in the future.

     (i)   Useful lives of plant and equipment

           The cost of plant and equipment is depreciated on a straight-line basis over the asset’s useful lives.
           Management estimates the useful lives of these plant and equipment to be within 1 to 10 years. 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. The carrying amount
           of the Group’s plant and equipment at 31 December 2007 is disclosed in Note 11 of the financial
           statements.

     (ii) Impairment of non-financial assets

           The Group assesses whether there are any indicators of impairment for all non-financial assets at each reporting
           date. Goodwill is tested for impairment annually and at other times when such indicators exist. Other
           non-financial assets are tested for impairment when there are indicators that the carrying amounts may not
           be recoverable.

           When value in use calculations are undertaken, management must estimate the expected future cash flows
           from the asset or cash-generating unit and choose a suitable discount rate in order to calculate the present
           value of those cash flows. Further details of the key assumptions applied in the impairment assessment of
           goodwill, are given in Note 13 of the financial statements.

     (iii) Impairment of loans and receivables

           The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset
           is impaired. To determine whether there is objective evidence of impairment, the Group considers factors
           such as the probability of insolvency or significant financial difficulties of the debtor and default or significant
           delay in payments.

           Where there is objective evidence of impairment, the amount and timing of future cash flows are estimated
           based on historical loss experience for assets with similar credit risk characteristics. The carrying amount of
           the Group’s loans and receivables at the balance sheet date is disclosed in Note 21 of the financial
           statements.

     (iv) Income taxes

           The Group has exposure to income taxes in numerous jurisdictions. Significant assumption is required in
           determining the provision for income taxes. There are certain transactions and computations for which the
           ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities
           for expected tax issues based on estimates of whether additional taxes will be due. Where the final tax
           outcome of these matters is different from the amounts that were initially recognised, such differences will
           impact the income tax and deferred tax provisions in the period in which such determination is made. The
           carrying amount of the Group’s income tax payables and deferred tax liabilities is disclosed in the balance
           sheet.




Reinventing Ourselves Touching Lives                                                             Hyflux Ltd Annual Report 2007   71
                                            HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                                31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.3 significAnT AccOunTing esTimATes AnD juDgemenTs (cOnT’D)

     (v) Impairment of available-for-sale investments

          The Group follows the guidance of FRS 39 in determining whether available-for-sale investments are
          considered impaired. The Group evaluates, among other factors, the duration and extent to which the fair
          value of an investment is less than its costs, the financial health of and the near-term business outlook of
          the investee, including factors such as industry and sector performance, changes in technology and
          operational and financing cashflow.

     (vi) Development costs

          Development costs are capitalised in accordance with the accounting policy in Note 2.12(b)(i). 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. The carrying amount of development costs capitalised at the
          balance sheet date is disclosed in Note 13 of the financial statements.

     (vii) Construction contracts

          The Group recognises contract revenue by reference to the stage of completion of the contract activity at the
          balance sheet date, when the outcome of a construction contract can be estimated reliably. The stage of
          completion is measured by reference to the proportion that contract costs incurred for work performed to
          date bear to the estimated total contract costs. Significant assumptions are required to estimate the total
          contract costs and the recoverable variation works that will affect the stage of completion. The estimates are
          made based on past experience and knowledge of the project engineers. The carrying amounts of assets
          and liabilities arising from construction contracts at the balance sheet date are disclosed in Note 19 of the
          financial statements.

     (viii) Service concession agreements

          The revenue for the construction services provided under the concession agreements and the corresponding
          financial receivables and/or intangible assets arising are recognised based on the percentage of completion
          method during the construction phase.

          The percentage of completion method during the construction phase is measured by reference to the
          construction costs incurred to-date to the estimated total construction costs. Significant judgement is
          required in determining the stage of completion, the extent of the construction costs incurred and the
          estimated total construction costs.

          Judgement is also exercised in determining the fair values of the financial receivables. Discount rates,
          estimates of future cash flows and other factors are used in the valuation process. The assumptions used
          and estimates made can materially affect the fair value estimates.




72    Hyflux Ltd Annual Report 2007                                               Reinventing Ourselves Touching Lives
                                             HyfLux LTD AnD iTs subsiDiARies

                        NOTES TO ThE FINANCIAl STATEMENTS
                                                  31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.4 fOReign cuRRency

     Transactions in foreign currencies are measured in the respective functional currencies of the Company and its
     subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating
     those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are
     translated at the rate of exchange ruling at the balance sheet date. Non-monetary items that are measured
     in terms of historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial
     transactions. Non-monetary items measured at fair value in a foreign currency are translated using the exchange
     rates at the date when the fair value was determined.

     Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance
     sheet date are recognised in the income statement except for exchange differences arising on monetary items
     that form part of the Group’s net investment in foreign subsidiaries, which are recognised initially in equity as
     foreign currency translation reserve in the consolidated balance sheet and recognised in the consolidated income
     statement on disposal of the subsidiary.

     On consolidation, the assets and liabilities of foreign operations are translated into S$ at the rate of exchange
     ruling at the balance sheet date and their income statements are translated at the weighted average exchange
     rates for the year. The exchange differences arising on the translation are taken directly to a separate component
     of equity as foreign currency translation reserve. On disposal of a foreign operation, the deferred cumulative
     amount recognised in equity relating to that particular foreign operation is recognised in the income statement.

     The foreign currency translation reserve represents exchange differences arising from the translation of the
     financial statements of foreign operations whose functional currencies are different from those of the Group’s
     presentation currency.

2.5 subsiDiARies

     A subsidiary is an entity over which the Group has the power to govern the financial and operating policies so as
     to obtain benefits from its activities.

     In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less
     accumulated impairment losses.

2.6 AssOciATes

     An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence.
     The associate is equity accounted for from the date the Group obtains significant influence until the date the
     Group ceases to have significant influence over the associate.

     The Group’s investments in associates are accounted for using the equity method. Under the equity method, the
     investment in associate is measured in the balance sheet at cost plus post-acquisition changes in the Group’s
     share of net assets of the associate. Goodwill relating to an associate is included in the carrying amount of the
     investment. Any excess of the Group’s share of the net fair value of the associate’s identifiable asset, liabilities
     and contingent liabilities over the cost of the investment is deducted from the carrying amount of the investment
     and is recognised as income as part of the Group’s share of profit or loss of the associate in the period in which
     the investment is acquired.




Reinventing Ourselves Touching Lives                                                           Hyflux Ltd Annual Report 2007   73
                                              HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                                   31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.6 AssOciATes (cOnT’D)

     When the Group’s share of losses in an associate equals or exceeds its interest in the associate, the Group does
     not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate.

     The financial statements of the associate are prepared as of the same reporting date as the Company. Where
     necessary, adjustments are made to bring the accounting policies into line with those of the Group.

     In the Company’s separate financial statements, investments in associates are accounted for at cost less
     accumulated impairment losses.

2.7 jOinT venTuRes

     A joint venture is a contractual arrangement whereby two or more parties undertake an economic activity that
     is subject to joint control, where the strategic financial and operating decisions relating to the activity require
     the unanimous consent of the parties sharing control. The Group recognised its interest in the joint ventures using
     proportionate consolidation. The Group combines its share of each of the assets, liabilities, income and expenses
     of the joint ventures with the similar items, line by line, in its consolidated financial statements. The financial
     statements of the joint ventures are prepared for the same reporting year as the Group. Consistent accounting
     policies are applied for like transactions and events in similar circumstances.

     The joint ventures are proportionately consolidated until the date on which the Group ceases to have joint control
     over joint ventures.

     In the Company’s separate financial statements, interests in joint ventures are accounted for at cost less
     accumulated impairment losses.

2.8 bAsis Of cOnsOLiDATiOn

     The consolidated financial statements comprise the financial statements of the Company and its subsidiaries as
     at the balance sheet date. The financial statements of the subsidiaries used in the preparation of the consolidated
     financial statements are prepared for the same reporting date as the Company. Consistent accounting policies
     are applied to like transactions and events in similar circumstances.

     All intra-group balances, income and expenses and unrealised gains and losses resulting from intra-group
     transactions are eliminated in full.

     Acquisitions of subsidiaries are accounted for by applying the purchase method. Identifiable assets acquired and
     liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at
     the acquisition date. Adjustments to those fair values relating to previously held interests are treated as a
     revaluation and recognised in equity. Any excess of the cost of business combination over the Group’s share in the
     net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities is recorded as
     goodwill on the balance sheet. The accounting policy for goodwill is set out in Note 2.12(a). Any excess of the
     Group’s share in the net fair value of the acquired subsidiary’s identifiable assets, liabilities and contingent liabilities
     over the cost of business combination is recognised as income in the income statement on the date of
     acquisition.

     Subsidiaries are consolidated from the date of acquisition, being the date on which the Group obtains control, and
     continue to be consolidated until the date that such control ceases.




74    Hyflux Ltd Annual Report 2007                                                     Reinventing Ourselves Touching Lives
                                            HyfLux LTD AnD iTs subsiDiARies

                       NOTES TO ThE FINANCIAl STATEMENTS
                                                31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.9 TRAnsAcTiOn wiTH minORiTy inTeResTs

     Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group and
     are presented separately in the consolidated income statement and within equity in the consolidated balance sheet,
     separately from parent shareholders’ equity. Transactions with minority interests are accounted for as transactions
     with parties external to the Group. Disposals to minority interests result in gain and loss for the Group that
     are recognised in the income statement. Purchases from minority interests result in goodwill being the difference
     between any consideration paid and the Group’s incremental share of the carrying value of identifiable net assets
     of the subsidiary.

2.10 pROpeRTy, pLAnT AnD equipmenT

     All items of property, plant and equipment are initially recorded at cost. The cost of an item of property, plant and
     equipment is recognised as an asset if, and only if, it is probable that future economic benefits associated with the
     item will flow to the Group and the cost of the item can be measured reliably.

     Subsequent to recognition, property, plant and equipment are measured at cost less accumulated depreciation
     and accumulated impairment losses.

     Depreciation is computed on a straight-line basis over the estimated useful lives of the assets as follows:

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

     Assets under construction included in property, plant and equipment are not depreciated as these assets are not
     yet available for use.

     The carrying values of property, plant and equipment are reviewed for impairment when events or changes in
     circumstances indicate that the carrying value may not be recoverable.

     The residual value, useful life and depreciation method are reviewed at each financial year-end to ensure that
     the amount, method and period of depreciation are consistent with previous estimates and the expected pattern
     of consumption of the future economic benefits embodied in the items of property, plant and equipment.

     An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits
     are expected from its use or disposal. Any gain or loss on derecognition of the asset is included in the income
     statement in the year the asset is derecognised.




Reinventing Ourselves Touching Lives                                                         Hyflux Ltd Annual Report 2007   75
                                             HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.11 invesTmenT pROpeRTy

     Investment property is initially recorded at cost. Subsequent to recognition, investment property is stated at
     cost less accumulated depreciation and any accumulated impairment losses. Depreciation is computed utilising
     the straight-line method to write off the cost of leasehold properties over their estimated useful lives. The estimated
     useful life is over the lease period of the investment property.

     Investment property is derecognised when either it has been disposed of or when the investment property is
     permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or
     losses on the retirement or disposal of an investment property are recognised in the income statement in the year
     of retirement or disposal. Transfers are made to or from investment property only when there is a change in
     use.

2.12 inTAngibLe AsseTs

     (a) goodwill

          Goodwill acquired in a business combination is initially measured at cost. Following initial recognition,
          goodwill is measured at cost less accumulated impairment losses. Goodwill is reviewed for impairment
          annually or more frequently if events and circumstances indicate that the carrying value may be impaired.

          For the purpose of impairment testing, goodwill acquired is allocated to each of the Group’s cash-generating
          units that are expected to benefit from the synergies of the combination.

          The cash-generating unit to which goodwill has been allocated is tested for impairment annually and whenever
          there is an indication that the cash-generating unit may be impaired, by comparing the carrying amount of the
          cash-generating unit, including the allocated goodwill, with the recoverable amount of the cash-generating
          unit. Where the recoverable amount of the cash-generating unit is less than the carrying amount, an
          impairment loss is recognised in the income statement. Impairment losses recognised for goodwill are not
          reversed in subsequent periods.

          Where goodwill forms part of a cash-generating unit and part of the operation within that cash-generating unit
          is disposed of, the goodwill associated with the operation disposed of is included in the carrying amount of
          the operation when determining the gain or loss on disposal of the operation. Goodwill disposed of in this
          circumstance is measured based on the relative fair values of the operations disposed of and the portion of
          the cash-generating unit retained.

          Goodwill and fair value adjustments arising on the acquisition of foreign operations on or after 1 January 2005
          are treated as assets and liabilities of the foreign operations and are recorded in the functional currency of
          the foreign operations and translated in accordance with the accounting policy set out in Note 2.4.

          Goodwill and fair value adjustments which arose on acquisitions of foreign operations before 1 January 2005
          are deemed to be assets and liabilities of the Company and are recorded in S$ at the rates prevailing at the
          date of acquisition.




76    Hyflux Ltd Annual Report 2007                                                  Reinventing Ourselves Touching Lives
                                              HyfLux LTD AnD iTs subsiDiARies

                         NOTES TO ThE FINANCIAl STATEMENTS
                                                  31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.12 inTAngibLe AsseTs (cOnT’D)

     (b) Other intangible assets

          Intangible assets acquired separately or generated internally are measured initially at cost. The cost of
          intangible assets acquired in a business combination is their fair value as at the date of acquisition. Following
          initial acquisition, intangible assets are measured at cost less any accumulated amortisation and accumulated
          impairment losses.

          Intangible assets with finite useful lives are amortised over the estimated useful lives and assessed for
          impairment whenever there is an indication that the intangible asset may be impaired. The amortisation
          period and the amortisation method are reviewed at least at each financial year-end.

          (i) Research and development costs

             Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical
             knowledge and understanding, is recognised in the income statement as an expense when it is
             incurred.

             Development activities involve a plan or design for the production of new or substantially improved products
             and processes. Development expenditure is capitalised when the Group can demonstrate the technical
             feasibility of completing the intangible asset so that it will be available for use or sale, its intention to
             complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the
             availability of resources to complete and the ability to measure reliably the expenditure during the
             development.

             The carrying value of development costs is reviewed for impairment annually when the asset is not yet in
             use or more frequently when an indication of impairment arises during the reporting year. Upon completion,
             the development costs is amortised on a straight-line basis over the estimated useful life which normally does
             not exceed 15 years.

          (ii) Intellectual property rights

             The initial cost of acquiring intellectual property rights is capitalised and amortised on a straight-line basis
             over the period of their expected benefits, which normally does not exceed 10 years.

          (iii) Licensing fees

             The initial cost of acquiring licenses is capitalised and amortised on a straight-line basis over the period of
             the licensing agreements of between 10 and 20 years.




Reinventing Ourselves Touching Lives                                                           Hyflux Ltd Annual Report 2007   77
                                             HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                                  31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.13 impAiRmenT Of nOn-finAnciAL AsseTs

     The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any
     such indication exists, or when annual impairment testing for an asset (i.e. an intangible asset with an indefinite
     useful life, an intangible asset not yet available for use, or goodwill acquired in a business combination) is required,
     the Group makes an estimate of the asset’s recoverable amount.

     An asset’s recoverable amount is the higher of an asset’s or cash-generating unit’s fair value less costs to sell
     and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows
     that are largely independent of those from other assets or Groups of assets. In assessing value in use, the
     estimated future cash flows are discounted to their present value. Where the carrying amount of an asset exceeds
     its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. Impairment
     losses of continuing operations are recognised in the income statement.

     An assessment is made at each reporting date as to whether there is any indication that previously recognised
     impairment losses recognised for an asset other than goodwill may no longer exist or may have decreased. A
     previously recognised impairment loss is reversed only if there has been a change in the estimates used to
     determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case,
     the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed
     the carrying amount that would have been determined, net of depreciation, had no impairment loss been
     recognised for the asset in prior years. Reversal of an impairment loss is recognised in the income statement.

2.14 finAnciAL AsseTs

     Financial assets are recognised on the balance sheet when, and only when, the Group becomes a party to the
     contractual provisions of the financial instrument.

     When financial assets are recognised initially, they are measured at fair value, plus, in the case of financial assets
     not at fair value through profit or loss, directly attributable transaction costs.

     A financial asset is derecognised where the contractual right to receive cash flows from the asset has expired.
     On derecognition of a financial asset in its entirety, the difference between the carrying amount and the sum of
     the consideration received and any cumulative gain or loss that has been recognised directly in equity is recognised
     in the income statement.

     All regular way purchases and sales of financial assets are recognised or derecognised on the trade date i.e. the
     date that the Group commits to purchase or sell the asset. Regular way purchases or sales are purchases or sales
     of financial assets that require delivery of assets within the period generally established by regulation or convention
     in the marketplace concerned.

     (a) Loans and receivables

          Non-derivative financial assets with fixed or determinable payments that are not quoted in an active market
          are classified as loans and receivables. Subsequent to initial recognition, loans and receivables are measured
          at amortised cost using the effective interest method. Gains and losses are recognised in the income
          statement when the loans and receivables are recognised or impaired, and through the amortisation
          process.




78    Hyflux Ltd Annual Report 2007                                                  Reinventing Ourselves Touching Lives
                                             HyfLux LTD AnD iTs subsiDiARies

                        NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007



2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.14 finAnciAL AsseTs (cOnT’D)

     (b) Available-for-sale financial assets

          Available-for-sale financial assets are financial assets that are not classified in any of the other categories.

          The Group has investments in equity instruments that do not have a quoted market price in an active
          market and whose fair value cannot be reliably measured. These investments are measured and carried at
          cost less accumulated impairment losses.

2.15 cAsH AnD cAsH equivALenTs

     Cash and cash equivalents comprise cash on hand, fixed deposits, and short-term, highly liquid investments
     that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in
     value. These also include bank overdrafts that form an integral part of the Group’s cash management.

2.16 impAiRmenT Of finAnciAL AsseTs

     The Group assesses at each balance sheet date whether there is any objective evidence that a financial asset or
     group of financial assets is impaired.

     a)   Assets carried at amortised cost

          If there is objective evidence that an impairment loss on financial assets carried at amortised cost has been
          incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and
          the present value of estimated future cash flows discounted at the financial asset’s original effective interest
          rate. The carrying amount of the asset is reduced through the use of an allowance account. The impairment
          loss is recognised in the income statement.

          When the asset becomes uncollectible, the carrying amount of impaired financial assets is reduced directly
          or if an amount was charged to the allowance account, the amounts charged to the allowance account are
          written off against the carrying value of the financial asset.

          To determine whether there is objective evidence that an impairment loss on financial assets has been
          incurred, the Group considers factors such as the probability of insolvency or significant financial difficulties
          of the debtor and default or significant delay in payments.

          If in a subsequent period, the amount of the impairment loss decreases and the decrease can be related
          objectively to an event occurring after the impairment was recognised, the previously recognised impairment
          loss is reversed. Any subsequent reversal of an impairment loss is recognised in the income statement, to
          the extent that the carrying value of the asset does not exceed its amortised cost at the reversal date.




Reinventing Ourselves Touching Lives                                                           Hyflux Ltd Annual Report 2007   79
                                            HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                                31 December 2007



2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.16 impAiRmenT Of finAnciAL AsseTs (cOnT’D)

     (b) Available-for-sale financial assets

          Significant or prolonged decline in fair value below cost, significant financial difficulties of the issuer or
          obligor, and the disappearance of an active trading market are considerations to determine whether there is
          objective evidence that investment securities classified as available-for-sale financial assets are impaired.

          If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net
          of any principal payment and amortisation) and its current fair value, less any impairment loss previously
          recognised in the income statement, is transferred from equity to the income statement. Reversals of
          impairment loss in respect of equity instruments are not recognised in the income statement. Reversals of
          impairment losses on debt instruments are reversed through the income statement, if the increase in fair
          value of the instrument can be objectively related to an event occurring after the impairment loss was
          recognised in the income statement.

2.17 cOnsTRucTiOn cOnTRAcTs

     When the outcome of a construction contract can be estimated reliably, contract revenue and contract costs are
     recognised as revenue and expenses respectively by reference to the stage of completion of the contract activity
     at the balance sheet date (“percentage-of-completion method”). When the outcome of a construction contract
     cannot be estimated reliably, contract revenue is recognised to the extent of contract costs incurred that are likely
     to be recoverable. When it is probable that total contract costs will exceed total contract revenue, the expected
     loss is recognised as an expense immediately.

     Contract revenue comprises the initial amount of revenue agreed in the contract and variations in the contract
     work and claims that can be measured reliably. A variation or a claim is recognised as contract revenue when it
     is probable that the customer will approve the variation or negotiations have reached an advanced stage such that
     it is probable that the customer will accept the claim.

     The stage of completion is measured by reference to the contract costs incurred to date to the estimated total
     costs for the contract. Costs incurred during the financial year in connection with future activity on a contract are
     excluded from costs incurred to date when determining the stage of completion of a contract. Such costs are
     shown as construction contract work-in-progress on the balance sheet unless it is not probable that such contract
     costs are recoverable from the customers, in which case, such costs are recognised as an expense immediately.

     At the balance sheet date, the aggregated costs incurred plus recognised profit (less recognised loss) on each
     contract is compared against the progress billings. Where costs incurred plus the recognised profits (less
     recognised losses) exceed progress billings, the balance is presented as “Gross amount due for contract work”.
     Where progress billings exceed costs incurred plus recognised profits (less recognised losses), the balance is
     presented as due to customers on construction contracts within “Trade and other payables”.

     Progress billings not yet paid by customers and retentions and advances received are presented as “Progress
     payments from customers”.




80    Hyflux Ltd Annual Report 2007                                                Reinventing Ourselves Touching Lives
                                                HyfLux LTD AnD iTs subsiDiARies

                         NOTES TO ThE FINANCIAl STATEMENTS
                                                     31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.18 invenTORies

     Inventories are stated at the lower of cost and net realisable value.

     Costs incurred in bringing the inventories to their present location and condition are accounted for as follows:

	    •	   Raw	materials	                                    –	         purchase	costs	on	a	first-in,	first-out	basis;

	    •	   Finished	goods	and	work-in-progress	              –	         costs	of	direct	materials	and	labour	and	a	proportion	of	
                                                                       manufacturing overheads based on normal operating
                                                                       capacity.

2.19 finAnciAL LiAbiLiTies

     Financial liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the
     contractual provisions of the financial instrument.

     Financial liabilities are recognised initially at fair value, plus, in the case of financial liabilities other than derivatives,
     directly attributable transaction costs.

     Subsequent to initial recognition, all financial liabilities are measured at amortised cost using the effective
     interest method, except for derivatives, which are measured at fair value.

     A financial liability is derecognised when the obligation under the liability is extinguished. For financial liabilities
     other than derivatives, gains and losses are recognised in the income statement when the liabilities are derecognised
     or impaired, and through the amortisation process. Any gains or losses arising from changes in fair value of
     derivatives are recognised in the income statement. Net gains or losses on derivatives include exchange
     differences.

2.20 bORROwing cOsTs

     Borrowing costs are recognised in the income statement as incurred except to the extent that they are capitalised.
     Borrowing costs are capitalised if they are directly attributable to the acquisition, construction or production of a
     qualifying asset. Capitalisation of borrowing costs commences when the activities to prepare the asset for its
     intended use or sale are in progress and the expenditures and borrowing costs are incurred. Borrowing costs are
     capitalised until the assets are ready for their intended use or sale.

2.21 pROvisiOns

     Provisions are recognised when the Group has a present obligation as a result of a past event, it is probable that
     an outflow of resources embodying economic benefits will be required to settle the obligation and the amount of
     the obligation can be estimated reliably.

     Provisions are reviewed at each balance sheet date and adjusted to reflect the current best estimate. If it is no
     longer probable that an outflow of resources embodying economic benefits will be required to settle the obligation,
     the provision is reversed.




Reinventing Ourselves Touching Lives                                                                 Hyflux Ltd Annual Report 2007   81
                                             HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.22 empLOyee benefiTs

     (a) Defined contribution plans

          The Group participates in the national pension schemes as defined by the laws of the countries in which
          it has operations. In particular, the Singapore companies in the Group make contributions to the Central
          Provident Fund scheme in Singapore, a defined contribution pension scheme. Contributions to national
          pension schemes are recognised as an expense in the period in which the related service is performed.

     (b) employee leave entitlement

          Employee entitlements to annual leave are recognised as a liability when they accrue to employees.
          The estimated liability for leave is recognised for services rendered by employees up to balance sheet date.

     (c) employee share option plans

          Employees of the Group receive remuneration in the form of share options as consideration for services
          rendered. The cost of these equity-settled transactions with employees is measured by reference to the fair
          value of the options at the date on which the options are granted. This cost is recognised in the income
          statement, with a corresponding increase in the employee share option reserve, over the vesting period. The
          cumulative expense recognised at each reporting date until the vesting date reflects the extent to which the
          vesting period has expired and the Group’s best estimate of the number of options that will ultimately vest.
          The charge or credit to the income statement for a period represents the movement in cumulative expense
          recognised as at the beginning and end of that period.

          No expense is recognised for options that do not ultimately vest, except for options where vesting is conditional
          upon a market condition which are treated as vesting irrespective of whether or not the market condition is
          satisfied, provided that all other performance and/or service conditions are satisfied. The employee share
          option reserve is transferred to retain earnings upon expiry of the share options. When the options are
          exercised, the employee share option reserve is transferred to share capital as new shares are issued.

2.23 LeAses

     (a) As lessee

          Finance leases, which transfer to the Group substantially all the risks and rewards incidental to ownership of
          the leased item, are capitalised at the inception of the lease at the fair value of the leased asset or, if lower,
          at the present value of the minimum lease payments. Any initial direct costs are also added to the amount
          capitalised. Lease payments are apportioned between the finance charges and reduction of the lease liability
          so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are
          charged to the income statement. Contingent rents, if any, are charged as expenses in the periods in which
          they are incurred.

          Capitalised leased assets are depreciated over the shorter of the estimated useful life of the asset and the
          lease term, if there is no reasonable certainty that the Group will obtain ownership by the end of the lease
          term.

          Leased assets in which the Group does not assume the risks and rewards of ownership are classified as
          operating leases. Operating lease payments are recognised as an expense in the income statement on a
          straight-line basis over the lease term. The aggregate benefit of incentives provided by the lessor is recognised
          as a reduction of rental expense over the lease term on a straight-line basis.




82    Hyflux Ltd Annual Report 2007                                                  Reinventing Ourselves Touching Lives
                                            HyfLux LTD AnD iTs subsiDiARies

                       NOTES TO ThE FINANCIAl STATEMENTS
                                                31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.23 LeAses (cOnT’D)

     (b) As lessor

          Leases where the Group retains substantially all the risks and rewards of ownership of the asset are classified
          as operating leases. Initial direct costs incurred in negotiating an operating lease are added to the carrying
          amount of the leased asset and recognised over the lease term on the same bases as rental income.

          Leases where the Group transfer substantially all the risks and rewards of ownership of the leased asset to
          the lessee are classified as finance leases.

          Lease receivables are apportioned between the finance lease income and reduction of the lease receivable
          so as to achieve a constant rate of interest on the remaining balance of the asset. Finance lease income is
          recognised in the income statement.

2.24 Revenue

     Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the
     revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or
     receivable.

     (a) contract revenue

          Revenue is recognised using the percentage-of-completion method. The stage of completion measured
          by relevance to, where appropriate, the contract value of work performed to date (based on project milestones)
          to estimated total contract value or the proportion that contract costs incurred for work performed to-date
          bear to the estimated total contract costs. Where the contract outcome cannot be measured reliably, revenue
          is recognised only to the extent of contract costs incurred that are recoverable.

     (b) Operating and maintenance income

          Revenue is recognised upon rendering of services.

     (c) finance lease income

          Accounting policy for recognising finance lease income is stated in Note 2.23.

     (d) sale of goods

          Revenue is recognised upon the transfer of significant risks and rewards of ownership of the goods to the
          customer, which generally coincides with delivery and acceptance of the goods sold. Revenue is not recognised
          to the extent where there are significant uncertainties regarding recovery of the consideration due, associated
          costs or the possible return of goods.




Reinventing Ourselves Touching Lives                                                        Hyflux Ltd Annual Report 2007   83
                                             HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.24 Revenue (cOnT’D)

     (e) Licence fee

           Licence fees collected for the use of an enterprise’s assets are recognised in accordance with the substance
           of the agreement. This is usually on a straight-line basis over the life of the agreement. When the Group has
           fulfilled all obligations under the license fee agreement, the license fees collected will be recognised in full
           immediately.

           In instances whereby licence fee will be received is contingent on the occurrence of a future event, the
           revenue is recognised only when it is probable that the licence fee will be received, which is normally when
           the event has occurred.

     (f)   finance income

           Accounting policy for recognising finance income is stated in Note 2.2(c)(i).

     (g) Rental income

           Rental income arising on investment property is accounted for on a straight-line basis over the lease period.

     (h) interest income

           Interest income is recognised as interest accrues (using the effective interest method).

2.25 incOme TAxes

     (a) current tax

           Current tax assets and liabilities for the current and prior periods are measured at the amount expected to
           be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount
           are those that are enacted or substantively enacted by the balance sheet date. Current taxes are recognised
           in the income statement.

     (b) Deferred tax

           Deferred income tax is provided using the liability method on temporary differences at the balance sheet date
           between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.




84    Hyflux Ltd Annual Report 2007                                                 Reinventing Ourselves Touching Lives
                                               HyfLux LTD AnD iTs subsiDiARies

                        NOTES TO ThE FINANCIAl STATEMENTS
                                                    31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.25 incOme TAxes (cOnT’D)

     (b) Deferred tax (cont’d)

          Deferred tax liabilities are recognised for all taxable temporary differences, except:

	    	    •	 Where	the	deferred	tax	liability	arises	from	the	initial	recognition	of	goodwill	or	of	an	asset	or	liability	in	a	
             transaction that is not a business combination and, at the time of the transaction, affects neither the accounting
	    	    	 profit	nor	taxable	profit	or	loss;

	    	    •	 In	respect	of	taxable	temporary	differences	associated	with	investments	in	subsidiaries,	associates	and	
             interests in joint ventures, where the timing of the reversal of the temporary differences can be controlled and
	    	    	 it	is	probable	that	the	temporary	differences	will	not	reverse	in	the	foreseeable	future;	and

	    	    •	 In	respect	of	deductible	temporary	differences	and	carry-forward	of	unused	tax	credits	and	unused	tax	losses,	
             to the extent that it is probable that taxable profit will be available against which the deductible temporary
             differences, and the carry-forward of unused tax credits and unused tax losses can be utilised.

          The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the
          extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred
          income tax asset to be utilised. Unrecognised deferred income tax assets are reassessed at each balance sheet
          date and are recognised to the extent that it has become probable that future taxable profit will allow the deferred
          tax asset to be recovered.

          Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year
          when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or
          substantively enacted at the balance sheet date.

          Deferred taxes are recognised in the income statement.

     (c) sales tax

          Revenues, expenses and assets are recognised net of the amount of sales tax except:

	    	    •	 Where	 the	 sales	 tax	 incurred	 on	 a	 purchase	 of	 assets	 or	 services	 is	 not	 recoverable	 from	 the	 taxation	
             authority, in which case the sales tax is recognised as part of the cost of acquisition of the asset or as part
	    	    	 of	the	expense	item	as	applicable;	and

	    	    •	 Receivables	and	payables	that	are	stated	with	the	amount	of	sales	tax	included.

          The net amount of sales tax recoverable from, or payable to, the taxation authority is included as part of
          receivables or payables in the balance sheet.

2.26 DeRivATive finAnciAL insTRumenTs AnD HeDging AcTiviTies

     A derivative financial instruments is initially recognised at fair value on the date of the contract is entered into and
     are subsequently remeasured at fair value. Derivative financial instruments are carried as assets when the fair
     value is positive and as liabilities when the fair value is negative.

     Any gains or losses arising from changes in fair value on derivative financial instruments that do not qualify for
     hedge accounting are taken to the income statement.




Reinventing Ourselves Touching Lives                                                                Hyflux Ltd Annual Report 2007   85
                                             HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007


2.   summARy Of significAnT AccOunTing pOLicies (cOnT’D)

2.27 gOveRnmenT gRAnTs

     Government grants are recognised at their fair value where there is reasonable assurance that the grant will
     be received and all attaching conditions will be complied with. Where the grant relates to an asset, the fair value is
     recognised as deferred capital grant on the balance sheet and is amortised to the income statement over the
     expected useful life of the relevant asset by equal annual instalments.

     When the grant relates to an expense item, it is recognised in the income statement over the period necessary to
     match them on a systematic basis to the costs that it is intended to compensate. Grants related to income is
     presented as a credit in the income statement, either separately or under a general heading such as “Other
     income”.

2.28 segmenT RepORTing

     A business segment is a distinguishable component of the Group that is engaged in providing products or services
     that are subject to risks and returns that are different from those of other business segments. A geographical
     segment is a distinguishable component of the Group that is engaged in providing products or services within a
     particular economic environment and that is subject to risks and returns that are different from those of components
     operating in other economic environments.

2.29 sHARe cApiTAL AnD sHARe issue expense

     Proceeds from issuance of ordinary shares are recognised as share capital in equity. Incremental costs directly
     attributable to the issuance of ordinary shares are deducted against share capital.

2.30 cOnTingencies

     A contingent liability or asset is a possible obligation or asset that arises from past events and whose existence will
     be confirmed only by the occurrence or non-occurrence of uncertain future event(s) not wholly within the control
     of the Group.

     Contingent liabilities and assets are not recognised on the balance sheet of the Group.

3.   Revenue
                                                                                                            group
                                                                                                   2007             2006
                                                                                                  s$’000          s$’000
                                                                                                                (Restated)

     Revenue from construction contracts and service concession arrangements                     181,906         110,619
     Operating and maintenance income                                                              6,562           7,929
     Finance lease income                                                                          1,630          11,695
     Sale of goods                                                                                 1,264           5,369
     Licence fee                                                                                      37           6,443
     Finance income                                                                                1,387             324

                                                                                                 192,786         142,379




86    Hyflux Ltd Annual Report 2007                                                 Reinventing Ourselves Touching Lives
                                            HyfLux LTD AnD iTs subsiDiARies

                       NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007


4.   OTHeR incOme/(expenses) – neT
                                                                                                            group
                                                                                                2007                 2006
                                                                                               s$’000               s$’000

     Rental income :
     -   Investment property (Note 12)                                                             228                    228
     -   Others                                                                                     56                    127

                                                                                                   284                     355
     Net foreign exchange loss arising from derivative financial instruments                        (6)                   (283)
     Goodwill arising from acquisition of interests from minority interests written off           (242)                      –
     Others                                                                                         72                    (386)

                                                                                                   108                    (314)

5.   empLOyees cOmpensATiOn
                                                                                                            group
                                                                                                2007                 2006
                                                                                               s$’000              s$’000
                                                                                                                 (Restated)

     Wages, salaries and bonuses                                                              23,165                15,031
     Pension contributions                                                                     2,419                 1,881
     Other personnel expenses                                                                  5,137                 3,130

     Total personnel expenses                                                                 30,721                20,042
     Cost of share-based payments                                                              3,131                 3,150

                                                                                              33,852                23,192

     Details of the key management personnel compensation included in
         the employees compensation are as follows:

     Directors’ fees                                                                              457                   305
     Short-term employee benefits                                                               2,286                 1,958
     Cost of share-based payments                                                               1,600                 1,436

     Total compensation for key management personnel                                            4,343                 3,699

     Comprise amounts payable to:
     -  Directors of the Company                                                                2,057                 1,967
     -  Other key management personnel                                                          2,286                 1,732

                                                                                                4,343                 3,699

     The remuneration of key management personnel is determined by the Remuneration Committee having regard to
     the performance of individuals and market trends.




Reinventing Ourselves Touching Lives                                                      Hyflux Ltd Annual Report 2007     87
                                           HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                               31 December 2007


6.   finAnce incOme

                                                                                                       group
                                                                                             2007               2006
                                                                                            s$’000             s$’000

     Interest income from:
     -    loans and receivables                                                              2,548             5,534

7.   finAnce expenses

                                                                                                       group
                                                                                             2007               2006
                                                                                            s$’000             s$’000

     Interest expense on:
     -    bank loans                                                                         8,092             9,558
     -    obligation under finance lease                                                        27                 4

                                                                                             8,119             9,562
     Amortised interest on loans and receivables                                             1,697                 –
     Less: Interest expense capitalise in plant and equipment (Note 11)                       (938)             (484)

     Finance expenses recognised in the income statement                                     8,878             9,078

8.   OTHeR OpeRATing expenses

     The following items have been included in arriving at other operating expenses:

                                                                                                       group
                                                                                             2007             2006
                                                                                            s$’000          s$’000
                                                                                                          (Restated)

     Crediting/(charging):

     Non-audit fees paid to auditors of the Company                                            (156)             (165)
     Provision for inventory obsolescence                                                      (378)                –
     Inventory written down                                                                    (279)           (1,252)
     Impairment of financial assets
     - trade receivables (Note 21)                                                           (1,022)             (197)
     - other receivables (Note 22)                                                                –            (1,236)
     Reversal of impairment of trade receivables (Note 21)                                      977                 –
     Foreign exchange gain/(loss) - net                                                       8,805            (2,530)




88    Hyflux Ltd Annual Report 2007                                             Reinventing Ourselves Touching Lives
                                           HyfLux LTD AnD iTs subsiDiARies

                       NOTES TO ThE FINANCIAl STATEMENTS
                                                31 December 2007


9.   TAx expense

     (a) major components of income tax expense

          The major components of income tax expense for the years ended 31 December 2007 and 2006 are:

          (i) Income statement:

                                                                                                    group
                                                                                        2007                  2006
                                                                                       s$’000                s$’000

             Current income tax
             - current income taxation                                                   1,065                1,345
             - (over)/under provision in respect of previous years                        (242)                  55

                                                                                            823               1,400
             Deferred income tax
             - originated and reversal of temporary differences                          1,587                  335
             - effect of reduction in tax rate                                            (362)                   –
             - underprovision in respect of previous years                                   –                3,086

                                                                                         1,225                3,421

             Income tax expense recognised in the income statement                       2,048                4,821

         (ii) Statement of changes in equity:

             Net change in hedging reserve for derivative financial instruments
                designated as hedging instruments in cash flow hedges:

             - commodity swaps                                                                  –                  (706)
             - interest rate swaps                                                              –                   999
             Fair value adjustments on acquisition of subsidiaries                              –                  (809)

             Income tax expense reported in equity                                              –                  (516)




Reinventing Ourselves Touching Lives                                               Hyflux Ltd Annual Report 2007      89
                                                      HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                                           31 December 2007


9.   TAx expense (cOnT’D)

     (b) Relationship between tax expense and profit before taxation

          A reconciliation between tax expense and profit before taxation multiplied by the applicable corporate tax rate
          for the years ended 31 December 2007 and 2006 is as follows:

                                                                                                                                   group
                                                                                                                          2007              2006
                                                                                                                         s$’000            s$’000

          Profit before taxation                                                                                         38,693            20,178

          Tax at the domestic rates applicable to profits
             in the countries where the Group operates (1)                                                                9,170             5,201
          Adjustments:
             Non-deductible expenses                                                                                      2,028               948
             Income not subject to taxation                                                                              (6,222)           (2,273)
             Effect of reduction in tax rate                                                                               (362)                –
             Effect of partial tax exemption and tax relief                                                              (5,874)           (3,600)
             Deferred tax assets not recognised (Note 29)                                                                 3,550             1,404
             (Over)/under provision in respect of previous years                                                           (242)            3,141

          Income tax expense recognised in the income statement                                                           2,048             4,821

          (1)
                The reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction.


          The corporate income tax rate applicable to Singapore companies of the Group was reduced to 18% for the
          Year of Assessment 2008 onwards from 20% for the Year of Assessment 2007.

          The Company has been granted Pioneer Status in respect of production and sale of membrane systems.
          Accordingly, the Company enjoys for a period of seven years, commencing from 1 September 2001, tax
          exemption on income arising from sale of membrane systems subject to the terms and conditions of the
          Pioneer Status.

          In accordance with the “Income Tax Law of the People’s Republic of China for Enterprises with Foreign
          Investment and Foreign Enterprises”, Hyflux Filtech (Shanghai) Co., Ltd, Hyflux Unitech (Shanghai) Co.,
          Ltd and Hyflux NewSpring Construction (Shanghai) Co., Ltd 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. Hyflux
          Filtech (Shanghai) Co., Ltd is in its fourth profitable year after offsetting all accumulated losses. Accordingly,
          50% of EIT is payable for the current year. Hyflux Unitech (Shanghai) Co., Ltd is in its first profitable year
          after offsetting all accumulated losses. Accordingly, its profit is exempted from EIT in the current financial
          year. Hyflux NewSpring Construction (Shanghai) Co., Ltd is in its second profitable year after offsetting all
          accumulated losses. Accordingly, its profit is exempted from EIT in the current financial year.




90    Hyflux Ltd Annual Report 2007                                                                   Reinventing Ourselves Touching Lives
                                            HyfLux LTD AnD iTs subsiDiARies

                       NOTES TO ThE FINANCIAl STATEMENTS
                                                31 December 2007


9.   TAx expense (cOnT’D)

     (b) Relationship between tax expense and profit before taxation (cont’d)

          In addition, Hydrochem Engineering (Shanghai) Co., Ltd has been granted “Hi-Tech Incentive” for a period
          of five years commencing from 2006 to 2010. Under this incentive, the Company is refunded 2.1% of the
          income tax by the Pudong New District Treasury Authority.

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

10. eARnings peR sHARe

     Basic earnings per share amounts are calculated by dividing profit for the year attributable to shareholders of the
     Company by the weighted average number of ordinary shares outstanding during the financial year.

     Diluted earnings per share amounts are calculated by dividing profit for the year attributable to shareholders of the
     Company by the weighted average number of ordinary shares outstanding during the financial year plus the
     weighted average number of ordinary shares that would be issued on the conversion of all the dilutive potential
     ordinary shares into ordinary shares.

     The following table reflects the income statement and share data used in the computation of basic and diluted
     earnings per share for the years ended 31 December:

                                                                                                               group
                                                                                                    2007                     2006

     Profit net of tax attributable to shareholders of the
          Company used in computation of basic and diluted
          earnings per share (S$’000)                                                            32,949                15,473

     Weighted average number of ordinary shares for
          basic earnings per share computation                                            521,256,402 516,507,735
     Dilutive effect of share options                                                       7,695,573   5,002,528

     Weighted average number of ordinary shares
         adjusted for the effect of dilution                                              528,951,975 521,510,263

     Nil (2006: 2,550,000) share options granted to employees under the existing employee share option plans have
     not been included in the calculation of diluted earnings per share because they are anti-dilutive for the current
     and previous financial years.

     Warrants granted to a shareholder, details of which are disclosed in Note 30(b), have not been included in the
     calculation of diluted earnings per share because the dilutive effect of the warrants could not be reliably
     estimated.




Reinventing Ourselves Touching Lives                                                         Hyflux Ltd Annual Report 2007     91
                                       11. pROpeRTy, pLAnT AnD equipmenT                                                          Leasehold




92
                                                                              plant and     motor                    Office   properties and     furniture                 construction-
                                       group                                 machinery    vehicles   computers   equipment    improvements     and fittings   Renovation     in-progress     Total
                                                                                s$’000     s$’000      s$’000       s$’000           s$’000       s$’000         s$’000          s$’000    s$’000
                                       cost
                                               At 1.1.2006                       7,552      2,185       2,751        1,163            7,303           482         4,654             627    26,717
                                               Adoption of FRS 40                    –          –           –            –           (3,348)             –            –               –    (3,348)
                                               At 1.1.2006 (restated)            7,552      2,185       2,751        1,163            3,955           482         4,654            627     23,369
                                               Additions                         2,348        219         903          345              383           241           525         16,088     21,052
                                               Disposals                           (67)      (339)        (29)         (52)               –           (28)            –           (925)    (1,440)
                                               Acquisition of subsidiaries       1,936        664          59           98              396            24           119               –     3,296




  Hyflux Ltd Annual Report 2007
                                               Reclassification                      –          –          36          (78)              22            20             -               –          –
                                               Net exchange differences            (77)       (29)        (23)         (28)              (1)            5          (128)              5      (276)
                                               At 31.12.2006 (restated)        11,692       2,700       3,697        1,448            4,755           744         5,170         15,795     46,001
                                               At 31.12.2006                   11,692       2,700       3,697        1,448            9,066           744         5,170         27,819      62,336
                                               Adoption of FRS 40                    –          –           –            –           (3,348)             –            –               –     (3,348)
                                               Adoption of INT FRS 112               –          –           –            –             (963)             –            –        (12,024)    (12,987)
                                               At 1.1.2007 (restated)           11,692      2,700       3,697        1,448            4,755           744         5,170         15,795      46,001
                                               Additions                         3,053        595       2,051          344            4,320           291         8,743         15,719      35,116
                                               Disposals                       (17,283)      (299)        (44)         (10)            (605)          (73)           (9)        (4,585)    (22,908)
                                               Acquisition of subsidiaries      17,010         39           –            –                –            49             –          3,772      20,870
                                               Reclassification                  3,854          –           –            –                –              –            –         (3,854)          –
                                               Net exchange differences             65         16           8           12                1              2           33             18        155
                                               At 31.12.2007                   18,391       3,051       5,712        1,794            8,471         1,013        13,937         26,865     79,234
                                       Accumulated depreciation
                                            At 1.1.2006                          3,962      1,294       1,859          704            1,059           179           982               –    10,039
                                            Adoption of FRS 40                       –          –           –            –             (717)             –            –               –      (717)
                                               At 1.1.2006 (restated)            3,962      1,294       1,859          704              342           179           982               –     9,322
                                               Charge for the year               1,197        328         471          176              123            84           549               –     2,928
                                               Disposals                           (32)      (304)         (8)         (19)               –            (7)            –               –      (370)
                                               Acquisition of subsidiaries         578        156          18           27                6             2             8               –       795
                                               Reclassification                      –          –           2           (5)               2             1             –               –          –
                                               Net exchange differences            (38)        (7)          8          (14)              (7)           (3)          (16)              –        (77)
                                               At 31.12.2006 (restated)          5,667      1,467       2,350          869              466           256         1,523               –    12,598
                                               At 31.12.2006                     5,667      1,467       2,350          869            1,296           256         1,523               –    13,428
                                               Adoption of FRS 40                    –          –           –            –             (846)             –            –               –      (846)
                                               Adoption of INT FRS 112               –          –           –            –               16              –            –               –        16
                                               At 1.1.2007 (restated)            5,667      1,467       2,350          869              466           256         1,523               –    12,598
                                               Charge for the year               1,958        470         813          204              607            95           649               –     4,796
                                               Disposals                          (141)      (174)        (14)         (25)            (409)          (32)            –               –      (795)
                                               Net exchange differences             30          8           5            8                1             1             9               –        62
                                               At 31.12.2007                     7,514      1,771       3,154        1,056              665           320         2,181               –    16,661
                                       net carrying amount




Reinventing Ourselves Touching Lives
                                             At 31.12.2007                     10,877       1,280       2,558          738            7,806           693        11,756         26,865     62,573
                                               At 31.12.2006 (restated)          6,025      1,233       1,347          579            4,289           488         3,647         15,795     33,403
                                                                                                                      HyfLux LTD AnD iTs subsiDiARies

                                                                                                 NOTES TO ThE FINANCIAl STATEMENTS
                                                                                                                              31 December 2007

                                       11. pROpeRTy, pLAnT AnD equipmenT (cOnT’D)

                                                                                                                 Leasehold           Office      plant and       motor                  furniture    construction-
                                       company                                                                improvements       equipment      machinery       vehicle   computers   and fittings     in-progress     Total
                                                                                                                    s$’000          s$’000         s$’000       s$’000      s$’000       s$’000            s$’000    s$’000
                                       cost
                                          At 1.1.2006                                                                    –               –          2,349          150         688              4             207     3,398
                                          Additions                                                                    733              96          1,890            –         198             12             786     3,715
                                          Disposals                                                                      –               –              –         (150)          –              –               –      (150)




Reinventing Ourselves Touching Lives
                                          At 31.12.2006 and 1.1.2007                                                   733              96          4,239            –         886             16             993     6,963
                                          Additions                                                                     11               1          1,321            –         169             10           3,609     5,121
                                          Disposals                                                                      –               –              –            –           –              –            (660)     (660)
                                          Reclassification                                                               –               –          3,854            –           –              –          (3,854)        –
                                          At 31.12.2007                                                                744              97          9,414            –       1,055             26              88    11,424

                                       Accumulated depreciation
                                          At 1.1.2006                                                                     –              –          1,304          150         680              –               –     2,134
                                          Charge for the year                                                             1              2            531            –          97              1               –       632
                                          Disposals                                                                       –              –              –         (150)          –              –               –      (150)

                                          At 31.12.2006 and 1.1.2007                                                      1              2          1,835            –         777              1               –     2,616
                                          Charge for the year                                                            13             19            985            –         177              2               –     1,196

                                          At 31.12.2007                                                                  14             21          2,820            –         954              3               –     3,812

                                       net carrying amount
                                           At 31.12.2007                                                               730              76          6,594            –         101             23              88     7,612

                                          At 31.12.2006                                                                732              94          2,404            –         109             15             993     4,347


                                       Included in construction-in-progress is interest capitalised during the year amounting to S$938,000 (2006: S$484,000).

                                       Assets held under finance leases

                                       The carrying amount of plant and equipment held under finance leases as at 31 December 2007 was S$357,000 (2006: S$605,000).




93Hyflux Ltd Annual Report 2007
                                          HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                               31 December 2007


12. invesTmenT pROpeRTy
                                                                                                            group
                                                                                                           s$’000

     cost:
          At 1.1.2006                                                                                          –
          Adoption of FRS 40                                                                               3,348

          At 1.1.2006 (restated), 31.12.2006 and 31.12.2007                                                3,348

     Accumulated depreciation:
         At 1.1.2006                                                                                           –
         Adoption of FRS 40                                                                                  717

          At 1.1.2006 (restated)                                                                             717
          Charge for the year                                                                                129

          At 31.12.2006 (restated)                                                                           846
          Charge for the year                                                                                129

          At 31.12.2007                                                                                      975

     net carrying amount:
          At 31.12.2007                                                                                    2,373

          At 31.12.2006                                                                                    2,502


                                                                                                   group
                                                                                          2007            2006
                                                                                         s$’000         s$’000
                                                                                                      (Restated)

     Credited/(charged) to income statement:

     Rental income from investment property                                                 228              228
     Direct operating expenses arising from investment property                             (59)             (59)

     The fair value of the investment property at 31 December 2007 is approximating S$3,115,000.




94    Hyflux Ltd Annual Report 2007                                          Reinventing Ourselves Touching Lives
                                           HyfLux LTD AnD iTs subsiDiARies

                         NOTES TO ThE FINANCIAl STATEMENTS
                                                31 December 2007


13. inTAngibLe AsseTs
                                                intellectual
                                 goodwill on       property    Development       Licensing       concession
                                consolidation         rights          costs           fees            rights             Total
                                     s$’000         s$’000          s$’000         s$’000           s$’000             s$’000

     group

     cost
            At 1.1.2006                  223         2,561          17,406          3,591                   –          23,781
            Additions                      –           103           5,183          2,358               4,506          12,150
            Acquisition of
               subsidiaries            4,065         2,403                –             –               1,898            8,366
            Disposals                      –             –              (98)         (193)                  –             (291)
            Net exchange
               differences                 –          (385)              (7)           (8)                     –             (400)

            At 31.12.2006 and
               1.1.2007                4,288         4,682          22,484          5,748               6,404          43,606
            Additions                      –            49           9,419            746                   –          10,214
            Acquisition of
               businesses                  –              –               –             –               3,559           3,559
            Disposals                      –            (16)           (142)       (1,022)             (9,963)        (11,143)
            Net exchange
               differences                 –             77                  4          –                      –              81

            At 31.12.2007              4,288         4,792          31,765          5,472                      –       46,317

     Accumulated amortisation
         At 1.1.2006                       –           592           1,321            819                      –         2,732
         Amortisation                      –            47           1,652            213                      –         1,912
         Disposals                         –             –             (10)             –                      –           (10)
         Net exchange
            differences                    –              –              (8)           (2)                     –              (10)

            At 31.12.2006 and
               1.1.2007                    –           639           2,955          1,030                    –           4,624
            Amortisation                   –            51           1,557            357                  308           2,273
            Disposals                      –             –             (77)          (697)                (308)         (1,082)
            Net exchange
               differences                 –              –                  3          –                      –                3

            At 31.12.2007                  –           690           4,438            690                      –         5,818

     net carrying amount
          At 31.12.2007                4,288         4,102          27,327          4,782                      –       40,499

            At 31.12.2006              4,288         4,043          19,529          4,718               6,404          38,982




Reinventing Ourselves Touching Lives                                                         Hyflux Ltd Annual Report 2007     95
                                          HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                              31 December 2007


13. inTAngibLe AsseTs (cOnT’D)

                                                               intellectual
                                                                  property Development       Licensing
                                                                     rights       costs           fees      Total
                                                                   s$’000       s$’000         s$’000     s$’000

     company

     cost
            At 1.1.2006                                             1,711           259             –      1,970
            Additions                                                  51             –         1,479      1,530

            At 31.12.2006 and 1.1.2007                              1,762           259         1,479      3,500
            Additions                                                  17             8           888        913

            At 31.12.2007                                           1,779           267         2,367      4,413

     Accumulated amortisation
         At 1.1.2006                                                    19           30             –         49
         Amortisation                                                   13           26             4         43

            At 31.12.2006 and 1.1.2007                                  32           56             4         92
            Amortisation                                                15           26            98        139

            At 31.12.2007                                               47           82           102        231

     net carrying amount
          At 31.12.2007                                             1,732           185         2,265      4,182

            At 31.12.2006                                           1,730           203         1,475      3,408


     Impairment testing of goodwill

     Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to country of operation
     and business segment.

     A segment-level summary of the goodwill allocation is presented below:

                                                                              industrial        Others      Total
                                                                                s$’000         s$’000     s$’000

     Singapore                                                                    1,525           360      1,885
     Netherlands                                                                  2,403             –      2,403

                                                                                  3,928           360      4,288




96    Hyflux Ltd Annual Report 2007                                           Reinventing Ourselves Touching Lives
                                             HyfLux LTD AnD iTs subsiDiARies

                        NOTES TO ThE FINANCIAl STATEMENTS
                                                  31 December 2007


13. inTAngibLe AsseTs (cOnT’D)

     The recoverable amount of CGU is determined based on value-in-use calculations. The calculations use cash
     flow projections based on financial budgets approved by management covering a five-year period.

     The assumptions used for the analysis of each CGU within the business segment are consistent with the industry
     forecast and the discount rates used of 8% are pre-tax and reflect specific risks relating to the relevant
     segments.

14. invesTmenTs in subsiDiARies
                                                                                                         company
                                                                                                 2007               2006
                                                                                                s$’000             s$’000

     Unquoted equity shares, at cost                                                       113,106                82,470
     Loans due from subsidiaries                                                            24,509                25,422

                                                                                           137,615              107,892
     Impairment losses                                                                      (3,238)              (3,238)

     Carrying amount of investments                                                        134,377              104,654

     The directors have determined that the loans due from subsidiaries form part of the Company’s investment and
     are therefore included in the cost of investments in subsidiaries. These loans are unsecured and non-interest
     bearing. They have no fixed repayment terms and are repayable only when cash flows of the subsidiaries permit.
     Accordingly, the fair values are not determinable as the timing of the future cash flows arising from the loans
     cannot be estimated reliably.

     Details of the significant subsidiaries are as follows:

                                                                               country of
                                                                               incorporation          effective equity
                                                                               and place of           interest held by
     name of companies                 principal activities                    business                  the group
                                                                                                      2007      2006
                                                                                                          %         %
     Held by the company

     Hydrochem (S) Pte Ltd             Engineering, procurement,               Singapore                 100             100
                                       construction (“EPC”), installation,
                                       testing, commissioning, operation
                                       and maintenance of liquid
                                       treatment plants

     Hydrochem Engineering             Provision of management services        Singapore                 100             100
     (S) Pte Ltd                       and supply of fabricated components


     Hyflux Engineering Pte Ltd        Operation and maintenance of liquid     Singapore                 100             100
                                       treatment plants and sale of treated
                                       liquids

     Hyflux International Ltd(1)       Investment holding                      British Virgin            100             100
                                                                               Islands



Reinventing Ourselves Touching Lives                                                     Hyflux Ltd Annual Report 2007     97
                                            HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007


14. invesTmenTs in subsiDiARies (cOnT’D)
                                                                                  country of
                                                                                  incorporation     effective equity
                                                                                  and place of      interest held by
     name of companies                principal activities                        business             the group
                                                                                                    2007      2006
                                                                                                       %         %
     Held by the company (cont’d)

     Hyflux Lifestyle Products (S)    Research, development, manufacture,         Singapore             –      100
     Pte Ltd(7)                       marketing and distribution of consumer
                                      lifestyle products and merchandise

     Hyflux Aquosus (Singapore)       Manufacture and sale of consumer            Singapore             –      100
     Pte Ltd(7)                       products

     Hyflux Filtech (Singapore)       Investment holding                          Singapore           71        71
     Pte Ltd

     Hyflux NewSpring                 EPC, installation, testing, commissioning, People’s            100       100
     Construction Engineering         operation and maintenance of liquid and Republic of
     (Shanghai) Co., Ltd(2)           non-liquid treatment plants                China

     Hyflux IP Resource Pte Ltd       Investment holding                          Singapore          100       100

     SinoSpring Utility Ltd(1)(8)     Investment holding                          British Virgin     100        80
                                                                                  Islands

     Eflux Singapore Pte Ltd          Collection, processing, recycling,          Singapore          100       100
                                      purification and sale of spent/
                                      solvent products

     Hyflux Consumer Products         Investment holding                          Singapore          100       100
     Pte Ltd(7)

     Hyflux Water Projects Ltd        Investment holding                          British Virgin     100          –
                                                                                  Islands

     Spring China Utility Ltd(1)      Investment holding                          British Virgin     100          –
                                                                                  Islands

     New Spring Utility Pte Ltd       Investment holding                          Singapore          100          –

     Held through subsidiaries

     Hydrochem Engineering            EPC, installation, testing, and             People’s           100       100
     (Shanghai) Co., Ltd(4)           commissioning of industrial liquid          Republic of
                                      separation and treatment systems            China

     Hyflux Filtech Shanghai          EPC, installation, testing, commissioning   People’s            71        71
     Co., Ltd(2)                      of industrial liquid separation and         Republic of
                                      treatment systems                           China

     Eflux SK Pte Ltd                 Manufacture and blending of                 Singapore           51        51
                                      lubricating oil


98    Hyflux Ltd Annual Report 2007                                               Reinventing Ourselves Touching Lives
                                             HyfLux LTD AnD iTs subsiDiARies

                           NOTES TO ThE FINANCIAl STATEMENTS
                                                  31 December 2007


14. invesTmenTs in subsiDiARies (cOnT’D)
                                                                                   country of
                                                                                   incorporation          effective equity
                                                                                   and place of           interest held by
     name of companies                 principal activities                        business                  the group
                                                                                                          2007      2006
                                                                                                             %          %
     Held through subsidiaries (cont’d)

     CEPAration B.V(5)                 Manufacturing, developing and trading       Netherlands               51              51
                                       of ceramic hollow membranes

     CEPAration N.V(5)                 Manufacturing, developing and trading       Netherlands               51              51
                                       of ceramic hollow membranes

     Hyflux Utility Ltd(1) (8)         Investment holding                          British Virgin              –             80
                                                                                   Islands

     Hyflux NewSpring                  Development and operation of water          People’s                    –             80
     (Nan Tong) Co., Ltd(8)            treatment plant and sale of treated water   Republic of
                                                                                   China

     Hyflux NewSpring                  Development and operation of water          People’s                    –             80
     (Dafeng) Co., Ltd(8)              treatment plant and sale of treated water   Republic of
                                                                                   China

     Hyflux NewSpring                  Development and operation of water          People’s                    –             80
     (Liao Yang) Co., Ltd(8)           treatment plant and sale of treated water   Republic of
                                                                                   China

     Tianjin Dagang NewSpring          Development and operation of seawater       People’s                 100              76
     Co., Ltd(3)                       treatment plant and sale of treated water   Republic of
                                                                                   China

     Hyflux NewSpring                  Development and operation of water          People’s                    –             80
     (Wuxi) Co., Ltd(8)                treatment plant and sale of treated water   Republic of
                                                                                   China

     Hyflux NewSpring                  Development and operation of water          People’s                    –             80
     (Tian Tai) Co., Ltd(8)            treatment plant and sale of treated water   Republic of
                                                                                   China

     Hyflux NewSpring                  Development and operation of water          People’s                    –             80
     (Changshu) Co., Ltd(8)            treatment plant and sale of treated water   Republic of
                                                                                   China

     Hyflux Aquosus (Singapore)        Manufacture and sale of consumer            Singapore                100               –
     Pte Ltd(7)                        products

     Hyflux Lifestyle Products (S)     Research, development, manufacture,         Singapore                100               –
     Pte Ltd(7)                        marketing and distribution of consumer
                                       lifestyle products and merchandise




Reinventing Ourselves Touching Lives                                                         Hyflux Ltd Annual Report 2007    99
                                                      HyfLux LTD AnD iTs subsiDiARies

                               NOTES TO ThE FINANCIAl STATEMENTS
                                                            31 December 2007


14. invesTmenTs in subsiDiARies (cOnT’D)
                                                                                                       country of
                                                                                                       incorporation           effective equity
                                                                                                       and place of            interest held by
      name of companies                       principal activities                                     business                   the group
                                                                                                                                2007 2006
                                                                                                                                   %        %
      Held through subsidiaries (cont’d)

      Hyflux NewSpring                        Development and operation of water                      People’s                       –        80
      (Taizhou) Co., Ltd(8)                   treatment plant and sale of treated water               Republic of
                                                                                                      China

      Hyflux NewSpring                        Development and operation of water                      People’s                       –        76
      (Yangzhou) Co., Ltd(8)                  treatment plant and sale of treated water               Republic of
                                                                                                      China

      Hyflux Newspring (GuanYun)              Development and operation of water                      People’s                   100            –
      WTP Co., Ltd(6)                         treatment plant and sale of treated water               Republic of
                                                                                                      China

      Hyflux Newspring (Funing)               Development and operation of water                      People’s                   100            –
      Co., Ltd(6)                             treatment plant and sale of treated water               Republic of
                                                                                                      China

      Hyflux Newspring (Guan Yun) Development and operation of waste water People’s                                              100            –
      WWTP Co., Ltd(6)            treatment plant and sale of treated water Republic of
                                                                            China

      Hyflux Newspring (Leping)               Development and operation of water                      People’s                   100            –
      Co., Ltd(6)                             treatment plant and sale of treated water               Republic of
                                                                                                      China

      Hyflux Newspring (Dezhou)               Development and operation of water                      People’s                   100            –
      Co., Ltd(3)                             treatment plant and sale of treated water               Republic of
                                                                                                      China

      The subsidiaries incorporated in Singapore are audited by Ernst & Young, Singapore.
      (1)
            Not required to be audited by the law of the country of incorporation.

      (2)
            Audited by Shu Lun Pan Certified Public Accountants Co., Ltd, PRC.

      (3)
            Audited by Tianjing GuangXing Cai Certified Public Accountants, PRC. In 2006, Tianjin Dagang NewSpring Co., Ltd was 95% owned by
            SinoSpring Utility Ltd, which was 80% owned by the Company. During the financial year, minority shareholders of Tianjin Dagang
            NewSpring Co., Ltd exited and SinoSpring Utility Ltd transferred its equity interest in Tianjin Dagang NewSpring Co., Ltd to Spring China
            Utility Ltd, a wholly owned subsidiary of the Company.

      (4)
            Audited by Shanghai Hddy Certified Public Accountants Co., Ltd, PRC.

      (5)
            Audited by overseas affiliates of Ernst & Young.

      (6)
            Not required to be audited by the law of the country of incorporation for the current financial year.

      (7)
            During the financial year, the Company transferred its 100% equity interest in Hyflux Lifestyle Products (S) Pte Ltd and Hyflux Aquosus
            (Singapore) Pte Ltd to a subsidiary, Hyflux Consumer Products Pte Ltd.

      (8)
            During the financial year, SinoSpring Utility Ltd disposed 13 China plants held by Hyflux Utility Ltd and its subsidiaries to Hyflux Water
            Trust in December 2007. Subsequent to this disposal, SinoSpring Utility Ltd became a wholly-owned subsidiary of Hyflux Ltd after the
            Company acquired the 20% interests held by its minority shareholder.




100     Hyflux Ltd Annual Report 2007                                                                  Reinventing Ourselves Touching Lives
                                                     HyfLux LTD AnD iTs subsiDiARies

                           NOTES TO ThE FINANCIAl STATEMENTS
                                                          31 December 2007


15. invesTmenTs in jOinT venTuRe
                                                                                                                                 company
                                                                                                                       2007                 2006
                                                                                                                      s$’000               s$’000

     Unquoted equity shares, at cost                                                                                   1,125              20,000

     Details of the significant joint ventures are as follows:

                                                                                                   country of
                                                                                                   incorporation               effective equity
                                                                                                   and place of                interest held by
     name of companies                      principal activities                                   business                       the group
                                                                                                                                2007      2006
                                                                                                                                   %         %
     Held by the company

     SingSpring Pte Ltd(1)                  Operation of seawater desalination                      Singapore                        –           50
                                            plant and sale of treated water

     Hyflux Marmon                          Research and development                                Singapore                      50             –
     Development Pte Ltd(2)

     (1)
           During the financial year, the Company divested 20% of its interests in SingSpring Pte Ltd in February 2007. As a result, this investment
           was reclassified from a joint venture to an associate (Note 16).

     (2)
           During the financial year, the Company acquired 50% of the issued share capital of a newly incorporated company, Hyflux Marmon
           Development Pte Ltd.


     The aggregate amounts of each of current assets, non-current assets, current liabilities, non-current liabilities,
     income and expenses related to the Group’s interests in the joint ventures are as follows:

                                                                                                                                  group
                                                                                                                       2007                 2006
                                                                                                                      s$’000               s$’000

     Assets and liabilities:
     Current assets                                                                                                       419             11,376
     Non-current assets                                                                                                   456             99,254

     Total assets                                                                                                         875            110,630

     Current liabilities                                                                                                 (106)             (8,473)
     Non-current liabilities                                                                                                –             (98,461)

     Total liabilities                                                                                                   (106)           (106,934)

     income and expenses:
     Income                                                                                                                 37            15,293

     Expenses                                                                                                            (399)            (11,852)




Reinventing Ourselves Touching Lives                                                                             Hyflux Ltd Annual Report 2007   101
                                              HyfLux LTD AnD iTs subsiDiARies

                              NOTES TO ThE FINANCIAl STATEMENTS
                                                   31 December 2007


16. invesTmenTs in AssOciATes
                                                                                group                         company
                                                                      2007           2006                2007         2006
                                                                     s$’000         s$’000              s$’000      s$’000

      Shares, at cost                                                99,313             7,150           12,277                 –
      Share of post-acquisition reserves, including
          translation differences                                       751              (188)               –                 –

      Carrying amount of investments                                100,064             6,962           12,277                 –

      Fair value of investment in an associate for which
           there is published price quotation                        76,545                  –               –                 –

      Goodwill amounting to S$1,800,000 (2006: Nil) is included in the carrying amount of investments in associates.

      Details of the significant associates are as follows:

                                                                                        country of
                                                                                        incorporation       effective equity
                                                                                        and place of        interest held by
      name of companies                principal activities                             business               the group
                                                                                                             2007     2006
                                                                                                                %        %
      Held by the company

      SingSpring Trust(4)              Operation of seawater desalination               Singapore            30.0         –
                                       plants and sale of treated water

      Held though subsidiaries

      Beijing Shouren Water            Development, manufacture and sale of             People’s             18.5     18.5
      Engineering Co., Ltd(1)          manufactured equipment and parts of              Republic of
                                       liquid separation and treatment systems.         China
                                       Provision of technical and consultancy
                                       services

      New Spring (Huludao)             Development and operation of seawater            People’s             49.0     39.2
      Co., Ltd(3)                      desalination plant and sale of treated           Republic of
                                       water                                            China

      Ningxia Hypow                    Manufacturing and marketing of L-lactic          People’s             25.0     25.0
      Bio-Technology Co., Ltd(7)       acid and L-lactic acid products                  Republic of
                                                                                        China

      Hyflux Water Trust(2)            Business Trust                                   Singapore            31.5         –

      Lube Oil Re-fining Co.,          Collection of used oil, processing,              Kingdom of           41.5         –
      LLC (“LUBREC”)(5)                recycling and/or purification of used            Saudi Arabia
                                       lube oil and sale of processed oil

      Marmon Hyflux Investment         Investment holding                               Singapore            49.0         –
      Pte Ltd(6)




102    Hyflux Ltd Annual Report 2007                                                    Reinventing Ourselves Touching Lives
                                                     HyfLux LTD AnD iTs subsiDiARies

                           NOTES TO ThE FINANCIAl STATEMENTS
                                                          31 December 2007


16. invesTmenTs in AssOciATes (cOnT’D)
     (1)
           Audited by Beijing Huatong Certified Public Accountants Co., Ltd, PRC.

     (2)
           During the financial year, a wholly-owned subsidiary of the Company acquired 31.5% of the issued share capital of Hyflux Water Trust
           for a cash consideration of approximately S$73.7 million.

     (3)
           Audited by Liao Ning Zhong Zhi Certified Public Accountants Co., Ltd. In 2006, New Spring (Huludao) Co., Ltd was 49% owned by
           SinoSpring Utility Ltd, which was 80% owned by the Company. During the financial year, SinoSpring Utility Ltd transferred its 49%
           equity interest in New Spring (Huludao) Co., Ltd to Spring China Utility Ltd, a wholly owned subsidiary of the company.

     (4)
           During the financial year, the Company’s interests in SingSpring Pte Ltd was reduced from 50% to 30% in February 2007. As a result,
           this investment was reclassified from a joint venture to an associate (Note 15). In addition, this investment in associate was pledged to
           the associate’s principal bank for banking facilities granted to the associate.

     (5)
           The Company’s wholly-owned subsidiary, Eflux Singapore Pte Ltd acquired 41.5% of the issued capital of LUBREC for a cash consideration
           of approximately S$10.8 million in August 2007.

     (6)
           During the financial year, the Company acquired 49% of the issued share capital of a newly incorporated company, Marmon Hyflux
           Investment Pte Ltd.

     (7)
           Audited by Beijing Wulian Fang Yuan Public Accountants Co., Ltd, PRC.

     The summarised financial information of the associates are as follows:

                                                                                                                                   group
                                                                                                                        2007               2006
                                                                                                                       s$’000             s$’000

     Assets and liabilities:
     Current assets                                                                                                   59,491              21,506
     Non-current assets                                                                                              126,457               2,501

     Total assets                                                                                                    185,948              24,007

     Current liabilities                                                                                             (17,945)                    (960)
     Non-current liabilities                                                                                         (61,050)                       –

     Total liabilities                                                                                               (78,995)                    (960)

     Results:
     Revenue                                                                                                         10,258                      210

     Profit/(loss) for the year                                                                                        1,277                     (125)

17. LOng-TeRm invesTmenTs

                                                                                             group                           company
                                                                                    2007             2006               2007        2006
                                                                                   s$’000           s$’000             s$’000     s$’000

     Available-for-sale financial assets:

     Unquoted equity shares, at cost                                                7,917            5,997                 899                   899




Reinventing Ourselves Touching Lives                                                                             Hyflux Ltd Annual Report 2007    103
                                              HyfLux LTD AnD iTs subsiDiARies

                              NOTES TO ThE FINANCIAl STATEMENTS
                                                  31 December 2007


18. finAnciAL AnD LeAse ReceivAbLes

      The Group has concession arrangements with the various governing bodies or agencies of the government of
      the People’s Republic of China (the “grantors”) to supply treated water from water treatment plants, and operate
      wastewater treatment plants and water recycling plants. Under the concession arrangements, the Group will
      construct and/or operate the plants for Concession Periods of between 20 to 30 years and transfer the plants to
      the grantors at the end of the Concession Periods. Such concession arrangements fall within the scope of INT
      FRS 112. The Group has previously accounted for these arrangements as finance lease in accordance with INT
      FRS 104. On adoption of INT FRS 112, certain water purchase agreements and water treatment concessions are
      now recognised as financial receivables in accordance with Note 2.2(c)(i) instead of finance lease arrangement.
      Under INT FRS 112, the revenue for the construction services provided under the arrangements and the
      corresponding financial receivables and/or intangible assets arising are recognised based on the percentage of
      completion method during the construction phase.

                                                                                                        group
                                                                                              2007             2006
                                                                                             s$’000          s$’000
                                                                                                           (Restated)

      Financial receivables                                                                    9,757        57,736
      Lease receivables                                                                            –       100,011

      Total financial and lease receivables                                                    9,757       157,747
      Less: Current portion                                                                     (187)         (757)

                                                                                               9,570       156,990

      Future minimum lease receivable under finance leases together with the present value of the net minimum lease
      receivable were as follows:
                                                                                                      group
                                                                                               2007          2006
                                                                                            s$’000          s$’000
                                                                                                         (Restated)

      Minimum lease receivable:
      Not later than one year                                                                      –         11,822
      Later than one year but not later than five years                                            –         47,322
      Later than five years                                                                        –        165,126

      Total minimum lease receivable                                                               –        224,270
      Less: Future finance income                                                                  –       (153,032)

      Present value of minimum lease receivable                                                    –            71,238
      Unguaranteed residual value                                                                  –            28,773

      Net investment in finance lease                                                              –        100,011

      Present value of the finance lease receivable was analysed as follows:

      Not later than one year                                                                      –               757
      Later than one year but not later than five years                                            –             4,451
      Later than five year                                                                         –            66,030

      Present value of minimum lease receivable                                                    –            71,238



104    Hyflux Ltd Annual Report 2007                                             Reinventing Ourselves Touching Lives
                                            HyfLux LTD AnD iTs subsiDiARies

                        NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007


19. gROss AmOunT Due fOR cOnTRAcT wORK
                                                                              group                        company
                                                                     2007            2006             2007         2006
                                                                    s$’000         s$’000            s$’000      s$’000
                                                                                 (Restated)

     Aggregate amount of costs incurred and
         recognised profits to date                                169,474         98,075           14,038              20,960
     Less: Progress billings                                       (76,217)       (49,168)          (4,511)             (6,929)

     Gross amounts due from customers for contract work             93,257         48,907             9,527             14,031

20. invenTORies
                                                                              group                       company
                                                                     2007              2006          2007         2006
                                                                    s$’000            s$’000        s$’000      s$’000

     Raw materials                                                  14,570            6,368         12,924                3,954
     Work-in-progress                                                3,955            1,003          2,860                  898
     Finished goods                                                  2,116            3,822          1,714                3,654

     Total inventories at lower of cost and net realisable value    20,641         11,193           17,498                8,506

     During the financial year, the Group has provided for inventories obsolescence of $378,000 (2006: Nil) and has
     written down inventories of S$279,000 (2006: S$1,252,000), which are recognised as an expense in the income
     statement.

21. TRADe ReceivAbLes AnD AmOunTs Due fROm ReLATeD pARTies

                                                                              group                        company
                                                                     2007              2006           2007         2006
                                                                    s$’000            s$’000         s$’000      s$’000

     Trade receivables:
     -   third parties                                              46,110         30,734             1,148               1,165
     Due from related parties (trade):
     -   subsidiaries                                                    –              –           22,673              15,929
     -   joint venture                                                   –          1,348                –                   –
     -   associates                                                 15,216         14,393                –                   –

                                                                    15,216         15,741           22,673              15,929

     Trade receivables and amounts due from related parties         61,326         46,475           23,821              17,094
     Add:
     -   Financial and lease receivables (Note 18)                   9,757       157,747                     –                  –
     -   Other receivables and deposits and non-trade
             amounts due from related parties (Note 22)             36,527         25,471          177,622              47,502
     -   Short-term loans (Note 23)                                      –             98                –                   –
     -   Cash and fixed deposits (Note 24)                         121,047         55,827            6,074               4,694

     Total loans and receivables                                   228,657       285,618           207,517              69,290

     Included in the trade receivables from external parties for the Group are notes receivable of S$4,372,000 (2006:
     S$2,814,000) which are non-interest bearing and relate to bank documents secured from customers for settlement
     of payment within the next six months.


Reinventing Ourselves Touching Lives                                                           Hyflux Ltd Annual Report 2007   105
                                            HyfLux LTD AnD iTs subsiDiARies

                              NOTES TO ThE FINANCIAl STATEMENTS
                                                31 December 2007


21. TRADe ReceivAbLes AnD AmOunTs Due fROm ReLATeD pARTies (cOnT’D)

      Trade receivables are non-interest bearing and are generally on 30 to 90 days’ terms. They are recognised at their
      original invoice amounts which represents their fair values on initial recognition.

      The significant foreign currencies which the trade receivables and amounts due from related parties are
      denominated in at 31 December are as follows:
                                                                       group                  company
                                                                  2007        2006       2007         2006
                                                                s$’000       s$’000     s$’000      s$’000

      US Dollars                                                    18,604        30,055        10,616          3,886
      RMB                                                           32,924         7,058             –              –

      Receivables that are past due but not impaired

      The Group has trade receivables amounting to S$27,895,000 (2006: S$9,650,000) that are past due at the
      balance sheet date but not impaired. These receivables are unsecured and the analysis of their aging at the
      balance sheet date is as follows:
                                                                                                  group
                                                                                           2007           2006
                                                                                         s$’000         s$’000

      Trade receivables past due:
      -   Lesser than 60 days                                                                    5,062          2,209
      -   61 to 120 days                                                                         7,192          3,229
      -   More than 120 days                                                                    15,731          4,212

                                                                                                27,985          9,650

      Receivables that are impaired

      The Group’s trade receivables that are impaired at the balance sheet date and the movement of the allowance
      accounts used to record the impairment are as follows:
                                                                                                    group
                                                                                            collectively impaired
                                                                                             2007          2006
                                                                                           s$’000         s$’000

      Trade receivables - nominal amounts                                                        2,405          2,515
      Less: Allowance for impairment                                                            (1,902)        (2,009)

                                                                                                   503            506

      Movements in allowance accounts:
      At 1 January                                                                               2,009          1,812
      Charge for the year                                                                        1,022            197
      Written off                                                                                 (105)             –
      Written back                                                                                (977)             –
      Exchange differences                                                                         (47)             –

      At 31 December                                                                             1,902          2,009




106    Hyflux Ltd Annual Report 2007                                              Reinventing Ourselves Touching Lives
                                             HyfLux LTD AnD iTs subsiDiARies

                      NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007


22. OTHeR ReceivAbLes AnD DepOsiTs AnD nOn-TRADe AmOunTs Due fROm ReLATeD pARTies

                                                                               group                        company
                                                                     2007               2006           2007         2006
                                                                    s$’000             s$’000         s$’000      s$’000

     current
     Other receivables and deposits:
     -    third parties                                             24,812         13,080              3,353               1,816
     -    staff advances                                               680            104                 21                  23
     -    deposits                                                   6,248          6,875                  3                   3

                                                                    31,740         20,059              3,377               1,842

     Due from related parties (non-trade):
     -   subsidiaries                                                    –                 –        152,505              30,734
     -   joint venture                                                  11             1,333              –                 411
     -   associates                                                  4,776               100          2,907                   –

                                                                     4,787             1,433        155,412              31,145
     non-current
     Other receivables:
     -   third parties                                                    –            3,979                  –                  –

     Due from related parties (non-trade):
     -   subsidiaries                                                     –                 –        18,833              11,766
     -   joint venture                                                    –                 –             –               2,749

                                                                          –                 –        18,833              14,515

     Other receivables and deposits and non-trade
         amounts due from related parties                           36,527         25,471           177,622              47,502

     Other receivables are unsecured, non-interest bearing and repayable on demand.

     The current non-trade amounts due from subsidiaries are unsecured, non-interest bearing and are expected to
     be repaid within the next 12 months except for a receivable which bears interest at rates ranging from 4.15% to
     5.79% (2006: 4.15% to 5.79%) per annum.

     The current non-trade amounts due from joint ventures and associates are unsecured, non-interest bearing and
     expected to be repaid within the next 12 months.

     The non-trade non-current amounts due from subsidiaries and joint venture are unsecured, non-interest bearing
     and not expected to be repaid within the next 12 months.




Reinventing Ourselves Touching Lives                                                            Hyflux Ltd Annual Report 2007   107
                                            HyfLux LTD AnD iTs subsiDiARies

                              NOTES TO ThE FINANCIAl STATEMENTS
                                                31 December 2007


22. OTHeR ReceivAbLes AnD DepOsiTs AnD nOn-TRADe AmOunTs Due fROm ReLATeD pARTies (cOnT’D)

      The significant foreign currencies which the other receivables and deposits and non-trade amounts due from
      related parties are denominated in at 31 December are as follows:

                                                                              group                         company
                                                                     2007              2006         2007          2006
                                                                    s$’000            s$’000       s$’000        s$’000

      US Dollars                                                     1,517             7,002     108,864         11,758
      RMB                                                           12,081             4,843           –              3
      Euro                                                             847             3,959       3,057             91

      At the balance sheet date, the Group has provided an allowance of S$1,658,000 (2006: S$1,725,000) for
      the impairment of unsecured receivables with a nominal amount of S$1,658,000 (2006: S$1,725,000).

23. sHORT-TeRm LOAns

      These loans were unsecured, bore interest ranging from 4.0% to 7.0% per annum and were repaid in full during
      the financial year.

24. cAsH AnD fixeD DepOsiTs

                                                                              group                      company
                                                                     2007              2006         2007         2006
                                                                    s$’000            s$’000       s$’000      s$’000

      Cash at banks and on hand                                     50,076        40,594            3,175           311
      Fixed deposits                                                70,971        15,233            2,899         4,383

                                                                  121,047         55,827            6,074         4,694

      Cash at banks earns interest at floating rates based on daily bank deposit rates ranging from 0.9 % to 3.9% (2006:
      1.0% to 5.0%) per annum. Fixed deposits are made for varying periods of between one day to three months
      depending on the immediate cash requirements of the Group and earn interests at rates ranging from 0.3% to
      5.2% (2006: 1.5% to 6.0%) per annum with maturities within the next 12 months.

      As at 31 December 2007, the Company had approximately available undrawn committed borrowing facilities of
      S$14,800,000 (2006: S$175,600,000) in respect of which all conditions prevalent had been met.

      The significant foreign currencies which the cash and fixed deposits are denominated in at 31 December are as
      follows:

                                                                              group                      company
                                                                     2007              2006         2007         2006
                                                                    s$’000            s$’000       s$’000      s$’000

      US Dollars                                                    20,325        16,420            2,331         1,781
      RMB                                                           29,196        22,693                –             –




108    Hyflux Ltd Annual Report 2007                                                  Reinventing Ourselves Touching Lives
                                              HyfLux LTD AnD iTs subsiDiARies

                        NOTES TO ThE FINANCIAl STATEMENTS
                                                   31 December 2007


25. TRADe pAyAbLes AnD AmOunTs Due TO ReLATeD pARTies

                                                                                group                        company
                                                                      2007               2006           2007         2006
                                                                     s$’000             s$’000         s$’000     s$’000

     Trade payables:
     -   third parties                                               55,022         35,277               1,172              1,012
     Due to related parties (trade):
     -   subsidiaries                                                      –                 –             845                   30

     Trade payables and amounts due to related parties               55,022         35,277               2,017              1,042
     Add:
     -   Other payables and accruals and non-trade
             amount due to related parties (Note 26)                 19,543         15,157            39,957              11,982
     -   Progress payments from customers                            25,989          3,358             2,080               2,062
     -   Interest-bearing loans and borrowings (Note 27)            198,511        148,664           195,596              67,420
     -   Finance lease liabilities (Note 28)                            291            576                 –                   –

     Total financial liabilities carried at amortised cost          299,356        203,032           239,650              82,506

     Trade payables are normally settled on 30 to 60-day terms.

     The trade amounts due to related parties are unsecured, non-interest bearing and are repayable on demand.

     The significant foreign currencies which the trade payables and amounts due to related parties are denominated
     in at 31 December are as follows:
                                                                         group                      company
                                                                    2007        2006           2007         2006
                                                                  s$’000       s$’000        s$’000        s$’000

     US Dollars                                                           –              –                   27                  28
     RMB                                                             37,570         20,494                    –                   –
     Euro                                                               228            193                    –                   –




Reinventing Ourselves Touching Lives                                                             Hyflux Ltd Annual Report 2007   109
                                            HyfLux LTD AnD iTs subsiDiARies

                              NOTES TO ThE FINANCIAl STATEMENTS
                                                31 December 2007


26. OTHeR pAyAbLes AnD AccRuALs AnD nOn-TRADe AmOunTs Due TO ReLATeD pARTies

                                                                              group                      company
                                                                    2007             2006           2007         2006
                                                                   s$’000          s$’000          s$’000      s$’000
                                                                                 (Restated)

      Other payables and accruals:
      -   payables                                                 10,071             5,178         2,917         1,737
      -   accrued operating expenses                                7,676             8,706           299           293

                                                                   17,747          13,884           3,216         2,030

      Due to related parties (non-trade):
      -   subsidiaries                                                  –                 –        36,741         9,851
      -   joint venture                                                 –             1,273             –           101
      -   associates                                                1,796                 –             –             –

                                                                    1,796             1,273        36,741         9,952

      Other payables and accruals and
          non-trade amounts due to related parties                 19,543          15,157          39,957        11,982

      Other payables are normally settled on an average term of two to three months.

      The non-trade amounts due to related parties are unsecured, non-interest bearing and are repayable
      on demand.

      The significant foreign currencies which the other payables and accruals and non-trade amounts due to related
      parties are denominated in at 31 December are as follows:

                                                                              group                      company
                                                                    2007               2006         2007         2006
                                                                   s$’000             s$’000       s$’000      s$’000

      US Dollars                                                    2,532             3,350        10,915         5,871
      RMB                                                           6,349             3,877         2,833         1,767




110    Hyflux Ltd Annual Report 2007                                                  Reinventing Ourselves Touching Lives
                                             HyfLux LTD AnD iTs subsiDiARies

                        NOTES TO ThE FINANCIAl STATEMENTS
                                                  31 December 2007


27. inTeResT-beARing LOAns AnD bORROwings

                                            weighted
                                            average
                                            effective
                                             interest                            group                        company
                                            rate p.a.     maturities     2007         2006          2007                  2006
                                                %                       s$’000       s$’000        s$’000                s$’000

     current
     S$ bank loan                              3.76         2008         5,245       30,902          5,000               30,902
     Euro bank loans                             –            –              –          778              –                    –
     Share of a joint venture’s bank loan        –            –              –        1,983              –                    –

                                                                         5,245       33,663          5,000               30,902

     non-current
     S$ bank loans                             3.17         2011  12,000             15,000       12,000                 15,000
     US$ bank loans                            6.22         2011 178,596             21,518      178,596                 21,518
     Euro bank loans                           4.71         2017   2,670              2,394            –                      –
     Share of a joint venture’s bank loan        –            –        –             76,089            –                      –

                                                                       193,266      115,001      190,596                 36,518

                                                                       198,511      148,664      195,596                 67,420

     (i)   S$ bank loan (current)

           The interest on this S$ bank loan is based on floating interest rates (inclusive of an applicable margin),
           unsecured and fully repayable by March 2008.

     (ii) S$ bank loans (non-current)

           The interest on these bank loans are based in the floating applicable interest rates of the respective currencies
           borrowed, inclusive of a margin, unsecured and fully repayable in 2011.

           Certain subsidiaries in the Group have provided corporate guarantees to the financial institutions for the loans
           extended to the Company.

     (iii) Share of a joint venture’s bank loan

           During the financial year, the Company divested its interest in this joint venture. In 2006, the loan bears
           floating interest at rates ranging from 4.52% to 4.6% per annum, including margin. The Group has swapped
           the floating rates with a fixed rate of 4.6%, including margin, using an interest rate swap.




Reinventing Ourselves Touching Lives                                                           Hyflux Ltd Annual Report 2007   111
                                             HyfLux LTD AnD iTs subsiDiARies

                              NOTES TO ThE FINANCIAl STATEMENTS
                                                  31 December 2007


27. inTeResT-beARing LOAns AnD bORROwings (cOnT’D)

      (iii) Share of a joint venture’s bank loan (cont’d)

           The loan is secured by a charge on all present and future assets and intellectual property of a joint venture
           in the Group and a mortgage on the land where the desalination plant of the joint venture is located. In
           addition, the shareholders of the joint venture (including the Company) have also pledged all the issued
           ordinary shares in the joint venture to the principal banks as security for the loan.

      (iv) Euro bank loans

           One of the Euro bank loan is secured by a lien over the inventory and receivables of a subsidiary and partially
           guaranteed by a director of the subsidiary and a financial institution.

      (v) US$ bank loan

           The interest on this bank loan is based on the floating applicable interest rates of the respective currencies
           borrowed, inclusive of a margin, unsecured and fully repayable in 2011.

           Certain subsidiaries in the Group have provided corporate guarantees to the financial institutions for the loans
           extended to the Company.

28. finAnce LeAse LiAbiLiTies

      The Group has finance leases for certain items of plant and equipment (Note 11). These leases have terms of
      renewal but no purchase options and escalation clauses. There are no restrictions placed upon the Group by
      entering into these leases. Renewals are at the option of the specific entity that holds the lease. The average
      discount rate implicit in the leases is 6.5% (2006: 7.2%) per annum.

      Future minimum lease payments under finance leases together with the present value of the net minimum lease
      payments are as follows:

                                                                                             group
                                                                   minimum         present       minimum         present
                                                                      lease       value of          lease       value of
                                                                   payments      payments        payments      payments
                                                                      2007           2007           2006           2006
                                                                     s$’000        s$’000          s$’000        s$’000

      Not later than one year                                            135           104            267           244
      Later than one year but not later than five years                  200           187            381           332

                                                                         335           291            648           576
      Less: Amounts representing finance charges                         (44)            –            (72)            –

      Present value of minimum lease payments                            291           291            576           576




112    Hyflux Ltd Annual Report 2007                                                Reinventing Ourselves Touching Lives
                                             HyfLux LTD AnD iTs subsiDiARies

                       NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007


29. DefeRReD TAx

     Deferred income tax as at 31 December relates to the following:

                                                                      group                                    company
                                                   consolidated                  consolidated
                                                   balance sheet               income statement           balance sheet
                                                 2007        2006               2007       2006          2007      2006
                                                s$’000     s$’000             s$’000     s$’000         s$’000    s$’000

     Deferred tax liabilities
     Differences in depreciation
          for tax purposes                      (1,285)     (2,517)              679     2,517               (95)              (95)
     Intangible assets                          (1,590)     (1,103)            1,241     1,103               (64)              (64)
     Fair value adjustment on
          derivative financial instruments            –       293                  –         –                  –                –
     Fair value adjustments on
          acquisition of subsidiaries                 –       (809)                –         –                  –                –

                                                (2,875)     (4,136)                                        (159)              (159)

     Deferred tax assets
     Fair value adjustments on
          acquisition of subsidiaries                –        306                  –         –                  –                –
     Unutilised tax losses                       1,200        199               (695)     (199)                 –                –
     Other items                                    18          –                  –         –                  –                –

                                                 1,218        505                                               –                –

     Deferred tax expense                                                      1,225     3,421

     Unrecognised tax losses and capital allowances

     The Group has tax losses and capital allowances of approximately S$28,990,000 (2006: S$9,187,000) and
     S$1,569,000 (2006: S$279,000) respectively that are available for offset against future taxable profits of the
     companies in which the losses arose for which no deferred tax asset is recognised due to uncertainty of its
     recoverability. The Company has tax losses and capital allowances of approximately S$1,262,000 (2006: Nil) and
     S$3,938,000 (2006: S$1,562,000) respectively.

     The use of these tax losses and capital allowances is subject to the agreement of the tax authorities and
     compliance with certain provisions of the tax legislation of the respective countries in which the companies
     operate.




Reinventing Ourselves Touching Lives                                                          Hyflux Ltd Annual Report 2007    113
                                                  HyfLux LTD AnD iTs subsiDiARies

                                 NOTES TO ThE FINANCIAl STATEMENTS
                                                       31 December 2007


29. DefeRReD TAx (cOnT’D)

      Unrecognised temporary differences relating to investments in subsidiaries, associates and joint venture

      As at 31 December 2007, there was no recognition of deferred tax liability (2006: Nil) for taxes that would be
      payable on the unremitted earnings of certain of the Company’s subsidiaries, associates or joint venture, as:

	     •	      The	 Company	 has	 determined	 that	 undistributed	 profits	 of	 its	 subsidiaries	 will	 not	 be	 distributed	 in	 the	
	     	       foreseeable	future;

	     •	      The	Company	have	agreements	with	its	associates	that	the	profits	of	the	associate	will	not	be	distributed	until	
              it obtains the consent of the Company. The Company does not foresee giving such consent in the foreseeable
	     	       future;	and

	     •	                                                                                                                        	
              The	joint	venture	of	the	Company	cannot	distribute	its	profits	until	it	obtains	the	consent	of	both	the	venturers.	
              The Company does not foresee giving such consent in the foreseeable future.

30. sHARe cApiTAL AnD empLOyee sHARe OpTiOn ReseRve

                                                                                            group and company
                                                                                   2007                                2006
                                                                  no. of shares                       no. of shares
      share capital                                                        ‘000         s$’000                 ‘000        s$’000

      At 1 January                                                     518,885         91,142              514,557         25,728

      Exercise of employee share options                                  4,495           4,678               4,328           3,007

      Transfer of share premium reserve to share capital                       –              –                    –       62,407

      At 31 December                                                   523,380         95,820              518,885         91,142

      The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All
      ordinary shares carry one vote per share without restrictions.

      In accordance with the Companies (Amendment) Act 2005, on 30 January 2006, the shares of the Company
      ceased to have a par value and the amount standing in the share premium reserve became part of the Company’s
      share capital.

      The Company has an employee share option scheme under which options to subscribe for the Company’s ordinary
      shares have been granted to employees of the Group.

      employee share Option Reserve

      Employee share option reserve represents the equity-settled share options granted to employees (Note 30(a)).
      The 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, and is reduced by the expiry or exercise
      of the share options.




114       Hyflux Ltd Annual Report 2007                                                     Reinventing Ourselves Touching Lives
                                            HyfLux LTD AnD iTs subsiDiARies

                       NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007


30. sHARe cApiTAL AnD empLOyee sHARe OpTiOn ReseRve (cOnT’D)

     (a) employee share Option scheme

          The Hyflux Employees’ Share Option Scheme (the “Scheme”) was approved by the members of the Company
          at an Extraordinary General Meeting held on 27 September 2001. The Scheme provides an opportunity for
          employees and directors of the Company and its subsidiaries, other than substantial shareholders of the
          Company, to participate in the equity of the Company.

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

          The Scheme is administered by a committee (“the Committee”) comprising four directors. It shall continue
          to be in force at the discretion of the Committee for a period of 10 years from 27 September 2001. However,
          the period may be extended with the approval of members at a general meeting of the Company and of any
          relevant authorities which may then be required. The contractual life of the option is ten years and there are
          no cash settlement alternatives.

          The fair value of equity share options as at the date of grant is estimated by an external valuer using the
          Trinomial Option Pricing Module, taking into account the terms and conditions upon which the options were
          granted. The inputs to the model used for the years ended 31 December 2007 and 31 December 2006 are
          described below.

          Discrete dividend payments are based on historical and forecasted dividend trend which range from S$0.004
          to S$0.014 (2006: S$0.004 to S$0.014). The expected volatility of 36.09% to 37.93% (2006: 32.79% to
          34.87%) reflects the assumption that the historical volatility is indicative of future trends, which may also not
          necessarily be the actual outcome. Risk-free rate refers to the annual yield at date of grant of options, of a
          Singapore Government Securities Bond with comparable maturity based on the Singapore Sovereign yield
          curves. It ranges from 2.27% to 2.53% (2006: 2.87% to 2.95%). The expected life of the options of 92
          days (2006: 92 days) is based on historical data and is not necessarily indicative of exercise patterns that
          may occur. Share price of underlying shares are based on the last traded price as at the date of grant option.
          No other features of the option grant were incorporated into the measurement of fair value.




Reinventing Ourselves Touching Lives                                                          Hyflux Ltd Annual Report 2007   115
                                                                                                             HyfLux LTD AnD iTs subsiDiARies




116
                                                                                         NOTES TO ThE FINANCIAl STATEMENTS
                                                                                                                 31 December 2007
                                       30. sHARe cApiTAL AnD empLOyee sHARe OpTiOn ReseRve (cOnT’D)

                                       (a)   employee share Option scheme (cont’d)

                                             At the end of the financial year, details of all the options granted under the Scheme on the unissued ordinary shares of the Company were as follows:




  Hyflux Ltd Annual Report 2007
                                             Date of grant        balance as         Options      Options          Options          balance as          no. of holders          exercise             exercisable
                                             of options          at 1.1.2007         granted     forfeited       exercised      at 31.12.2007         as at 31.12.2007           price                 period
                                                                                                                                                                                   s$

                                             15.10.2001           1,678,312              –       (1,250)      (1,188,500)             488,562                55                 0.2688      15.10.2002 - 27.09.2011
                                             11.01.2002              12,750              –             –         (12,000)                 750                 1                 0.4123      11.01.2003 - 27.09.2011
                                             28.03.2002              60,906              –             –         (34,000)              26,906                 2                 0.5436      28.03.2003 - 27.09.2011
                                             08.04.2002              18,750              –             –         (10,000)               8,750                 1                 0.5401      08.04.2003 - 27.09.2011
                                             13.05.2002              94,500              –         (500)         (94,000)                   –                 1                 0.5504      13.05.2003 - 27.09.2011
                                             08.07.2002              18,750              –             –         (18,000)                 750                 1                 0.5664      08.07.2003 - 27.09.2011
                                             01.08.2002             235,125              –             –        (234,000)               1,125                 1                 0.5888      01.08.2003 - 27.09.2011
                                             16.09.2002             190,875              –             –        (190,000)                 875                 5                 0.4869      16.09.2003 - 27.09.2011
                                             07.01.2003             433,250              –      (26,750)        (213,000)             193,500                 4                 0.5995      07.01.2004 - 27.09.2011
                                             07.04.2003             337,750              –             –        (188,000)             149,750                 3                 0.7253      07.04.2004 - 27.09.2011
                                             16.10.2003           1,010,500              –             –        (279,000)             731,500                 9                 1.0581      16.10.2004 - 27.09.2011
                                             08.12.2003           1,575,000              –             –        (525,000)           1,050,000                 2                 1.0197      08.12.2004 - 27.09.2011
                                             29.12.2003             625,000              –      (15,500)        (164,000)             445,500                15                 1.0627      29.12.2004 - 27.09.2011
                                             14.05.2004             360,000              –             –        (120,000)             240,000                 1                 0.9600      14.05.2005 - 27.09.2011
                                             07.02.2005           3,408,500              –     (183,500)        (640,000)           2,585,000                39                 1.8600      07.02.2006 - 27.09.2011
                                             03.05.2005             300,000              –             –        (120,000)             180,000                 1                 2.3227      03.05.2006 - 27.09.2011
                                             09.05.2005           4,500,000              –             –                –           4,500,000                 1                 2.3067      09.05.2006 - 27.09.2011
                                             01.06.2005              75,000              –             –         (30,000)              45,000                 2                 2.5493      01.06.2006 - 27.09.2011
                                             08.06.2005              45,000              –             –                –              45,000                 1                 2.6507      08.06.2006 - 27.09.2011
                                             28.03.2006           2,430,000              –     (360,000)        (222,000)           1,848,000                16                 2.6620      28.03.2007 - 27.09.2011
                                             18.10.2006           1,800,000              –     (100,000)        (100,000)           1,600,000                 4                 2.3620      18.10.2007 - 27.09.2011
                                             07.12.2006           3,480,000              –     (310,000)        (114,000)           3,056,000                65                 2.3720      07.12.2007 - 27.09.2011
                                             05.04.2007                   –        970,000     (240,000)                –             730,000                 6                 2.6240      05.04.2008 - 27.09.2011
                                             23.05.2007                   –      1,180,000     (200,000)                –             980,000                 5                 2.6080      23.05.2008 - 27.09.2011
                                             25.09.2007                   –      3,430,000             –                –           3,430,000                42                 2.7920      25.09.2008 - 27.09.2011

                                                                 22,689,968      5,580,000 (1,437,500)        (4,495,500)          22,336,968               283




Reinventing Ourselves Touching Lives
                                            HyfLux LTD AnD iTs subsiDiARies

                       NOTES TO ThE FINANCIAl STATEMENTS
                                                    31 December 2007


30. sHARe cApiTAL AnD empLOyee sHARe OpTiOn ReseRve (cOnT’D)

     (a) employee share Option scheme (cont’d)

          Details of the options to subscribe for ordinary shares of the Company granted to directors of the Company
          pursuant to the Hyflux Employees’ Share Option Scheme:

                                                         Aggregate options
                                                        granted (including    Aggregate options
                                                        bonus issue) since      exercised since
                                         Options           commencement         commencement             Aggregate options
                                         granted            of the scheme        of the scheme              outstanding as
                                       during the                 to end of            to end of                  at end of
         name of director          financial year            financial year       financial year             financial year

          Lum Ooi Lin                          –              6,375,000            (1,125,000)                   5,250,000
          Teo Kiang Kok                        –                250,000                     –                      250,000
          Lee Joo Hai                          –                250,000                     –                      250,000
          Gay Chee Cheong                      –                200,000                     –                      200,000
          Christopher Murugasu                 –                862,500              (501,563)                     360,937

          Total                                –              7,937,500            (1,626,563)                   6,310,937

     (b) warrants

          On 23 November 2004, the Company entered into a Warrant Subscription Agreement with Istithmar PJSC
          (“Istithmar”), a company incorporated in Dubai, United Arab Emirates and a shareholder of the Company, in
          which Istithmar is entitled to subscribe for equity shares equal to 10% of the diluted share capital of the
          Company as adjusted under the terms of the Warrant Subscription Agreement. This was approved by the
          shareholders of the Company on 8 April 2005 at an Extraordinary General Meeting.

          Pursuant to an agreement with Istithmar as announced on 18 March 2006, Istithmar’s entitlement to the
          warrant subscription was reduced from 10% to 7.5% of the diluted share capital of the Company on the date
          in which the warrants are exercised, subject to terms of the Warrant Subscription Agreement.

          The exercise price is equivalent to the higher of (a) S$1.95 and (b) the lower of 70% of the volume-weighted
          average price for trades in the Company’s shares done on Singapore Exchange on the market day immediately
          preceding the exercise date or in the 30 calendar day period immediately preceding the exercise date.

          The exercise period is from April 2008 to April 2010.




Reinventing Ourselves Touching Lives                                                       Hyflux Ltd Annual Report 2007   117
                                              HyfLux LTD AnD iTs subsiDiARies

                              NOTES TO ThE FINANCIAl STATEMENTS
                                                  31 December 2007


31. cApiTAL ReseRves

      Capital reserves comprise the following:-

      (i)   Capital gain for the Group wherein the Group’s portion of contribution of share capital for a subsidiary was
            paid on behalf by a minority interest.

      (ii) Statutory reserve fund

            In accordance with the Foreign Enterprise Law applicable to the subsidiary in the People’s Republic of China
            (“PRC”), the subsidiary is required to make appropriation to a Statutory Reserve Fund (“SRF”). At least
            10% of the statutory after tax profits as determined in accordance with the applicable PRC accounting
            standards and regulations must be allocated to the SRF until the cumulative total of the SRF reaches 50%
            of the subsidiary’s 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 subsidiary. The SRF is not
            available for dividend distribution to shareholders.

32. HeDging ReseRve

      Hedging reserve represents the Group’s share of the hedging reserve of a joint venture in 2006.

      During the financial year, the Group divested 20% of its interest in the joint venture and as a result, this investment
      was reclassified from a joint venture to an associate. An amount of S$4,180,000 transferred from the hedging
      reserve to the income statement represented the Group’s share of the net loss on the hedging instruments.

33. cOmmiTmenTs AnD cOnTingencies

      (i)   Operating lease commitments

            The Group has various operating lease agreements for offices and rental of land. Most leases contain
            renewable options. Some of the leases contain escalation clauses. Lease terms do not contain restrictions
            on the Group’s activities concerning dividends, additional debt or further leasing.

            Minimum lease payments recognised as an expense in the income statement for the financial year ended 31
            December 2007 amounted to S$2,689,000 (2006: S$2,285,000).

            Future minimum rental payable under non-cancellable leases as at balance sheet date are as follows:

                                                                                                             group
                                                                                                     2007             2006
                                                                                                    s$’000           s$’000

            Not later than one year                                                                  2,370            2,309
            Later than one year but not later than five years                                        8,616            8,155
            Later than five years                                                                   19,030           20,076

                                                                                                    30,016           30,540




118    Hyflux Ltd Annual Report 2007                                                  Reinventing Ourselves Touching Lives
                                              HyfLux LTD AnD iTs subsiDiARies

                         NOTES TO ThE FINANCIAl STATEMENTS
                                                   31 December 2007

33. cOmmiTmenTs AnD cOnTingencies (cOnT’D)

     (ii) Capital commitments

           As at 31 December 2007, the Group has outstanding commitments in respect of uncalled capital of
           approximately US$70,000,000 (2006: US$38,000,000) in joint ventures and associates.

     (iii) Guarantees

           The Group has provided the following guarantees at the balance sheet date:

           – It has provided bankers’ guarantees to customers and suppliers amounting to S$16,000,000
             (2006: S$17,000,000).

           – It has provided security bonds amounting to S$1,280,000 (2006: S$870,000) to the Controller of
             Immigration in relation to the employment of foreign workers.

           The Company has given formal undertakings to provide financial support to certain subsidiaries with deficit
           shareholders’ funds for at least the next twelve months from the balance sheet date.

34. ReLATeD pARTy DiscLOsuRes

     An entity or individual is considered a related party of the Group for the purposes of the financial statements if:

     (i)   it possesses the ability (directly or indirectly) to control or exercise significant influence over the operating and
	    	     financial	decisions	of	the	group	or	vice	versa;	or

     (ii) it is subject to common control or common significant influence.

     In addition to the related party information disclosed elsewhere in the financial statements, the following significant
     transactions between the Group and related parties took place on terms agreed between the parties during the
     financial year:
                                                                                                            group
                                                                                                    2007            2006
                                                                                                 s$’000            s$’000

     Revenue from manufacturing and construction contracts
     Investee company                                                                                      –                  8,316
     Associates                                                                                       45,214                      –

     Revenue from maintenance contracts
     Joint venture                                                                                           –                2,522
     Associates                                                                                            904                    –

     Revenue from licensing contract
     Associate                                                                                                 –              4,860

     Management fees received from associates                                                           1,000                      –

     Rental income received from
     Associates                                                                                            334                     –
     Joint venture                                                                                          24                     –

     Professional service paid to firms related to a director                                                69                   52




Reinventing Ourselves Touching Lives                                                              Hyflux Ltd Annual Report 2007   119
                                             HyfLux LTD AnD iTs subsiDiARies

                              NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007


35. finAnciAL RisK mAnAgemenT ObjecTives AnD pOLicies

      Risk management is integral to the whole business of the Group. The Group has a system of controls in place to
      create an acceptable balance between cost of risks occurring and the cost of managing the risks. The management
      continually monitors the Group’s risk management process to ensure that an appropriate balance between risk
      and control is achieved. Risk management policies and systems are reviewed regularly to reflect changes in
      market conditions and the Group’s activities.

      The Risk Management 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 following sections provide details regarding the Group’s and Company’s exposure to the above-mentioned
      financial risks and the objectives, policies and processes for the management of these risks.

      (a) credit risk

           Credit risk is the risk of loss that may arise on outstanding financial instruments should a counterparty
           default on its obligations. The Group’s and the Company’s exposure to credit risk arises primarily from trade
           and other receivables.

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

           The Group establishes an allowance for impairment that represents its estimate of incurred losses in respect
           of trade 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 date of payment statistics for similar financial assets.

           The allowance account in respect of trade and other receivables is used to record impairment losses when
           the Group is satisfied that no recovery of the amount owing is possible. At that point, the financial asset is
           considered irrecoverable and the amount charged to the allowance account is written off against the carrying
           amount of the impaired financial asset.




120    Hyflux Ltd Annual Report 2007                                                Reinventing Ourselves Touching Lives
                                              HyfLux LTD AnD iTs subsiDiARies

                       NOTES TO ThE FINANCIAl STATEMENTS
                                                  31 December 2007


35. finAnciAL RisK mAnAgemenT ObjecTives AnD pOLicies (cOnT’D)

     (a) credit risk (cont’d)

          Credit risk concentration profile

          The credit risk concentration profile of the Group’s trade receivables at the balance sheet date is as follows:

                                                                                            group
                                                                           2007                            2006
                                                                     s$’000 % of total               s$’000    % of total

          by country:
             Singapore                                                6,363            14            6,276                     20
             People’s Republic of China                              37,824            82           24,254                     79
             Other countries                                          1,923             4              204                      1

                                                                     46,110          100            30,734                    100

          by industry sectors:
              Municipal                                              18,453            40            1,575                      5
              Industrial                                             21,392            46           25,150                     82
              Others                                                  6,265            14            4,009                     13

                                                                     46,110          100            30,734                    100

          At the balance sheet date, approximately 82% (2006: 79%) of the Group’s trade receivables were due from the
          Municipal and Industrial business segments located in the People’s Republic of China.

          Financial assets that are neither past due nor impaired

          Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good
          payment record with the Group. Cash and short-term deposits, that are neither past due nor impaired are
          placed with or entered into with reputable financial institutions or companies with high credit ratings and no
          history of default.

          Financial assets that are either past due or impaired

          Information regarding financial assets that are either past due or impaired is disclosed in Note 21 of the
          financial statements.




Reinventing Ourselves Touching Lives                                                          Hyflux Ltd Annual Report 2007   121
                                               HyfLux LTD AnD iTs subsiDiARies

                              NOTES TO ThE FINANCIAl STATEMENTS
                                                   31 December 2007


35. finAnciAL RisK mAnAgemenT ObjecTives AnD pOLicies (cOnT’D)

      (b) Liquidity risk

           Liquidity risk is the risk that the Group or the Company will encounter difficulty in meeting financial obligations
           due to shortage of funds. The Group’s and the Company’s exposure to liquidity risk arises primarily from the
           timing of the maturities of financial assets and liabilities. The Group monitors its liquidity risk and maintains a
           level of cash and cash equivalent demand adequate for management to finance the Group’s operations and
           to migitate the effects of fluctuation in cash flows. For long-term projects which require long-term funding,
           the Group may arrange project financing or other long-term financing programme as appropriately.

           At the balance sheet date, approximately 3% (2006: 23%) of the Group’s loans and borrowings (Note 27) will
           mature in less than one year based on the carrying amount reflected in the financial statements. 3% (2006:
           46%) of the Company’s loans and borrowings will mature in less than one year at the balance sheet date.

           The table below summarises the maturity profile of the Group’s and the Company’s financial liabilities at the
           balance sheet date based on contractual undiscounted payments.

                                                         2007                                       2006
                                       1 year or    1 to 5  Over 5                1 year or    1 to 5   Over 5
                                            less    years     years      Total         less    years     years         Total
                                         s$’000    s$’000 s$’000       s$’000       s$’000    s$’000 s$’000          s$’000
           group
           Derivative financial
               instruments                   –          –          –        –        4,995           –          –     4,995
           Trade payables               55,022          –          –   55,022       35,277           –          –    35,277
           Other payables
               and accruals             17,747          –          –   17,747       13,884           –          –    13,884
           Progress payments
               from customers           25,989          –          –   25,989        3,358           –          –     3,358
           Interest-bearing loans
               and borrowings            5,245 193,266             – 198,511        33,663    51,317     63,684 148,664
           Finance lease liabilities       104     187             –    291            244       332          –     576

                                       104,107 193,453             – 297,560        91,421    51,649     63,684 206,754

           company
           Trade payables                1,172          –          –    1,172        1,012           –          –     1,012
           Other payables
               and accruals              3,216          –          –    3,216        2,030           –          –     2,030
           Progress payments
               from customers            2,080          –          –    2,080        2,062           –          –     2,062
           Interest-bearings
               loans and borrowings      5,000 190,596             – 195,596        30,902    36,518            –    67,420

                                        11,468 190,596             – 202,064        36,006    36,518            –    72,524




122    Hyflux Ltd Annual Report 2007                                                  Reinventing Ourselves Touching Lives
                                              HyfLux LTD AnD iTs subsiDiARies

                        NOTES TO ThE FINANCIAl STATEMENTS
                                                   31 December 2007


35. finAnciAL RisK mAnAgemenT ObjecTives AnD pOLicies (cOnT’D)

     (c) interest rate risk

          Interest rate risk is the risk that the fair value or future cash flows of the Group’s and the Company’s financial
          instruments will fluctuate because of changes in market interest rates. The Group’s and the Company’s
          exposure to interest rate risk arises primarily from their loans and borrowings and interest-bearing loans given
          to related parties.

          Sensitivity analysis for interest rate risk

          At the balance sheet date, if S$ and US$ interest rates had been 75 (2006: 75) basis points lower/higher
          with all other variables held constant, the Group’s profit net of tax would have been higher/lower by
          S$1,379,000 (2006: S$252,000), arising mainly as a result of lower/higher interest expense on floating rate
          loans and borrowings, and the Group’s other reserve in equity would have been S$ Nil (2006: S$232,000)
          higher/lower, arising mainly as a result of an increase/decrease in the fair value of derivatives classified as
          available-for-sale.

     (d) foreign currency risk

          The Group is exposed to foreign currency risk on sales, purchases and borrowings that are denominated in
          a currency other than the respective functional currencies of the Group entities. The currencies giving rise to
          this risk are primarily US dollar and Chinese Renminbi.

          The Group monitors its exposure in respect of trade receivables, trade payables and borrowings denominated
          in foreign currencies, as well as forecast sales and purchases over the following 12 months. The Group, when
          necessary, uses forward exchange contracts to hedge its foreign currency risk.

          Approximately 98% (2006: 76%) of the Group’s sales are denominated in foreign currencies whilst almost
          89% (2006: 72%) of costs are denominated in the respective functional currencies of the Group’s entities.
          The Group’s trade receivable and trade payable balances at the balance sheet date have similar exposures.

          In respect of other monetary assets and liabilities held in currencies other than the US dollar, the Group
          ensures that the net exposure is kept to an acceptable level.

          The Group and the Company also hold cash and short-term deposits denominated in foreign currencies for
          working capital purposes. At the balance sheet date, such foreign currency balances (mainly in US$ and
          RMB) amount to S$49,521,000 (2006: S$39,113,000) and S$2,331,000 (2006: S$1,781,000) for the Group
          and the Company respectively.




Reinventing Ourselves Touching Lives                                                           Hyflux Ltd Annual Report 2007   123
                                              HyfLux LTD AnD iTs subsiDiARies

                              NOTES TO ThE FINANCIAl STATEMENTS
                                                   31 December 2007


35. finAnciAL RisK mAnAgemenT ObjecTives AnD pOLicies (cOnT’D)

      (d) foreign currency risk (cont’d)

           Sensitivity analysis for foreign currency risk

           A 3% strengthening of Singapore dollar against the following currencies at the reporting date would increase/
           (decrease) equity and profit by the amount shown below. This analysis assumes that all other variables
           remain constant.
                                                                        profit net of tax                equity
                                                                      2007            2006        2007           2006
                                                                    s$’000         s$’000       s$’000          s$’000

           US Dollars                                                (3,149)              858             –               –
           RMB                                                        2,948               662             –               –

           A 3% weakening of Singapore dollar against the above currencies would have had the equal but opposite
           effect on the above currencies to the amounts shown above, on the basis that all other variables remain
           constant.

      (e) market price risk

           Market price risk does not have a significant impact to the Group as the Group does not have interest in
           quoted securities.

36. finAnciAL insTRumenTs

      (a) Derivative financial instruments and hedging activities

           Derivative financial instruments included in the balance sheets at 31 December are as follows:

                                                                                group                         company
                                                                      2007           2006            2007            2006
                                                                     s$’000         s$’000          s$’000          s$’000

           Current assets:
           Interest rate swaps                                             –              228             –             228
           Commodity swaps                                                 –            3,530             –               –

                                                                           –            3,758             –             228

           Current liabilities:
           Interest rate swaps                                             –        (4,995)               –               –

           Cashflow hedges

           As at 31 December 2006, the Group held 5 financial derivatives, namely 2 interest rate swaps and 3
           commodity swaps. These swaps were designated as hedges of expected future interest and utilities expenses
           where the Group’s 50% joint venture company and the Company had firm commitments. The interest rate
           swaps were being used to hedge the interest rate risks of the existing bank loans of the Group’s 50% joint
           venture company and the Company. The commodity swaps were used to hedge the fuel price risk that
           directly impacts the Group’s 50% joint venture company’s existing commitment under an energy supply
           contract.




124    Hyflux Ltd Annual Report 2007                                                    Reinventing Ourselves Touching Lives
                                                        HyfLux LTD AnD iTs subsiDiARies

                             NOTES TO ThE FINANCIAl STATEMENTS
                                                              31 December 2007


36. finAnciAL insTRumenTs (cOnT’D)

     (a) Derivative financial instruments and hedging activities (cont’d)

          The terms of these swaps have been negotiated to match the terms of the commitments.

          The cash flow hedge of the expected future interest expense was assessed to be highly effective and a
          fair value gain of S$581,000 for the financial year ended 31 December 2006, with a related deferred tax
          charge of S$101,000 relating to the hedging instruments is included in the hedging reserve.

          During the financial year, the Group divested its interest in this joint venture.

     (b) fair value of financial instruments

          The fair value of financial assets and liabilities by classes that are not carried at fair value and whose carrying
          amounts are not reasonable approximation of fair value are as follows :

                                                                             group                               company
                                                            2007                       2006              2007              2006
                                                           s$’000                    s$’000             s$’000            s$’000
                                                    carrying     fair         carrying      fair carrying     fair carrying     fair
                                                     amount value              amount     value amount      value   amount     value
                                                     s$’000 s$’000             s$’000 s$’000 s$’000 s$’000          s$’000 s$’000

          financial assets:
          Unquoted equity shares,
             at cost (Note 17)                         7,917             –   5,997       (1)
                                                                                                               899             (1)
                                                                                                                                           899             (1)

          Lease receivables (Note 18)                      –             – 100,011 253,043                       –              –            –              –
          Other receivables
             from third parties
             (Note 22)                                       –           –       3,979               (2)
                                                                                                                   –            –              –            –
          Due from subsidiaries
             (Note 22)                                       –           –              –             –    18,833              (2)
                                                                                                                                       11,766              (2)

          Due from a joint venture
             (Note 22)                                       –           –              –             –            –            –       2,749              (2)



          financial liabilities:
          Finance lease liabilities
             (Note 28)                                   187         200             332          381              –            –              –            –
          (1)
                These equity instruments represent ordinary shares in companies that are not quoted on any market and do not have any comparable
                industry peer that is listed. In addition, the variability in the range of reasonable fair value estimates derived from valuation techniques is
                significant. As such, these equity instruments are carried at cost at balance sheet date. The Group does not intend to dispose of these
                investments in the foreseeable future.

          (2)
                The fair value of other receivables from third parties, amounts due from subsidiaries and amounts due from a joint venture are not
                determinable as the timing of the future cash flows arising from these receivables cannot be estimated reliably.




Reinventing Ourselves Touching Lives                                                                                     Hyflux Ltd Annual Report 2007   125
                                              HyfLux LTD AnD iTs subsiDiARies

                              NOTES TO ThE FINANCIAl STATEMENTS
                                                  31 December 2007


36. finAnciAL insTRumenTs (cOnT’D)

      (b) fair value of financial instruments (cont’d)

           Determination of fair value

           Lease receivables (Note 18)

           The fair value of finance lease receivable has been determined using discounted cash flows. Where repayment
           terms are not fixed, future cash flows are projected based on management’s best estimates. The discount
           rate used is the current risk-free adjusted by market risk premium for similar type of arrangement.

           Financial assets and liabilities (Notes 18, 21, 22, 24, 25 and 26)
           Non-current loans and borrowings at floating rate (Note 27)

           The carrying amounts of these financial assets and liabilities are reasonable approximation of fair values,
           either due to their short-term nature or that they are floating rate instruments that are repriced to market
           interest rates on or near the balance sheet date.

37. 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. No changes were made in the objectives, policies or processes
      during the years ended 31 December 2007 and 31 December 2006.

      As disclosed in Note 31(ii), a subsidiary of the Group is required by the Foreign Enterprise Law of the PRC to
      contribute to and maintain a non-distributable statutory reserve fund whose utilisation is subject to approval by the
      relevant PRC authorities. This externally imposed capital requirement has been complied with by the above-
      mentioned subsidiary for the financial year ended 31 December 2007.

      The Group monitors capital using a gearing ratio, which is net debt divided by total capital. The Group includes
      within net debt, interest-bearing loans and borrowings, finance lease liabilities, less cash and fixed deposits. Total
      equity of the Group represents capital for the Group.

                                                                                                           group
                                                                                                   2007           2006
                                                                                                  s$’000         s$’000

      Interest bearing loans and borrowings                                                     198,511        148,664
      Finance lease liabilities                                                                     291            576
      Less: Cash and fixed deposits                                                            (121,047)       (55,827)

      Net debt                                                                                   77,755         93,413

      Total capital equity - total                                                              247,067        218,066

      Gearing ratio                                                                                 32%            43%




126    Hyflux Ltd Annual Report 2007                                                 Reinventing Ourselves Touching Lives
                                             HyfLux LTD AnD iTs subsiDiARies

                        NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007


38. segmenT infORmATiOn

     Reporting format

     The primary segment reporting format is determined to be business segments as the Group’s risks and rates of
     return are affected predominantly by differences in the products and services produced. Secondary information
     is reported geographically. The operating businesses are organised and managed separately according to the
     nature of the products and services provided, with each segment representing a strategic business unit that offers
     different products and serves different markets.

     Business segments

     The Municipal segment is a supplier of comprehensive range of innovative water and fluid treatment solutions to
     municipalities and governments, including commissioning, operation & maintenance of a wide range of water
     treatment and liquid separation plants on a turnkey or Design-Build-Own-Operate (“DBOO”) arrangement.

     The Industrial segment is in the business of liquid separation applications for the manufacturing sector such as
     the pharmaceutical, biotechnology, food processing and petrochemical oil-related industries.

     Geographical segments

     The Group’s geographical segments are based on the location of the Group’s customers. Sales to external
     customers disclosed in geographical segments are based on the geographical location of its customers.

     Allocation basis and transfer pricing

     Segment results, assets and liabilities 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, income tax and deferred
     tax liabilities, interest-bearing loans and borrowings and related expenses.

     Transfer prices between business segments are set on an arm’s length basis in a manner similar to transactions
     with third parties. Segment revenue, expenses and results include transfers between business segments. These
     transfers are eliminated on consolidation.




Reinventing Ourselves Touching Lives                                                       Hyflux Ltd Annual Report 2007   127
                                             HyfLux LTD AnD iTs subsiDiARies

                              NOTES TO ThE FINANCIAl STATEMENTS
                                                 31 December 2007


38. segmenT infORmATiOn (cOnT’D)

      (a) business segment

           The following tables present revenue and results information, assets, liabilities and other segment information
           regarding the Group’s business segments as at and for the years ended 31 December 2007 and 2006.

           2007                                                   municipal      industrial       Others         group
                                                                    s$’000         s$’000        s$’000         s$’000

           Revenue:
           External sales                                            88,971       102,347         1,468        192,786

           Results:
           Segment results                                           27,304        10,253        (1,188)        36,369

           Net loss on sale of property, plant and equipment                                                         (4)
           Gain on sale of partial interest in a joint venture                                                    8,185
           Finance income                                                                                         2,548
           Finance expenses                                                                                      (8,878)
           Fair value loss on derivative financial instruments                                                   (3,532)
           Share of profit of associates                                                                          1,277
           Other income - net                                                                                       108
           Negative goodwill on acquisitions
              of subsidiaries/businesses                                                                         2,620

           Profit before taxation                                                                               38,693
           Tax expense                                                                                          (2,048)

           Profit for the year                                                                                  36,645

           Assets and liabilities:
           Segment assets                                          267,824        112,588        13,097        393,509
           Unallocated assets                                                                                  170,272

           Total assets                                                                                        563,781

           Segment liabilities                                       75,476        40,935         1,031        117,442
           Unallocated liabilities                                                                             199,272

           Total liabilities                                                                                   316,714

           Other segment information:
           Capital expenditure                                       12,636        21,050         1,430         35,116
           Depreciation and amortisation                              4,347           995         1,856          7,198




128    Hyflux Ltd Annual Report 2007                                                Reinventing Ourselves Touching Lives
                                           HyfLux LTD AnD iTs subsiDiARies

                          NOTES TO ThE FINANCIAl STATEMENTS
                                               31 December 2007


38. segmenT infORmATiOn (cOnT’D)

     (a) business segment (cont’d)

          2006                                                  municipal    industrial        Others                group
          (Restated)                                              s$’000       s$’000         s$’000                s$’000

          Revenue:
          External sales                                          45,264       90,148           6,967              14,379

          Results:
          Segment results                                          5,291       15,513          (1,519)             19,285

          Net gain on sale of property, plant and equipment                                                             52
          Gain on sale of a subsidiary and an associate                                                              1,655
          Finance income                                                                                             5,534
          Finance expenses                                                                                          (9,078)
          Fair value gain on derivative financial instruments                                                          115
          Share of loss of associates                                                                                 (910)
          Other expenses - net                                                                                        (314)
          Negative goodwill on acquisitions
             of subsidiaries/businesses                                                                              3,839

          Profit before taxation                                                                                   20,178
          Tax expense                                                                                              (4,821)

          Profit for the year                                                                                      15,357

          Assets and liabilities:
          Segment assets                                         276,888     121,689          15,896             414,473
          Unallocated assets                                                                                      28,925

          Total assets                                                                                           443,398

          Segment liabilities                                    125,670       19,446           1,536            146,652
          Unallocated liabilities                                                                                 78,680

          Total liabilities                                                                                      225,332

          Other segment information:
          Capital expenditure                                     10,560        8,408           2,084              21,052
          Depreciation and amortisation                              991        3,064             914               4,969




Reinventing Ourselves Touching Lives                                                      Hyflux Ltd Annual Report 2007   129
                                                HyfLux LTD AnD iTs subsiDiARies

                              NOTES TO ThE FINANCIAl STATEMENTS
                                                    31 December 2007


38. segmenT infORmATiOn (cOnT’D)

      (b) geographical segments

           The following table presents revenue, capital expenditure and certain assets information regarding the Group’s
           geographical segments for the years ended 31 December 2007 and 2006.

                                                            people’s Republic
                                           singapore            of china           Others                     Total
                                        2007      2006      2007         2006   2007     2006         2007         2006
                                       s$’000 s$’000       s$’000      s$’000 s$’000 s$’000          s$’000      s$’000
                                                                     (Restated)                                (Restated)

           Revenue:
           External sales              12,830   27,018   156,933      104,763     23,023   10,598 192,786       142,379

           Other
           Segment assets     189,083 230,575            194,665      175,408      9,761    8,490 393,509       414,473
           Unallocated assets                                                                     170,272        28,925

           Total assets                                                                             563,781     443,398

           Capital expenditure         19,582    7,196     14,501       8,198      1,033    5,658    35,116      21,052

39. DiviDenDs
                                                                                                     group and company
                                                                                                      2007       2006
                                                                                                     s$’000     s$’000

      Ordinary dividends paid:

      Final exempt (one-tier) dividend for 2006 : 1.35 cents (2005 : 1.35 cents) per share            7,016       6,963

      The directors propose a final exempt (one-tier) dividend of 1.89 cents per share amounting to a total of S$9,892,000
      for 2007, subject to shareholders’ approval at the forthcoming Annual General Meeting.

40. cOmpARATive figuRes

      Comparative figures in the financial statements have been restated from the previous year to reflect the adoption
      of new and revised accounting standards.

41. AuTHORisATiOn Of finAnciAL sTATemenTs

      The financial statements for the financial year ended 31 December 2007 were authorised for issue in accordance
      with a resolution of the directors on 14 March 2008.




130    Hyflux Ltd Annual Report 2007                                                 Reinventing Ourselves Touching Lives
                        CORPORATE GOVERNANCE STATEMENT



Hyflux is committed to achieving a high standard of corporate governance. The Group’s corporate governance practices
translate into an increase in long-term value and ultimately, return to shareholders. As part of this commitment, the
Group subscribes to the Code of Corporate Governance (the “Code”). This statement outlines the main corporate
governance practices of the Company with specific reference made to the principles and guidelines of the Code which
forms part of the Continuing Obligations of the Singapore Exchange Securities Trading Limited’s (“SGX-ST”) Listing
Manual.

The Board is pleased to confirm that for the financial year ended 31 December 2007, the Company has generally
adhered to the principles and guidelines as set out in the Code.

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 board of directors (the “Board”) is to protect and enhance long-term shareholders’ value. Apart
from its fiduciary duties, the Board sets the overall strategy of the Group and supervises executive management. The
Board also provides leadership and guidance on corporate strategy, business directions, risk policy and implementation
of corporate objectives, thereby taking responsibility for the overall corporate governance of the Group.

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

Matters which are specifically reserved to the 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, and matters which require Board approval as specified under the
Company’s interested person transaction policy.

The Board holds regular meetings each year. It held four meetings in the 2007 financial year. The Board may convene
additional meetings to address any specific significant matters that may arise from time to time.




Reinventing Ourselves Touching Lives                                                        Hyflux Ltd Annual Report 2007   131
                                   CORPORATE GOVERNANCE STATEMENT



The Directors’ attendance at the Board and Committee Meetings for the financial year ended 31 December 2007 is as
follows:
                                                board of               Audit            nominating         Remuneration     Risk management
                                                Directors           committee           committee           committee          committee
                                            no. of     no. of    no. of     no. of    no. of   no. of     no. of   no. of   no. of   no. of
    name                                   meetings meetings    meetings meetings    meetings meetings   meetings meetings meetings meetings
                                            Held     Attended    Held     Attended    Held    Attended    Held    Attended   Held   Attended

    Olivia Lum Ooi Lin                        4         4          na       na         na       na          1       1*        na      na

    Teo Kiang Kok                             4         3          4         4          1        1          1        1        3        2

    Lee Joo Hai                               4         4          4         4          1        1          1        1        3        2

    Gay Chee Cheong                           4         3          4         4          1        1          1        1        na      na

    Christopher Murugasu                      4         4         na        na         na       na          1        1        3        3

    Professor Tan Teck Meng1                  4         3          4         1         na       na         na       na        na      na

    Raj Mitta1                                4         2         na        na         na       na         na       na        3        2

    Rajnish Gopinath2                         4         1         na        na         na       na         na       na        na      na

na : not applicable

1
       Professor Tan Teck Meng and Mr Raj Mitta were appointed as directors on 28 April 2007. Professor Tan was appointed as a member of the
       Audit Committee and Remuneration Committee and Mr Raj Mitta as a member of Risk Management Committee.
2
       Mr Rajnish Gopinath retired as a director on 27 April 2007.
*      Attended by invitation.


TRAining fOR DiRecTORs
The Board has in place programmes for each newly appointed director to receive appropriate training, including an
orientation programme to familiarise him with the Group’s structure and its business.

bOARD cOmpOsiTiOn AnD guiDAnce
Principle 2: Strong and independent element on the Board

The directors of the Company in office as at the date of this report are set out in the Director’s report. Presently, the
Board comprises of one Executive Director, two Non-Executive Non-Independent Directors and four Non-Executive
Independent Directors. The Board consists of respected business leaders and professionals whose collective core
competencies and experience are extensive, diverse and relevant to the industry. Individual directors’ profiles can be
found in the “Board of Directors” section of this Annual Report.

executive Director (group ceO, president and managing Director)
Ms Olivia Lum Ooi Lin

non-executive non-independent Directors
Mr Teo Kiang Kok
Mr Christopher Murugasu

non-executive independent Directors
Professor Tan Teck Meng
Mr Raj Mitta
Mr Lee Joo Hai
Mr Gay Chee Cheong


132        Hyflux Ltd Annual Report 2007                                                             Reinventing Ourselves Touching Lives
                         CORPORATE GOVERNANCE STATEMENT



There is presently a good balance between the executive and non-executive directors and a strong and independent
element on the Board. 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 judgement.

Non-Executive members of the Board exercise no management function in the Company or any of its subsidiaries.
Although all the directors have equal responsibilities for the performance of the Group, the role of non-executive
directors is primarily to ensure that the strategies proposed by the executive 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 the present board size and number of committees facilitate effective decision-making and
are appropriate for the nature and scope of the Company’s operations.


cHAiRmAn AnD cHief execuTive OfficeR
Principle 3: Clear division of responsibilities at the top of the Company

The Company does not have a chairman on the Board of Directors. Responsibilities for various functions and departments
in Company are well defined. 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 Committeehas been tasked by the Board to recommend individuals of relevant background, possessing
experience and knowledge in business, legal, finance and management skills, critical to the Group’s business to be
appointed to the Board.

The Nominating Committee comprises three Directors, majority of whom including the Chairman, are Independent
Directors:

nominating committee:
Mr Gay Chee Cheong                          (Chairman)
Mr Lee Joo Hai
Mr Teo Kiang Kok

The primary function of the Nominating Committee is to determine the criteria for identifying candidates and to review
nominations for the appointment of directors to the Board, to consider how the Board’s performance may be evaluated
and to propose objective performance criteria for the Board’s approval. Its duties and functions are outlined as
follows:

(a)   to make recommendations to the Board on all board appointments and re-nomination having regard to the
      Director’s contribution and performance (e.g. attendance, preparedness, participation, candour, and any other
	     salient	factors);

(b)   to ensure that all Directors would be required to submit themselves for re-nomination and re-election at regular
	     intervals	and	at	least	once	in	every	three	years;

(c)   to determine annually whether a director is independent, in accordance with the independence guidelines
	     contained	in	the	Code;	




Reinventing Ourselves Touching Lives                                                           Hyflux Ltd Annual Report 2007   133
                               CORPORATE GOVERNANCE STATEMENT



(d)   to review whether a director is able to and has adequately carried out his duties as a director of the Company in
	     particular	where	the	Director	concerned	has	multiple	board	representations;	and

(e)   to consider how the Board’s performance may be evaluated and to propose objective performance criteria.

The Nominating Committee conducts an annual review of directors’ independence and based on the Code’s criteria for
independence, the Nominating Committee is of the view that Professor Tan Teck Meng, Mr Gay Chee Cheong, Mr Lee
Joo Hai and Mr Raj Mitta, are deemed independent.

The Nominating Committee has recommended the nomination of directors retiring pursuant to the Company’s Articles
of Association, namely, Professor Tan Teck Meng, Mr Raj Mitta, Mr Lee Joo Hai and Mr Gay Chee Cheong.

In reviewing the nomination of the retiring directors, the Nominating Committee considered the performance and
contribution of each of the retiring directors, having regards not only to their attendance and to participation at Board
and Board Committee meetings but also the time and efforts devoted to the Group’s business and affairs, especially the
operational and technical contributions.

bOARD peRfORmAnce
Principle 5: Formal assessment of the effectiveness of the Board and contributions by each Director

The Code recommends that the Nominating Committee be responsible for assessing the Board as a whole and also
assessing the individual director’s contribution.

But the Nominating Committee 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 Nominating Committee has conducted a Board performance evaluation to assess the effectiveness of the Board in
the financial year 2007 and is satisfied that sufficient time and attention has been given by the directors to the affairs
of the Group.




134    Hyflux Ltd Annual Report 2007                                               Reinventing Ourselves Touching Lives
                        CORPORATE GOVERNANCE STATEMENT



The Nominating Committee in conducting the appraisal process to assess the performance and effectiveness of the
Board as a whole, 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’s processes and accountability, Board’s performance in relation
to discharging its principal responsibilities and the directors’ standards of conduct.

The Board has taken 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 these are more of a measurement of Management’s performance
and therefore less applicable to directors.

Access TO infORmATiOn
Principle 6: Board members to have complete, adequate and timely information

The Board has separate and independent access to members of the senior management team of the Group, the
Company Secretary and the external auditors at all times. The directors also have unrestricted access to the Company’s
records and information, all Board and Board committees’ minutes, and management accounts to enable them to carry
out their duties.

The Company Secretary attends all Board and Board Committee meetings. The Company Secretary administers, attends
and prepares minutes of Board and Board Committee 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.

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 the Group or the individual, 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 key management
executives

The Remuneration Committee comprises entirely of Non-Executive Directors.

As at the date of this Report, the Remuneration Committee members are:

Remuneration committee
Mr Gay Chee Cheong                         (Chairman)
Mr Lee Joo Hai
Mr Teo Kiang Kok
Professor Tan Teck Meng
Mr Christopher Murugasu

The Remuneration Committee is responsible for ensuring a formal and transparent procedure for developing policy
on executive remuneration, and for fixing the remuneration packages of individual directors and senior management
employees. The Remuneration Committee’s review covers all aspects of remuneration including but not limited to
Directors’ fees, salaries, allowances, bonus, share options and benefits in kind and specific remuneration package for
each Director. In structuring a compensation framework for executive Director and key executives, the Remuneration
Committee seeks to link a proportion of executive compensation to the Group’s performance. The Remuneration
Committee’s recommendation are made in consultation with the Executive Committee and submitted for endorsement
by the Board. No Director is involved in deciding his own remuneration.




Reinventing Ourselves Touching Lives                                                        Hyflux Ltd Annual Report 2007   135
                              CORPORATE GOVERNANCE STATEMENT



The Remuneration Committee has access to expert advice inside and/or outside the Company with regard to
remuneration matters.

LeveL AnD mix Of RemuneRATiOn
Principle 8 : The level of remuneration for Directors should be adequate, not excessive, and linked to performance

The remuneration policy of the Company is to provide compensation packages at market rates, which reward
performance and attract, retain and motivate directors and senior management employees.

The Executive Director does not receive Directors’ fees. The Executive Director’s and key senior management employees’
remuneration packages are based on service contracts and their remuneration are determined by having regard to the
performance of the individuals, performance of the Group and market trends.

Non-Executive Directors are paid an annual 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 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. Annual increments and adjustments
to remuneration are reviewed and approved taking into account the outcome of the annual appraisal of the employees
by Management and Executive Committees and the various heads of department. All Non-Executive Directors’ fees are
recommended by the Board and are subject to shareholders’ approval at the Annual General Meeting.

For the financial ended 31 December 2007, the Remuneration Committee has recommended to the Board a total
Directors’ fees of $456,667 for the Non-Executive Directors, which will be tabled by the Board at the forthcoming
Annual General Meeting for shareholders’ approval.

Company’s directors receiving remuneration from the Group for the year ended 31 December 2007 and 2006 are as
follows:

                                                                                                    number of directors
Remuneration band                                                                                  2007           2006

S$500,000 and above                                                                                    0              0
S$250,000 to below S$500,000                                                                           1              1
Below S$250,000                                                                                        7              5




136   Hyflux Ltd Annual Report 2007                                                Reinventing Ourselves Touching Lives
                            CORPORATE GOVERNANCE STATEMENT



Summary compensation table for directors and management committee for the year ended 31 December 2007 (Group)
is as follows:
                                                                                        Allowances
                                                                                          and other
                                                  salary      bonus           fees          benefits    Total

DiRecTORs
between s$250,000 to s$500,000
Olivia Lum Ooi Lin                                               89%               8%          0%                  3%            100%

below s$250,000
Gay Chee Cheong                                                    0%              0%         100%                 0%            100%
Lee Joo Hai                                                        0%              0%         100%                 0%            100%
Teo Kiang Kok                                                      0%              0%         100%                 0%            100%
Christopher Murugasu                                               0%              0%         100%                 0%            100%
Raj Mitta**                                                        0%              0%         100%                 0%            100%
Professor Tan Teck Meng**                                          0%              0%         100%                 0%            100%
Rajnish Gopinath*                                                  0%              0%         100%                 0%            100%

mAnAgemenT cOmmiTTee
between s$250,000 to s$500,000
Sam Ong Eng Keang                                                71%             18%           0%                11%             100%
Benjamin Tan Eng Seng                                            71%             12%           0%                17%             100%

below s$250,000
Fong Chun Hoe                                                    92%              8%           0%                  0%            100%
Wong Khai Theen                                                  83%             14%           0%                  3%            100%
Peter Wu Siu Kin                                                 82%             18%           0%                  0%            100%
Foo Hee Kiang                                                    89%              3%           0%                  8%            100%
Ge Wen Yue                                                      100%              0%           0%                  0%            100%

immeDiATe fAmiLy membeRs Of DiRecTOR
below s$250,000
Deirdre Murugasu                                                100%               0%          0%                  0%            100%
Teo Yuan Cheng Casey                                             86%               9%          0%                  5%            100%

* Mr Rajnish Gopinath retired as director on 27 April 2007.
** Professor Tan Teck Meng and Mr Raj Mitta were appointed as directors on 28 April 2007.
Compensation reflected in table excludes entitlement under employment share options scheme.


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 2007.

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

The Board is accountable to shareholders for the management of the Group. The Board 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 relevant rules and regulations. The Management
is accountable to the Board by providing the Board with the necessary financial information for the discharge of its
duties.




Reinventing Ourselves Touching Lives                                                                 Hyflux Ltd Annual Report 2007   137
                               CORPORATE GOVERNANCE STATEMENT



AuDiT cOmmiTTee
Principle 11: Establishment of Audit Committee with written terms of reference

The Audit Committee comprises the following members at the date of this report:

Mr Lee Joo Hai                         (Chairman)
Mr Gay Chee Cheong
Mr Teo Kiang Kok
Professor Tan Teck Meng

The members of Audit Committee, collectively, backed with legal, accounting, financial management expertise or
business esperience are qualified to discharge the Audit Committee’s responsibilities.

The primary functions of the Audit Committee are as follows:

(a)	 assist	the	Board	in	discharging	its	statutory	responsibilities	on	financial	and	accounting	matters;

(b)	 review	the	financial	and	operating	results	and	accounting	policies	of	the	Group;

(c)   review significant financial reporting issues and judgements relating to financial statements for each financial
	     year,	quarterly	and	annual	results	announcement	before	submission	to	the	Board	for	approval;

(d)   review the adequacy of the Company’s internal control (financial and operational) and risk management policies
	     and	systems	established	by	the	management;

(e)   review the audit plans and reports of the external and internal auditors and consider the effectiveness of the
	     actions	taken	by	management	on	the	auditors’	recommendations;

(f)   appraise and report to our Board on the audits undertaken by the external and internal auditors, the adequacy
      of the disclosure of information, and the appropriateness and quality of the system of management and internal
	     controls;

(g)   review the independence of external auditors annually and consider the appointment or re-appointment of
      external auditors and matters relating to the resignation or removal of the auditors and approve the remuneration
	     and	terms	of	engagement	of	the	external	auditors;	and	

(h)   review interested person transactions, as defined in the Listing Manual of the SGX-ST.

The Audit Committee held four meetings during the year. The Audit Committee has reviewed the non-audit services
provided by the external auditors, including the fees paid for these services during the year, and is satisfied that the
nature and extent of such services would not affect the independence of the external auditors. The Audit Committee
has also reviewed the services provided by the Independent Directors’ firms and is satisfied that the provision of such
services did not affect their independence.

The Audit Committee has full access to the external auditors and will hold meetings with them at least once a year
without the presence of Management. The Audit Committee has authority to access all personnel, records, and other
information to enable it to properly discharge its function. It has full authority and discretion to invite any Director or
executive officer to attend its meetings.




138    Hyflux Ltd Annual Report 2007                                                Reinventing Ourselves Touching Lives
                         CORPORATE GOVERNANCE STATEMENT



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 Audit Committee 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 legislation, regulation and
best practice, and the identification and containment of business risks.

The Group 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 Group reviews all significant
control policies and procedures and highlights all significant matters to the Audit Committee 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 Group can make more informed decisions and benefit from a better balance between risk and reward. This will help
protect and create shareholders’ value.

Based on the information provided to the Audit Committee, nothing has come to the its attention to cause the Audit
Committee to believe that the system of internal controls and risk management is inadequate.

inTeRnAL AuDiT
Principle 13: Setting up independent internal audit function

The Group has appointed a professional firm, BDO Raffles Consultants Pte Ltd to undertake the functions of an internal
auditor. The internal audit function includes reviewing the effectiveness of the material internal controls of the Group.
The Internal Auditor reports directly to the Audit Committee and has an appropriate standing within the Company and
the Group and meets the standards set by nationally or internationally recognized professional bodies including the
Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors.

Within this framework, the internal audit function will provide reasonable assurance that the risks incurred by the Group
in each major activity will be identified, analysed and managed by Management. The Internal Auditor 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 Annual General Meeting

The Company is committed to regular and proactive communication with its shareholders. It aims to provide shareholders
with clear, balanced and useful information on a timely basis to ensure that shareholders receive a balanced and
updated view of the Group’s performance and business.

Where there is inadvertent disclosure made to a selected group, the Company will make the same disclosure public
as soon as practicable. Communication is made through:

(a)  annual reports that are 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	the	Companies’	Act,	Chapter	50,	and	Singapore	Statements	of	Accounting	Standards;
(b) quarterly and full-year financial statements comprising a summary of the financial information and affairs of the
	    Group	for	the	relevant	period;
(c)	 explanatory	memoranda	for	Annual	General	Meeting	and	Extraordinary	General	Meetings;
(d)	 press	releases	on	major	developments	of	the	Group;
(e)	 disclosures	to	the	SGX-ST	via	SGXNET;	and
(f) the Group’s website at http://www.hyflux.com at which Shareholders can access information on the Group.



Reinventing Ourselves Touching Lives                                                          Hyflux Ltd Annual Report 2007   139
                               CORPORATE GOVERNANCE STATEMENT



In addition, shareholders are encouraged to attend the annual general meetings to ensure a high level of accountability
and to stay informed of the Group’s strategies and growth. As the Annual General Meeting is the principal forum for
dialogue with shareholders, the presence of the chairpersons of the audit, nominating and remuneration committees
are required so as to address any question raised at the Annual General Meeting. The Group fully supports the Code’s
principle to encourage active shareholder participation.

Risk management committee
The Risk Management Committee comprises the following members:

Mr Christopher Murugasu                (Chairman)
Mr Lee Joo Hai
Mr Teo Kiang Kok
Mr Raj Mitta

The functions of the Risk Management Committee are as follows:

(a)   review with Management, and, when needed, with external consultants on areas of risks that may affect the
      viability and smooth operations of the Company, as well as Management’s risk migitation efforts, with the view of
	     safeguarding	shareholder’s	interest	and	Group	assets;	
(b)   direct and work with Management to develop and review policies and processes to address and manage identified
	     areas	of	risk	in	a	systematic	and	structured	manner;
(c)   make recommendations to the Board in relation to business risks that may affect the Company, as and when these
	     may	arise;	and
(d)   perform any other functions as may be agreed by the Board.

executive committee
The members of the Executive Committee are:

Ms Olivia Lum Ooi Lin                  (Chairman)
Mr Lee Joo Hai
Mr Teo Kiang Kok
Mr Gay Chee Cheong

management committee
As at the date of this report, the Management Committee comprise of the following members:

Ms Olivia Lum Ooi Lin                  (Chairman)
Mr Sam Ong Eng Keang
Mr Fong Chun Hoe
Mr Foo Hee Kiang
Mr Wong Khai Theen
Mr Ge Wen Yue
Mr Peter Wu Siu Kin
Mr Benjamin Tan Eng Seng

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 interim or full year results respectively, or if they are in possession of unpublished
price-sensitive information of the Company. In addition, its directors and officers are expected to observe insider trading
laws at all times even when dealing in securities within the permitted trading period.

The Group has complied with the Best Practices Guide on Securities Transactions issued by the Singapore Exchange.



140    Hyflux Ltd Annual Report 2007                                                   Reinventing Ourselves Touching Lives
                               SUPPlEMENTARY INFORMATION



mATeRiAL cOnTRAcTs
There were no material contracts of the Company or its subsidiaries involving the interests of the Chief Executive Officer
(as defined in the SGX-ST Listing Manual), each Director or Controlling shareholder, 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 Group has established procedures to ensure that all transactions with interested persons are reported on a timely
manner to the Audit Committee and that the transactions are at arm’s length basis. All interested person transactions
are subject to review by the Audit Committee to ensure compliance with the established procedures.

                                 Aggregate value of all interested person
                               transactions during the financial year under     Aggregate value of all interested person
                             review (excluding transactions conducted under          transactions conducted under
name of                        shareholders’ mandate pursuant to Rule 920         shareholders’ mandate pursuant to
interested person                     under sgx-sT Listing manual)              Rule 920 under sgx-sT Listing manual

BDO Raffles Consultants         S$53,000 in respect of the internal audit                           NIL
Pte Ltd                                   services rendered

Shook Lin & Bok               S$16,000 in respect of trademark application                          NIL
                                           services rendered




Reinventing Ourselves Touching Lives                                                         Hyflux Ltd Annual Report 2007   141
                                         SUPPlEMENTARY INFORMATION



summARy Of mAjOR pROpeRTies

                                                                         Approximate           group’s
                                            site area                    total lettable       effective
Description            Location                (sq m)    existing use     area (sq m)     interest (%)     Tenure

Office and        5 Changi South             10,472        Office and           5,630             100      60 years
factory           Street 1,                                    factory                                     commencing
                  Singapore 486764                                                                         from 1 March
                                                                                                           1997

Office            40 Changi South             2,426            Office           1,328             100      60 years
                  Street 1,                                                                                commencing
                  Singapore 486764                                                                         from 1
                                                                                                           December
                                                                                                           1996

Factory           No. 99 Juli Road            5,633        Office and           3,241             100      50 years
building          Zhangjiang                                   factory                                     commencing
                  High-Tech Park                                                                           from 26 April
                  Pudong Shanghai,                                                                         2001
                  China 201203

Apartment         Jinqiao Garden                  32    Staff quarters              59            100      70 years
                  Service Apartment                                                                        commencing
                  Block A, Floor 9,                                                                        from 15
                  Unit 2, Shanghai,                                                                        February
                  China                                                                                    1994

Office and        8# Factory in              18,040        Office and         23,180              100      50 years
factory           EPZ, 9# Yang                                 factory                                     commencing
                  Zi Jiang South                                                                           from 2007
                  Road, Yangzhou
                  Jiangsu Province,
                  China

Office            1307-1309 Centre              384            Office             232             100      50 years
                  Plaza 188,                                                                               commencing
                  Jiefangbei HePing,                                                                       from 12 June
                  District Tianjin,                                                                        1994
                  China 300042




142      Hyflux Ltd Annual Report 2007                                               Reinventing Ourselves Touching Lives
                                           HyfLux LTD AnD iTs subsiDiARies

                              STATISTICS OF ShAREhOlDINGS
                                               as at 14 March 2008


DisTRibuTiOn Of sHAReHOLDings
                                                      no. of
size of Holdings                                shareholders                    %    no. of shares                      %

1 - 999                                                  328                  6.09       157,011                     0.03
1,000 - 10,000                                         4,423                 82.17    15,980,647                     3.05
10,001 - 1,000,000                                       614                 11.41    26,924,963                     5.14
1,000,001 and above                                       18                  0.33   480,858,739                    91.78

Total                                                  5,383             100.00      523,921,360                  100.00


TwenTy LARgesT sHAReHOLDeRs

name                                                                                 no. of shares                      %

 1   Olivia Lum Ooi Lin                                                              124,984,141                    23.86
 2   HSBC (Singapore) Nominees Pte Ltd                                                72,026,250                    13.75
 3   Raffles Nominees Pte Ltd                                                         67,814,600                    12.94
 4   DBS Nominees Pte Ltd                                                             58,475,430                    11.16
 5   Citibank Nominees Singapore Pte Ltd                                              49,066,429                     9.37
 6   Merrill Lynch (S’pore) Pte Ltd                                                   26,386,908                     5.04
 7   DBSN Services Pte Ltd                                                            23,650,700                     4.51
 8   United Overseas Bank Nominees Pte Ltd                                            17,047,366                     3.25
 9   Morgan Stanley Asia (S’pore) Securities Pte Ltd                                  14,574,144                     2.78
10   DB Nominees (S) Pte Ltd                                                           7,609,738                     1.45
11   Murugasu Deirdre                                                                  3,931,178                     0.75
12   Tommie Goh Thiam Poh                                                              3,022,375                     0.58
13   ABN Amro Nominees Singapore Pte Ltd                                               2,745,000                     0.52
14   Foo Hee Kiang                                                                     2,691,912                     0.51
15   UOB Kay Hian Pte Ltd                                                              2,209,937                     0.42
16   Koh Lip Lin                                                                       1,590,789                     0.30
17   Phillip Securities Pte Ltd                                                        1,531,842                     0.29
18   Yong Siew Yoon                                                                    1,500,000                     0.29
19   DBS Vickers Securities (S) Pte Ltd                                                  924,000                     0.18
20   OCBC Nominees Singapore Pte Ltd                                                     853,803                     0.16

     Total                                                                           482,636,542                    92.11

Approximately 48.89% of the Company’s shares are held in the hands of public. Accordingly, the Company has complied
with Rule 723 of the Listing Manual of SGX-ST.




Reinventing Ourselves Touching Lives                                                    Hyflux Ltd Annual Report 2007   143
                                            HyfLux LTD AnD iTs subsiDiARies

                                       SUBSTANTIAl ShAREhOlDERS
                                               as at 14 March 2008


subsTAnTiAL sHAReHOLDeRs

name of shareholder                                         Direct interest   Deemed interest                 %

1 Olivia Lum Ooi Lin                                         124,984,141         52,500,000*               33.88
2 Istithmar PJSC                                              50,834,131*                  –                9.70
3 Matthews International Capital Management, LLC              31,746,999*                  –                6.06

*   Shares held in the name of nominees




144    Hyflux Ltd Annual Report 2007                                          Reinventing Ourselves Touching Lives
                                                    hYFlUx lTD
                                             Company Registration No. 200002722Z
                                 (Incorporated in the Republic of Singapore with limited liability)




nOTice Of AnnuAL geneRAL meeTing

nOTice is HeReby given that the Annual General Meeting of Hyflux Ltd (“the Company”) will be held at Taurus,
Level 1, Marina Mandarin, 6 Raffles Boulevard, Marina Square, Singapore 039594 on 25 April 2008 at 10.00 a.m.
for the following purposes:


As ORDinARy business

1. To receive and adopt the Directors’ Report and the Audited Accounts for the year ended 31 December 2007
   together with the Auditors’ Report thereon.
                                                                                              (ResOLuTiOn 1)

2. To declare a first and final dividend of 1.89 Singapore cents per ordinary share (one-tier tax exempt) for the year
   ended 31 December 2007 (previous year: 1.35 Singapore cents per ordinary share).
                                                                                                      (ResOLuTiOn 2)

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

    Professor Tan Teck Meng                  (Retiring under Article 88)                                              (ResOLuTiOn 3)
    Mr Raj Mitta                             (Retiring under Article 88)                                              (ResOLuTiOn 4)
    Mr Lee Joo Hai                           (Retiring under Article 89)                                              (ResOLuTiOn 5)
    Mr Gay Chee Cheong                       (Retiring under Article 89)                                              (ResOLuTiOn 6)

    [See Explanatory Note (i)]

4. To approve the appointment of Mr Ahmed Butti Ahmed as a director pursuant to the Company’s Article of Assciation:
   (Article 75)
                                                                                                   (ResOLuTiOn 7)

5. To approve the payment of Directors’ fees of S$456,667 for the year ended 31 December 2007 (previous year:
   S$305,166).
                                                                                             (ResOLuTiOn 8)

6. To appoint Messrs KPMG as external auditors in place of Messrs Ernst & Young, and to authorise the Directors to fix
   their remuneration.

    In accordance with the requirements of Rule 1203(5) of the Listing Manual of the Singapore Exchange Securities
    Trading Limited:

    (a) the outgoing Auditors, Messrs Ernst & Young, have confirmed that they are not aware of any professional
	   	 reasons	why	the	new	Auditors	should	not	accept	appointment	as	Auditors	of	the	Company;	and

    (b) the Company confirms that there were no disagreements with the outgoing Auditors, Messrs Ernst & Young, on
	   	 accounting	treatments	within	the	last	12	months;	and

    (c) the Company confirms that it is not aware of any circumstances connected with the change of Auditors that
        should be brought to the attention of shareholders.
                                                                                                 (ResOLuTiOn 9)

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




Reinventing Ourselves Touching Lives                                                                  Hyflux Ltd Annual Report 2007   145
                                                           hYFlUx lTD
                                                    Company Registration No. 200002722Z
                                        (Incorporated in the Republic of Singapore with limited liability)




As speciAL business

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

8. Authority to issue shares up to 50 per centum (50%) of the issued shares in the capital of the Company

    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 Directors be authorised and empowered to:

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

        (ii) 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 shares,

        at any time and upon such terms and conditions and for such purposes and to such persons as the Directors
	   	   may	in	their	absolute	discretion	deem	fit;	and

    (b) (notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in
        pursuance of any Instrument made or granted by the Directors while this Resolution was in force,

        provided that:

        (1) the aggregate number of shares (including 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 shares in the capital of the Company (as calculated in accordance
            with sub-paragraph (2) below), of which the aggregate number of 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 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 shares and Instruments that may be issued under sub-
            paragraph (1) above, the percentage of issued shares and Instruments shall be based on the number of
            issued shares in the capital of the Company at the time of the passing of this Resolution, after adjusting for:

	   	   	   (a)	new	shares	arising	from	the	conversion	or	exercise	of	the	Instruments	or	any	convertible	securities;
            (b) new shares arising from the exercising share options or vesting of share awards outstanding and subsisting
	   	   	   	 at	the	time	of	the	passing	of	this	Resolution;	and	
            (c) any subsequent consolidation or subdivision of shares.

        (3) in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the
            Listing Manual of the Singapore Exchange Securities Trading Limited 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	




146     Hyflux Ltd Annual Report 2007                                                               Reinventing Ourselves Touching Lives
                                                     hYFlUx lTD
                                              Company Registration No. 200002722Z
                                  (Incorporated in the Republic of Singapore with limited liability)




As speciAL business (cOnT’D)

8. Authority to issue shares up to 50 per centum (50%) of the issued shares in the capital of the Company (cont’d)

   (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 Company is required by law to be held, whichever is earlier or (ii) in the case of shares to be
       issued in pursuance of the Instruments, made or granted pursuant to this Resolution, until the issuance of such
       shares in accordance with the terms of the Instruments.

   [See Explanatory Note (ii)]                                                                                       (ResOLuTiOn 10)

9. Authority to issue shares under the Hyflux Employees’ Share Option Scheme

   That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors be authorised and empowered to offer
   and grant options under the Hyflux Employees’ Share Option Scheme (“the Scheme”) and to issue from time to time
   such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of
   options granted by the Company under the Scheme, whether granted during the subsistence of this authority or
   otherwise, provided always that the aggregate number of additional ordinary shares to be allotted and issued
   pursuant to the Scheme shall not exceed fifteen per centum (15%) of the issued shares in the capital of the
   Company from time to time 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 the earlier.

   [See Explanatory Note (iii)]                                                                                      (ResOLuTiOn 11)



By Order of the Board




yang Ai chian
Company Secretary
Singapore, 4 April 2008




Reinventing Ourselves Touching Lives                                                                   Hyflux Ltd Annual Report 2007   147
                                                            hYFlUx lTD
                                                     Company Registration No. 200002722Z
                                         (Incorporated in the Republic of Singapore with limited liability)




expLAnATORy nOTes:

(i) Professor Tan Teck Meng, will upon re-election as a Director of the Company, become Chairman of the Renumeration
    Committee and remain as a member of the Audit Committee. He is considered as non-executive independent for
    the purpose of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited.

    Mr Raj Mitta will upon re-election as a Director, become Chairman of Risk Management Committee and is considered
    as a non-executive independent director.

    Mr Lee Joo Hai, will upon re-election as a Director of the Company, remain as Chairman of the Audit Committee and
    is considered as non-executive independent for the purpose of Rule 704(8) of the Listing Manual of the Singapore
    Exchange Securities Trading Limited. Mr Lee will also remain as a member of the Risk Management, Remuneration
    and Nominating Committees.

    Mr Gay Chee Cheong, will upon re-election as a Director of the Company, remain as a member of the Audit and
    Remuneration Committees and is considered as non-executive independent for the purpose of Rule 704(8) of
    the Listing Manual of the Singapore Exchange Securities Trading Limited. Mr Gay will also remain as Chairman of
    the Nominating Committee.

(ii) The Ordinary Resolution 9, if passed, will empower the Directors 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 earlier, to issue shares,
     make or grant instruments convertible into shares and to issue shares pursuant to such instruments, up to a
     number not exceeding, in total, 50% of the issued 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.

    For determining the aggregate number of shares that may be issued, the percentage of issued shares in the capital
    of the Company will be calculated based on the issued shares in the capital of the Company at the time this Ordinary
    Resolution is passed after adjusting for new 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 is passed and any subsequent consolidation or subdivision of shares.

(iii) The 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 or such authority is varied or revoked by the Company in a general meeting, whichever is the earlier, to issue
      shares in the Company pursuant to the exercise of options granted or to be granted under the Scheme up to a
      number not exceeding in total (for the entire duration of the Scheme) fifteen per centum (15%) of the issued shares
      in the capital of the Company from time to time.

pROfiLe Of mR AHmeD buTTi AHmeD – TO be ReAD in cOnjuncTiOn wiTH ResOLuTiOn 7

Mr Ahmed Butti Ahmed is the Director General of Dubai Customs and CEO of the Ports, Customs and Free Zone
Corporation (PCFC). In addition, he holds the following offices: Chairman of Imdaad (Facilities Management), Chairman
of Palm Utilities (District Cooling & Water Treatment), Chairman of Dubai Security Services, Board Member of Dubai
World, Board Member of Tamweel and Board Member of Federal Customs Authority Board of Directors. Mr Ahmed
Butti Ahmed completed his Masters degree in Science from Denver University in the United States.

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.

2. The instrument appointing a proxy must be deposited at the Registered Office of the Company at 202 Kallang Bahru, Hyflux Building, Singapore
   339339 not less than 48 hours before the time appointed for holding the Meeting.




148      Hyflux Ltd Annual Report 2007                                                               Reinventing Ourselves Touching Lives
                                                   hYFlUx lTD
                                            Company Registration No. 200002722Z
                                (Incorporated in the Republic of Singapore with limited liability)




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 at 5.00 p.m. on 6 May 2008 for the preparation of dividend warrants.

Duly completed registrable transfers received by the Company’s Share Registrar, Boardroom Corporate & Advisory
Services Pte. Ltd., 3 Church Street #08-01 Samsung Hub, Singapore 049483 up to 5.00 p.m. on 6 May 2008 will be
registered to determine shareholders’ entitlements to the said dividend. Members whose Securities Accounts with The
Central Depository (Pte) Limited are credited with shares at 5.00 p.m. on 6 May 2008 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 2008, will
be made on 16 May 2008.




Reinventing Ourselves Touching Lives                                                                 Hyflux Ltd Annual Report 2007   149
Hyflux Group of Companies
Singapore                                    Hyflux NewSpring Sewage Disposal        India
Eflux Singapore Pte Ltd                      (Jia Wang) Co., Ltd                     Eflux Oil India Private Limited
Eflux SK Pte Ltd                             Hyflux NewSpring Sewage Disposal        Hyflux Engineering (India) Pte Ltd
                                             (Ru Dong) Co., Ltd
Eflux Philippines Pte Ltd                                                            Hyflux Lifestyle Products (India) Pte Ltd
                                             Hyflux Unitech (Shanghai) Co., Ltd
Eflux Vietnam Pte Ltd
                                             Kunshan Ecowater Systems Co., Ltd
Energy Life Pte Ltd                                                                  Malaysia
                                             NewSpring Huludao Co., Ltd.
Hydrochem (S) Pte Ltd
                                             Ningxia Hypow Bio-technology Co., Ltd   Hyflux Malaysia Sdn Bhd
Hydrochem Engineering (S) Pte Ltd
                                             Sinolac (Huludao) Biotech Co., Ltd
Hyflux Aquosus (Singapore) Pte Ltd
                                             Tianjin Dagang NewSpring Co., Ltd       MENA
Hyflux Capital (Singapore) Pte Ltd
                                             Wu Xi Kai Quan Waste Water Treatment    Saudi Arabia
Hyflux Consumer Products Pte Ltd             Co., Ltd                                Lube Oil Re-refining Company
Hyflux Engineering Pte Ltd
Hyflux EPC Pte Ltd
                                             Hong Kong                               Dubai
Hyflux Filtech (Singapore) Pte Ltd
                                             Hyflux Utility (TJ) Limited             Hyflux (Middle East) FZCO
Hyflux Filtration (S) Pte Ltd
                                             Hyflux Utility (HLD) Limited            Palm Water LLC
Hyflux IP Resources Pte Ltd
                                             Hyflux Utility (WX) Limited
Hyflux Lifestyle Products (S) Pte Ltd                                                Algeria
                                             Hyflux Utility (YK) Limited
Hyflux Marmon Development Pte Ltd                                                    Hyflux Engineering Algeria
                                             Hyflux Utility (LB) Limited
Hyflux Management And                                                                Hyflux-TJSB Algeria
Consultancy Pte Ltd                          Hyflux Utility (PJ) Limited
                                                                                     SPA/Almiyah Attilemcania
Hyflux Membrane Manufacturing (S) Pte Ltd    Hyflux Utility WT (MG) Limited
Hyflux SIP Pte Ltd                           Hyflux Utility WWT (MG) Limited
Hyflux Utility (India) Pte Ltd               Hyflux Utility WT (XC) Limited          Vietnam
                                             Hyflux Utility WWT (XC) Limited         Success Blossom Environment Vietnam
Hyflux Water Trust Management Pte Ltd
                                             Hyflux Utility WT (GCL) Limited         Joint Stock Company
IndoSpring Utility (S) Pte Ltd
Marmon Hyflux Investments Pte Ltd            Hyflux Utility (TY) Limited
NewSpring Utility Pte Ltd                    Hyflux Utility (DF) Limited
SingSpring Pte Ltd                           Hyflux Utility (YL) Limited
Sinolac (Singapore) Pte Ltd                  Hyflux Utility (DG) Limited
MenaSpring Utility (S) Pte Ltd               Hyflux Utility (LP) Limited
                                             Hyflux Utility WT (LY) Limited
People’s Republic of China
Eflux (Taizhou) Co., Ltd                     British Virgin Islands
Hangzhou Zheda Hyflux Hualu Membrane         Hyflux Advanced Technology Ltd
Technology Co., Ltd
                                             Hyflux International Ltd
Hydrochem Engineering (Shanghai) Co., Ltd
                                             Hyflux Water Projects Ltd
Hyflux Aquosus (Shanghai) Co., Ltd
                                             IndoSpring Utility Ltd
Hyflux Design Engineering
                                             SinoSpring Utility Ltd
(Shanghai) Co., Ltd
                                             Spring China Utility Ltd
Hyflux Engineering (Shanghai) Co., Ltd
                                             Spring Environment Ltd
Hyflux Filtech Shanghai Co., Ltd
Hyflux Hi-Tech Product (Yangzhou) Co., Ltd   Spring Utility Ltd
Hyflux Investment Management And
Consultancy Services (Tianjin) Co., Ltd      Europe
Hyflux NewSpring (De Zhou) Co., Ltd
                                             France
Hyflux NewSpring (Fu Ning) Co., Ltd          Tlemcen Desalination Investment
Hyflux NewSpring (Guan Yun) Co., Ltd         Company SAS
Hyflux NewSpring (Jia Wang) Co., Ltd
Hyflux NewSpring (Le Ping) Co., Ltd          Netherlands
Hyflux NewSpring                             Hyflux CEPAration B.V.
(Liao Yang Gong Chang Ling) Co., Ltd
Hyflux NewSpring Construction Engineering    Netherlands Antilles
(Shanghai) Co., Ltd                          Hyflux CEPAration N.V.
Hyflux NewSpring Sewage Disposal
(Guan Yun) Co., Ltd
Corporate Information

Audit Committee                   Company Secretary                 Mizuho Corporate Bank Limited
Lee Joo Hai (Chairman)            Yang Ai Chian                     Singapore Branch
Teo Kiang Kok                                                       168 Robinson Road
Gay Chee Cheong                   Registered Office                 Capital Towers
Professor Tan Teck Meng           Hyflux Building                   Singapore 068912
                                  202 Kallang Bahru
Nominating Committee              Singapore 339339                  BNP Paribas, Singapore Branch
Gay Chee Cheong (Chairman)        Tel: +65 6214 0777                20 Collyer Quay
Lee Joo Hai                       Fax: +65 6214 1211                Tung Centre
Teo Kiang Kok                                                       Singapore 049319
                                  Share Registrar and
                                  Share Transfer Office             Arab Bank
Remuneration Committee
                                  Boardroom Corporate & Advisory    80 Raffles Place
Gay Chee Cheong (Chairman)
                                  Services Pte Ltd (a member of     #32-32 UOB Plaza 2
Teo Kiang Kok
                                  Boardroom Limited)                Singapore 048624
Lee Joo Hai
                                  3 Church Street
Christopher Murugasu
                                  #08-01 Samsung Hub                NATIXIS, Singapore Branch
Professor Tan Teck Meng
                                  Singapore 049483                  50 Raffles Place #41-01
                                                                    Singapore Land Tower
Risk Management Committee         Auditors                          Singapore 048623
Christopher Murugasu (Chairman)   Ernst & Young
Lee Joo Hai                       Certified Public Accountants      Bank of China
Teo Kiang Kok                     One Raffles Quay                  Singapore Branch
Raj Mitta                         North Tower, Level 18             4 Battery Road
                                  Singapore 048583                  Bank of China Building
Executive Committee                                                 Singapore 049908
Olivia Lum Ooi Lin (Chairman)     Partner-in-Charge (since 2005):
Lee Joo Hai                       Steven Phan                       Deutsche Bank AG
Teo Kiang Kok                                                       Singapore Branch
Gay Chee Cheong                   Bankers                           One Raffles Quay #17-00
                                  DBS Bank Ltd                      South Tower
Management Committee              6 Shenton Way                     Singapore 048583
Olivia Lum Ooi Lin (Chairman)     DBS Building Tower One
Sam Ong Eng Keang                 Singapore 068809                  Investor Relations
Peter Wu Siu Kin                                                    Website: www.hyflux.com
Benjamin Tan Eng Seng             Oversea-Chinese Banking           Contact: Sam Ong Eng Keang
Wong Khai Theen                   Corporation Limited               Email: sam_ong@hyflux.com
Fong Chun Hoe                     65 Chulia Street
Foo Hee Kiang                     OCBC Centre
Ge Wen Yue                        Singapore 049513

                                  United Overseas Bank Limited
                                  1 Raffles Place
                                  OUB Centre
                                  Singapore 048616
Hyflux Ltd
Hyflux Building
202 Kallang Bahru
Singapore 339339
Tel: (65) 6214 0777
Fax: (65) 6214 1211

www.hyflux.com

				
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