Everyday our dreams get bigger

Everyday,
our dreams
get bigger
Annual Report 2005

Financial Contents
24. Directors’ Report 28. Statement by Directors 29. Auditors’ Report 30. Consolidated Profi t and
Loss Account 31. Balance Sheets 32. Statements of Changes in Equity 34. Consolidated Statement
of Cash Flows 36. Notes to the Financial Statements 72. Supplementary Information 81. Statistics of
Shareholdings 82. Notice of Annual General Meeting 84. Notice of Book Closure 85. Proxy Form

DIRECTORS’ REPORT
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
The directors are pleased to present their report to the members together with the audited consolidated fi nancial 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 2005.
Directors
The directors of the Company in office at the date of this report are:
Ms Lum Ooi Lin
Group CEO and President
Mr Teo Kiang Kok
Mr Lee Joo Hai
Mr Gay Chee Cheong
Mr S. Iswaran
Mr Christopher Murugasu (appointed on 1 February 2005)
Mr Hamed Ahmed Kazim (appointed on 8 May 2005)
In accordance with Articles 88 and 89 of the Company’s Article of Association, Hamed Ahmed Kazim, Lee Joo Hai and Gay Chee Cheong
are due for retirement, and, being eligible, offer themselves for re-election.
Arrangements to Enable Directors to Acquire Shares or Debentures
Except for the Hyflux Employees’ Share Option Scheme wherein options are granted to certain directors of the Company, neither at the
end of nor at any time during the fi nancial 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.
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, interests in shares of the Company and related corporations
(other than wholly-owned subsidiaries) as stated below:
Direct interest
Deemed interest
As at 1.1.2005
or date of
appointment
As at
31.12.2005
As at
21.1.2006
As at 1.1.2005
or date of
appointment
As at
31.12.2005
As at
21.1.2006
The Company
Ordinary shares of
S$0.05 each
Lum Ooi Lin 135,739,587 176,734,141 177,109,141 – – –
Gay Chee Cheong 300,000 450,000 450,000 18,176,250 12,264,375 12,264,375
Christopher Murugasu 200,625* 511,875 511,875 80,000 120,000 120,000
* Christopher Murugasu was appointed as director on 1 February 2005
By virtue of Section 7 of the Singapore Companies Act, Cap. 50, 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, or share options,
warrants or debentures of the Company, or of related corporations, either at the beginning of the fi nancial year, or date of appointment
if later, or at the end of the financial year.
24

DIRECTORS’ REPORT (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
Directors’ Contractual Benefits
Except as disclosed in the financial statements, 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.
Options
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 of the Company and its subsidiaries,
other than substantial shareholders of the Company, to participate in the equity of the Company.
On 24 November 2004, the members of the Company approved a modification to the Scheme which allowed Lum Ooi Lin, Group CEO
and President and a substantial shareholder of the Company, to participate in the Scheme. The maximum entitlement of Lum Ooi Lin is
10% of the total number of shares which may be issued by the Company pursuant to the exercise of options under the Scheme.
The Scheme is administered by a committee comprising five Directors, namely Teo Kiang Kok, Lee Joo Hai, Gay Chee Cheong,
Christopher Murugasu and Lum Ooi Lin. 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 S$0.05 each of the Company granted to Directors of the Company pursuant to
the Hyflux Employee Share Option Scheme:
Options granted
during the
financial year
Aggregate options
granted (including
bonus issue) since
commencement of
scheme to end of
financial year
Aggregate options
exercised since
commencement of
scheme to end of
financial year
Aggregate options
outstanding
as at end of
financial year
Options to subscribe for ordinary shares of
S$0.05 each
Lum Ooi Lin 5,125,000 # 6,375,000 375,000 6,000,000
Christopher Murugasu 190,625* 862,500 464,063 398,437
# 3,000,000 options were granted to Lum Ooi Lin during the fi nancial year, and adjustments were made due to the bonus issue
of shares on 25 July 2005
* Adjustments were made due to the bonus issue of shares on 25 July 2005
Except as disclosed above, 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 participants has received 5% or more of the options available under the Scheme; and
• No options that entitle the holder to participate, by virtue of the options, in any share issue of any other corporation have been
granted.
25

26
DIRECTORS’ REPORT (cont’d) Hyfl ux Ltd and Subsidiaries
Year ended 31 December 2005
Options (cont’d)
At the end of the financial year, details of the options granted under the Scheme on the unissued ordinary shares of S$0.05 each of the Company were as follows:
Exercise
Price Exercisable Period
S$
No. of
Holders as at
31.12.2005
Balance
as at
31.12.2005
Options
Exercised
Options
Lapsed
Bonus
Options
Options
Granted
Balance
as at 1.1.2005
Date of Grant
of Options
15.10.2001 4,146,935 – 1,960,438 (108,873) (2,551,688) 3,446,812 61 0.2688 15.10.2002 - 27.09.2011
11.01.2002 34,312 – 12,438 – (22,000) 24,750 1 0.4123 11.01.2003 - 27.09.2011
– – 0.6184 25.01.2003 - 27.09.2011
25.01.2002 32,500 – – (32,500) –
28.03.2002 141,938 – 24,844 (67,251) (25,000) 74,531 2 0.5436 28.03.2003 - 27.09.2011
08.04.2002 31,250 – 10,000 (11,250) – 30,000 1 0.5401 08.04.2003 - 27.09.2011
03.05.2002 188,000 – 62,500 – (63,000) 187,500 1 0.5504 03.05.2003 - 27.09.2011
08.07.2002 42,500 – 16,250 – (10,000) 48,750 2 0.5664 08.07.2003 - 27.09.2011
01.08.2002 468,750 – 234,375 – (234,000) 469,125 1 0.5888 01.08.2003 - 27.09.2011
16.09.2002 385,250 – 190,625 – (82,000) 493,875 5 0.4869 16.09.2003 - 27.09.2011
07.01.2003 571,500 – 213,750 – (144,000) 641,250 5 0.5995 07.01.2004 - 27.09.2011
07.04.2003 413,000 – 181,500 – (144,000) 450,500 4 0.7253 12.04.2004 - 27.09.2011
12.06.2003 50,500 – 19,000 – (12,500) 57,000 1 0.6923 12.06.2004 - 27.09.2011
25.08.2003 461,500 – 75,250 (300,000) (68,000) 168,750 1 0.7627 25.08.2004 - 27.09.2011
16.09.2003 555,000 – 218,250 (50,500) (230,000) 492,750 3 0.8928 16.09.2004 - 27.09.2011
16.10.2003 1,352,000 – 641,500 – (514,250) 1,479,250 10 1.0581 16.10.2004 - 27.09.2011
05.12.2003 1,650,000 – 825,000 – (525,000) 1,950,000 2 1.0197 05.12.2004 - 27.09.2011
29.12.2003 645,000 – 275,000 (60,000) (67,000) 793,000 16 1.0627 29.12.2004 - 27.09.2011
19.02.2004 400,000 – 180,000 – (100,000) 480,000 1 1.0293 19.02.2005 - 27.09.2011
06.05.2004 400,000 – – (320,000) (80,000) – – 1.4520 06.05.2005 - 27.09.2011
14.05.2004 400,000 – 160,000 – (80,000) 480,000 1 0.9600 14.05.2005 - 27.09.2011
17.09.2004 130,000 – 65,000 (96,000) (39,000) 60,000 1 1.0347 17.09.2005 - 27.09.2011
07.02.2005 – 3,721,000 1,670,000 (667,500) – 4,723,500 63 1.8600 07.02.2006 - 27.09.2011
03.05.2005 – 200,000 100,000 – – 300,000 1 2.3227 03.05.2006 - 27.09.2011
09.05.2005 – 3,000,000 1,500,000 – – 4,500,000 1 2.3067 09.05.2006 - 27.09.2011
01.06.2005 – 130,000 65,000 – – 195,000 3 2.5493 01.06.2006 - 27.09.2011
08.06.2005 – 110,000 55,000 – – 165,000 2 2.6507 08.06.2006 - 27.09.2011
12,499,935 7,161,000 8,755,720 (1,713,874) (4,991,438) 21,711,343 189
Except as disclosed above, no other options 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 to
take up unissued shares of the Company or its subsidiaries.

DIRECTORS’ REPORT (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
Audit Committee
The Audit Committee (“AC”) comprises the following members as at the date of this report:-
Mr Lee Joo Hai (Chairman) appointed on 17 January 2001
Mr Teo Kiang Kok appointed on 17 January 2001
Ms Olivia Lum Ooi Lin appointed on 17 January 2001
Mr Gay Chee Cheong appointed on 23 August 2001
with legal, accounting, financial management expertise or business experience and is chaired by a Non-Executive Independent Director.
The primary functions of the AC are as follows:
a) review with the external auditor, internal auditor and Management, the Company’s general policies and control procedures,
interested persons transactions, as well as any matters or issue that affect the performance of the Group;
b) review the quarterly, half-yearly and annual results announcements as well as the fi nancial statements of the Group and Company
before they are submitted to the Board for approval;
c) direct matters to be included as special review by the external and internal auditors;
d) meet with the external auditor, without the presence of the Management at least once a year to review the co-operation and
assistance given by the Management to them;
e) review the scope and results of the audit and its cost effectiveness;
f) review the non-audit services provided by the external auditors so as to ensure that any provision of such services would not
affect the independence of external auditors;
g) consider and recommend the appointment or re-appointment of the external auditors;
h) investigate any matter within its terms of reference, having full access to Management and resources to enable it to discharge its
functions; and
i) undertake other functions and duties are may be required by Statue and Listing Rule.
A majority of the current members are Non-Executive Directors. The Group CEO and President, Lum Ooi Lin, has remained in the AC
as the other members of the AC are of the opinion that she plays an important role in contributing in-depth information on the business
aspects of the Group as well as knowledge and understanding of the industry. The AC has established a set of guidelines such that any
decision made by AC requires the votes of all independent non-executive directors.
The AC held four meetings during the year. The AC had reviewed the non-audit services provided by the external auditors, including fees
paid for non-audit services during the year and is of the opinion that the auditor’s independence has not been compromised. The AC
also reviewed the services provided by the Independent Directors’ firm and is satisfied that the provision of such services did not affect
their independence.
The AC also reviewed the performance of the external auditors and recommended to the Board the re-appointment of the auditors at
the 2006 AGM.
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.
Auditors
Ernst & Young have expressed their willingness to accept reappointment as auditors.
On behalf of the Board of Directors,
Lum Ooi Lin
Group CEO and President
Teo Kiang Kok
Director
Singapore
31 March 2006
27

STATEMENT BY DIRECTORS PURSUANT TO SECTION 201(15)
OF THE COMPANIES ACT, CAP. 50
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
We, Lum Ooi Lin and Teo Kiang Kok, being two of the directors of Hyflux Ltd, (the “Company”) do hereby state that, in the opinion of the
directors,
(i)
(ii)
the accompanying balance sheets, consolidated profit and loss account, 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
Company and of the Group as at 31 December 2005, and of the results of the business, changes in equity and cash fl ows of
the Group and the changes in equity of the Company for the financial year then ended; and
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
Teo Kiang Kok
Director
Singapore
31 March 2006
28

AUDITORS’ REPORT TO THE MEMBERS OF HYFLUX LTD
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
We have audited the accompanying financial statements of Hyflux Ltd (the “Company”) and its subsidiaries (collectively, the “Group”),
set out on pages 30 to 71, for the financial year ended 31 December 2005. These financial statements are the responsibility of the
Company’s directors. Our responsibility is to express an opinion on these fi nancial statements based on our audit.
We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we plan and perform
the audit to obtain reasonable assurance about whether the fi nancial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing
the accounting principles used and signifi cant estimates made by the directors, as well as evaluating the overall fi nancial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion,
(a)
(b)
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 Singapore Companies Act, Cap. 50 (the “Act”) and Singapore
Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31
December 2005, and of the results, changes in equity and cash fl ows of the Group and the changes in equity of the Company
for the financial year ended on that date; and
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
31 March 2006
29

CONSOLIDATED PROFIT AND LOSS ACCOUNT
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
Note 2005 2004
S$’000
S$’000
(Restated)
Revenue 3 131,542 88,655
Other operating income 4 1,756 472
Raw materials and consumables used (69,506) (35,917)
Personnel expenses 5 (16,676) (9,302)
Cost of share-based payments (2,325) (663)
Depreciation and amortisation (4,157) (3,533)
Other operating expenses 6 (15,348) (10,611)
Gain on sale of property, plant and equipment 8,198 103
Gain on sale of shares in a subsidiary 3,768 –
Financial income/(expenses), net 7 153 (360)
Fair value gain on financial instruments 12,945 –
Share of results of associates (93) –
Profit before Taxation 50,257 28,844
Tax expense 25 (1,071) (968)
Net profit for the Financial Year 49,186 27,876
Attributable to:
Shareholders of the Company 46,276 26,104
Minority interests 2,910 1,772
49,186 27,876
Earnings Per Share (cents) 8
- Basic 9.21 5.55
- Fully diluted 8.92 5.44
30
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.

BALANCE SHEETS
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
Note Group Company
2005 2004 2005 2004
S$’000 S$’000 S$’000 S$’000
(Restated)
(Restated)
Non-Current Assets
Property, plant and equipment 9 106,608 129,049 1,264 1,583
Investment in subsidiaries 10 – – 56,618 26,099
Investment in joint ventures 11 – – 22,538 –
Investment in associates 12 11,494 – 8,812 –
Long-term investments 13 5,188 3,531 – –
Intangible assets 14 21,050 14,543 1,921 1,909
Other receivables 15 – – 870 34,447
Total non-current assets 144,340 147,123 92,023 64,038
Current Assets
Cash and fixed deposits 16 96,412 61,281 52,777 290
Short-term investment 2,000 2,013 2,000 –
Trade receivables 19 31,072 35,837 227 13,402
Gross amount due from customers for contract work 18 43,859 34,414 12,095 –
Other receivables, deposits and prepayments 20 17,621 14,325 1,084 329
Inventories 17 11,069 5,147 5,073 1,770
Due from related parties 21 27,687 – 26,657 13,520
Short-term loans 22 9,732 4,908 – –
Derivative financial instruments 33(d) 6,568 – 1 –
Total current assets 246,020 157,925 99,914 29,311
Current Liabilities
Trade payables 51,681 34,657 1,876 2,042
Advance from customers 8,400 1,240 6,437 3
Other payables and accruals 23 15,972 7,990 4,045 857
Tax payable 2,698 1,517 (3) –
Derivative financial instruments 33(d) 5,465 – 73 –
Deferred income 1,609 – – –
Interest bearing loans and borrowings 24 1,641 1,538 385 1,538
Short term loan – 2,405 – –
Total current liabilities 87,466 49,347 12,813 4,440
Net Current Assets 158,554 108,578 87,101 24,871
Non-Current Liabilities
Deferred tax liabilities 25 288 288 – –
Interest bearing loans and borrowings 24 105,437 139,391 30,902 385
Total non-current liabilities 105,725 139,679 30,902 385
Net Assets 197,169 116,022 148,222 88,524
Equity Attributable to Shareholders of the
Company
Issued share capital 26 25,728 15,784 25,728 15,784
Share premium 27 62,693 33,626 62,693 33,626
Capital reserve 28 987 834 – –
Foreign currency translation reserve (617) (1,527) – –
Hedging reserve (7,143) – 379 –
Employee share option reserve 2,852 813 2,852 813
Revenue reserve 104,946 63,117 56,570 38,301
Shareholders’ equity 189,446 112,647 148,222 88,524
Minority interests 7,723 3,375 – –
Total Equity and Minority Interest 197,169 116,022 148,222 88,524
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
31

32
STATEMENTS OF CHANGES IN EQUITY Hyfl ux Ltd and Subsidiaries
Year ended 31 December 2005
Attributable to equity holders of the Company
Total
Equity
Minority
Interests
Revenue
Reserve Total
Employee
Share Option
Reserve
Hedging
Reserve
Foreign Currency
Translation
Reserve
Capital
Reserve
Share
Premium
Share
Capital
Group
S$’000 S$’000 S$’000 S$’000 S$’000 S$’000 S$’000 S$’000 S$’000 S$’000
(Note 26)
At 31.12.2004 as previously reported 15,784 33,626 834 (1,527) – – 63,930 112,647 3,375 116,022
Cumulative effects of adopting FRS 102 (Note 2.2) – – – – – 813 (813) – – –
At 31.12.2004 as restated 15,784 33,626 834 (1,527) – 813 63,117 112,647 3,375 116,022
Net effects of adopting FRS 39 (Note 2.2) – – – – (16,651) – (129) (16,780) – (16,780)
At 1.1.2005 as restated 15,784 33,626 834 (1,527) (16,651) 813 62,988 95,867 3,375 99,242
Issue of shares for cash 1,186 34,398 – – – – – 35,584 – 35,584
Issue of shares under the Scheme 250 2,891 – – – – – 3,141 – 3,141
Issue of bonus shares 8,508 (8,508) – – – – – – – –
Capital contribution by minority shareholders – – – – – – – 2,241 2,241
Fair value gain of financial derivatives – – – – 9,508 – – 9,508 – 9,508
Capital reserve arising on consolidation – – 153 – – – – 153 (27) 126
Foreign currency translation differences – – – 910 – – – 910 (776) 134
Cost of share-based payment – – – – – 2,325 – 2,325 – 2,325
Transfer upon exercise of employee share options – 286 – – – (286) – – – –
Net profit for the year – – – – – – 46,276 46,276 2,910 49,186
Dividends (Note 35) – – – – – – (4,318) (4,318) – (4,318)
At 31.12.2005 25,728 62,693 987 (617) (7,143) 2,852 104,946 189,446 7,723 197,169
At 31.12.2003 as previously reported 15,624 31,606 – (667) – – 38,916 85,479 1,055 86,534
Cumulative effects of adopting FRS 102 (Note 2.2) – – – – – 150 (150) – – –
At 1.1.2004 as restated 15,624 31,606 – (667) – 150 38,766 85,479 1,055 86,534
Issue of shares under the Scheme 160 2,020 – – – – – 2,180 – 2,180
Capital reserve arising on consolidation – – 834 – – – – 834 – 834
Foreign currency translation differences – – – (860) – – – (860) 548 (312)
Cost of share-based payment – – – – – 663 – 663 – 663
Net profit for the year – – – – – – 26,104 26,104 1,772 27,876
Dividends – – – – – – (1,753) (1,753) – (1,753)
At 31.12.2004 15,784 33,626 834 (1,527) – 813 63,117 112,647 3,375 116,022

STATEMENTS OF CHANGES IN EQUITY (cont’d) Hyfl ux Ltd and Subsidiaries
Year ended 31 December 2005
Revenue
reserve Total
Employee
share
option
reserve
Hedging
reserve
Share
premium
Share
capital
Company
S$’000 S$’000 S$’000 S$’000 S$’000 S$’000
At 31.12.2004 as previously reported 15,784 33,626 – – 39,114 88,524
Cumulative effects of adopting of FRS 102 (Note 2.2) – – – 813 (813) –
At 31.12.2004 as restated 15,784 33,626 – 813 38,301 88,524
5 – (1,395) (1,390)
Net effects of adopting FRS 39 (Note 2.2) – –
At 31.12.2004 as restated 15,784 33,626 5 813 36,906 87,134
Issue of shares for cash 1,186 34,398 – – – 35,584
Issue of shares under employee share options scheme 250 2,891 – – – 3,141
Issue of bonus shares 8,508 (8,508) – – – –
Fair value loss of financial derivatives – – 374 – – 374
Cost of share-based payment – – – 2,325 – 2,325
Transfer upon exercise of employee share option – 286 – (286) – –
Net profit for the year – – – – 23,982 23,982
Dividends (Note 35) – – – – (4,318) (4,318)
At 31.12.2005 25,728 62,693 379 2,852 56,570 148,222
At 31.12.2003 as previously reported 15,624 31,606 – – 31,155 78,385
Cumulative effects of adopting FRS 102 – – – 150 (150) –
At 1.1.2004 as restated
15,624 31,606 – 150 31,005 78,385
Issue of shares for cash 160 2,020 – – – 2,180
Cost of share-based payment – – – 663 – 663
Net profit for the year – – – – 9,049 9,049
Dividends (Note 35) – – – – (1,753) (1,753)
At 31.12.2004 15,784 33,626 – 813 38,301 88,524
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
33

CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
Note 2005 2004
S$’000
S$’000
(Restated)
Cash Flows from Operating Activities
Profit before taxation 50,257 28,844
Adjustments for:
Cost of share-based payment 2,325 663
Fair value gain on financial instruments (12,945) –
Gain on sale of shares in a subsidiary (3,768) –
Gain on sale of property, plant and equipment (8,198) (103)
Loss on disposal of associate – 119
Share of results of associates 93 –
Amortisation of intangible assets 756 1,020
Depreciation of property, plant and equipment 3,401 2,513
Interest expense 2,547 710
Interest income (2,700) (350)
Government grants (939) (113)
Operating cash flows before working capital changes 30,829 33,303
Inventories (5,922) 2,835
Gross amounts due from customers for contract work (9,445) (18,655)
Trade receivables 4,765 (12,627)
Other receivables, deposits and prepayments (4,393) (19,633)
Due from related companies (27,687) –
Trade payables and accruals 17,088 14,536
Deferred income 1,609 –
Other payables and accruals 12,017 7,235
Advances from customers 7,160 –
Total working capital changes (4,808) (26,309)
Cash generated from operations 26,021 6,994
Income tax refunded/(paid) 110 (27)
Net cash generated from operating activities 26,131 6,967
Cash Flows from Investing Activities
Purchase of property, plant and equipment (81,873) (14,178)
Payment for construction in progress (445) (92,529)
Acquisition of intangible assets (7,470) (6,492)
Proceeds from sale of shares in a subsidiary A 25,439 –
Proceeds from sale of property, plant and equipment 19,162 165
Long term investments (1,658) (99)
Short term investments 13 (2,013)
Investment in associates (11,585) –
Interest received 1,653 350
Government grants received 939 113
Net cash used in investing activities (55,825) (114,683)
34

CONSOLIDATED STATEMENT OF CASH FLOWS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
Note 2005 2004
S$’000
S$’000
(Restated)
Cash Flows from Financing Activities
Proceeds from issue of new shares 38,724 2,180
Payments of dividends (4,318) (1,753)
Minority shareholders’ capital contribution 2,241 1,432
Payment of hire purchase obligations – (32)
Payment of finance lease obligations – (62)
(Payment)/proceeds of short-term loans (6,982) 114
Proceeds from long-term loans 36,403 136,625
Net interest paid (2,547) (710)
Interest received from derivatives 1,047 –
Net cash generated from financing activities 64,568 137,794
Net Increase in Cash and Cash Equivalents 34,874 30,078
Cash and Cash Equivalents at Beginning of Year 16 61,281 31,894
Effect of exchange rate changes 257 (691)
Cash and Cash Equivalents at End of Year 16 96,412 61,281
Note A
Cashflow from sale of shares in a subsidiary is arrived as follows:
S$’000
Net assets sold:
Current assets 8,666
Non-current assets 90,600
Current liabilities (13,148)
Non-current liabilities (90,254)
Derivative financial instruments 8,727
Shareholders loan 20,000
Net assets sold 24,591
Gain on sale 3,768
Professional fee incurred 1,641
Cash proceeds from sale 30,000
Less: Cash of subsidiary (2,920)
Less: Professional fees incurred (1,641)
Net cash inflow on sale 25,439
The accompanying accounting policies and explanatory notes form an integral part of the financial statements.
35

NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
1. Corporate Information
Hyflux Ltd (the “Company”) is a limited liability company, which is incorporated in the Republic of Singapore.
The registered office and principal place of business of the Company is located at Hyflux Building, 202 Kallang Bahru,
Singapore 339339.
The Company and its subsidiaries (collectively, the “Group”) currently focuses on four core businesses:
• Water Seawater desalination, raw water purification, wastewater cleaning, water recycling, water
reclamation and ultra pure water production for municipal and industrial clients;
• Industrial Processes Separation, concentration and purification treatments for manufacturing process streams;
• Structured Projects Privately financed projects structured either as Build-Own-Operate (BOO) or Build-Own Transfer
(BOT) schemes; and
• Consumer Air-to-water and home filtration products including faucet and under-sink fi lters for the
consumer lifestyle market
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 for derivative fi nancial instruments that have
been measured at their fair values.
The carrying values of recognised assets and liabilities that are designated as hedged items in a fair value hedge are
adjusted to record the gain or loss on the hedged items attributable to the hedged risks.
The financial statements are presented in Singapore Dollars (S$) and all values are rounded to the nearest thousand (S$’000)
except when otherwise indicated.
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 FRSs
On 1 January 2005, the Group and the Company adopted the following standards mandatory for annual financial
periods beginning on or after 1 January 2005.
(i) FRS 39 – Financial Instruments: Recognition and Measurement
(ii) FRS 102 – Share-based Payment
(i)
FRS 39 – Financial Instruments: Recognition and Measurement
The Group and the Company adopted FRS 39 prospectively on 1 January 2005. At that date, financial assets
within the scope of FRS 39 were classified as either financial assets at fair value through profit or loss, loans and
receivables, held-to-maturity investments or available-for-sale financial assets, as appropriate. Financial assets
that were classified as financial assets at fair value through profit or loss and available-for-sale financial assets
were measured at fair value while loans and receivables and held-to-maturity investments were measured at
amortised cost using the effective interest rate method. At 1 January 2005, differences between the carrying
values and fair values of financial assets at fair value through profit or loss were recognised in revenue reserve.
36

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
2. Summary of Significant Accounting Policies (cont’d)
2.2 Changes in Accounting Policies (cont’d)
(a)
Adoption of New FRSs (cont’d)
(i)
FRS 39 – Financial Instruments: Recognition and Measurement (cont’d)
According to FRS 39, all derivative financial instruments held by the Group and the Company were recognised
as assets or liabilities in the balance sheets and classifi ed as financial assets or financial liabilities at fair value
through profit or loss. Fair value adjustments of derivative fi nancial instruments, except for those designated
as hedging instruments in cash flow hedges, were recognised in revenue reserve at 1 January 2005.
At 1 January 2005, the Company held interest rate swaps that were designated as hedging instruments in
cash flow hedges of the interests on bank loans payable. The portion of the gain or loss on these hedging
instruments that is determined to be an effective hedge was recognised directly in the hedging reserve at that
date. The ineffective portion of a hedge was recognised in revenue reserve at 1 January 2005.
Under the transitional provisions of FRS 39, the change in accounting policy on 1 January 2005 resulted in:
• a decrease in the Group’s and the Company’s revenue reserve by S$129,000 and S$1,395,000
respectively;
• a decrease in the Group’s hedging reserve by S$16,651,000; and
• an increase of S$5,000 in the Company’s hedging reserve.
(ii)
FRS 102 – Share-based Payment
The main impact of FRS 102 on the Group and the Company is the recognition of an expense and a
corresponding entry to equity for share options granted to senior executives and general employees.
The Group and the Company have applied FRS 102 retrospectively and have taken advantage of the
transitional provisions of FRS 102 in respect of equity-settled awards. As a result, the Group and the Company
have applied FRS 102 only to equity-settled awards granted after 22 November 2002 that had not vested on
1 January 2005.
Under the transitional provisions of FRS 102, the change in accounting policy on 1 January 2005 resulted in
the following:
• The Group’s and the Company’s employee share option reserve increased by S$813,000
(2004:S$150,000); and the revenue reserve decreased by S$813,000 (2004:S$150,000)
• Profit for the year of the Group decreased by S$2,325,000 (2004:S$663,000);
• Basic earnings per share of the Group decreased by 0.46 cents (2004:0.21 cents); and
• Diluted earnings per share of the Group decreased by 0.45 cents (2004:0.21 cents).
(b)
Adoption of Revised FRSs
In addition, the Group adopted the following revised standards which did not result in any significant change in
accounting policies:
FRS 1 (revised) – Presentation of financial statements
FRS 2 (revised) – Inventories
FRS 8 (revised) – Accounting Policies, Changes in Accounting Estimates and Errors
FRS 10 (revised) – Events after the Balance Sheet Date
FRS 16 (revised) – Property, Plant and Equipment
FRS 17 (revised) – Leases
FRS 24 (revised) – Related Party Disclosures
FRS 27 (revised) – Consolidated and Separate Financial Statements
FRS 28 (revised) – Investments in Associates
FRS 31 (revised) – Interests in Joint Ventures
FRS 32 (revised) – Financial Instruments: Disclosure and Presentation
FRS 33 (revised) – Earnings Per Share
FRS 36 (revised) – Impairment of Assets
FRS 38 (revised) – Intangible Assets
37

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
2. Summary of Significant Accounting Policies (cont’d)
2.2 Changes in Accounting Policies (cont’d)
(c)
FRS and INT FRS not yet Effective
The Group has not applied the following INT FRS that have been issued but are only effective for annual financial
periods beginning on or after 1 January 2006:
• INT FRS 104 – Determining Whether an Arrangement Contains a Lease
This interpretation is effective for annual periods commencing on or after 1 January 2006 and will be adopted by
the Group in the financial year ending 31 December 2006. It provides guidelines in the determination of whether an
arrangement is a lease. This depends on the use of a specific asset and whether it conveys a right to use the asset
by the counterparty and, if so, FRS17, Leases, will apply.
SingSpring Pte Ltd (“SingSpring”), a joint venture, has signed a Water Purchase Agreement (“WPA”) with Singapore’s
Public Utilities Board (“PUB”) to supply treated water to PUB from a seawater desalination plant, which is developed,
financed, designed, built, owned and operated by SingSpring. The supply arrangement is for 20 years from December
2005. The plant is located on a piece of leasehold land which is in the name of SingSpring and the lease period is
30 years from January 2004. The management is still in discussion with its auditors on the appropriate accounting
treatment of the arrangement. If it is a finance lease, the change in accounting treatment to a finance lease for
SingSpring’s plant will have the following financial effect on the financial statements of the Group in 2006:
- Property, plant and equipment of the Group will be reduced by about S$90 million with a corresponding
recognition of a lease receivable of the same amount. Accordingly, there will be no change in the amount of
total assets.
- Recognition of finance income, as opposed to revenue from sale of water, in the consolidated profit and loss
account based on a pattern reflecting a constant periodic rate of return of SingSpring’s net investment in the
finance lease. The impact of this change on the results for the financial year ending 31 December 2006 is not
reasonably estimable.
2.3 Significant Accounting Estimates and Judgements
Estimates, assumptions concerning the future and judgements are made in the preparation of the financial statements.
They affect the application of the Group’s accounting policies, reported amounts of assets, liabilities, income and expenses,
and disclosures made. They are assessed on an on-going basis and are based on experience and relevant factors, including
expectations of future events that are believed to be reasonable under the circumstances.
(a)
Key Sources of Estimation Uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet
date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year are discussed below.
(i)
Depreciation of Property, Plant and Equipment
The cost of property, plant and equipment is depreciated on a straight-line basis over the asset’s useful lives.
Management estimates the useful lives of these property, plant and equipment to be within 1 to 5 years. The
carrying amount of the Group’s property, plant and equipment at 31 December 2005 was S$106,608,000
(2004: S$129,049,000). 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.
(ii)
Income Taxes
The Group has exposure to income taxes in various jurisdictions. Signifi cant judgement is involved in
determining the Group’s 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
38

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
carrying amount of the Group’s tax payables at 31 December 2005 was $2,698,000 (2004: $1,517,000).
2. Summary of Significant Accounting Policies (cont’d)
2.3 Significant Accounting Estimates and Judgements (cont’d)
(b)
Critical judgements made in applying Accounting Policies
In the process of applying the Group’s accounting policies, management has made certain judgements, apart from
those involving estimations, which have significant effect on the amounts recognised in the fi nancial statements.
(i)
Impairment of investments and financial assets
The Group follows the guidance of FRS 39 on determining when an investment or fi nancial asset is other-thantemporarily
impaired. This determination requires significant judgement, the Group evaluates, among other
factors, the duration and extent to which the fair value of an investment or fi nancial asset is less than its cost;
and the financial health of and near-term business outlook for the investment or fi nancial asset, including factors
such as industry and sector performance, changes in technology and operational and financing cashflow.
2.4 Functional and Foreign Currency
(a)
Functional Currency
The management has determined the currency of the primary economic environment in which the Company operates
i.e. functional currency, to be S$. Sales prices and major costs of providing goods and services including major
operating expenses are primarily influenced by fluctuations in S$.
(b)
Foreign Currency Transactions
Transactions in foreign currencies are measured in the respective functional currencies of the Company and its
subsidiaries and are recorded on initial recognition in the functional currencies at exchange rates approximating
those ruling at the transaction dates. Monetary assets and liabilities denominated in foreign currencies are translated
at the closing rate of exchange ruling at the balance sheet date. Non-monetary items that are measured in terms of
historical cost in a foreign currency are translated using the exchange rates as at the dates of the initial transactions.
Non-monetary items measured at fair value in a foreign currency are translated using the exchange rates at the date
when the fair value was determined.
Exchange differences arising on the settlement of monetary items or on translating monetary items at the balance
sheet date are recognised in the profit and loss account except for exchange differences arising on monetary items
that form part of the Group’s net investment in foreign subsidiaries, which are recognised initially in a separate
component of equity as foreign currency translation reserve in the consolidated balance sheet and recognised in the
consolidated profit and loss account on disposal of the subsidiary. In the Company’s separate financial statements,
such exchange differences are recognised in the profi t and loss account.
Differences on foreign currency borrowings that provide a hedge against a net investment in a foreign operation are
also taken directly to the foreign currency translation reserve until the disposal of the net investment, at which time
they are recognised in the profit and loss account. Tax charges and credits attributable to exchange differences on
those borrowings are also dealt with in the foreign currency translation reserve.
(c)
Foreign Currency Translation
The results and financial position of foreign operations are translated into S$ using the following procedures:
• Assets and liabilities for each balance sheet presented are translated at the closing rate ruling at that balance
sheet date; and
• Income and expenses for each income statement are translated at average exchange rates for the year, which
approximates the exchange rates at the dates of the transactions.
All resulting exchange differences are recognised in a separate component of equity as foreign currency translation
reserve.
On disposal of a foreign operation, the cumulative amount of exchange differences deferred in equity relating to that
foreign operation is recognised in the profit and loss account as a component of the gain or loss on disposal.
39

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
2. Summary of Significant Accounting Policies (cont’d)
2.5 Subsidiaries and Principles of Consolidation
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. The Group generally has such power when it directly or indirectly, holds more than 50% of the
issued share capital, or controls more than half of the voting power, or controls the composition of the board of directors.
In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less any impairment
losses.
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 are prepared for the same reporting date as the parent
Company. Consistent accounting policies are applied for like transactions and events in similar circumstances.
All intra-Group balances, transactions, income and expenses and profits and losses resulting from intra-Group transactions
that are recognised in assets, are eliminated in full.
Subsidiaries are fully 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.
Acquisitions of subsidiaries are accounted for using the purchase method. The cost of an acquisition is measured as the fair
value of the assets given, equity instruments issued and liabilities incurred or assumed at the date of exchange, plus costs
directly attributable to the acquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business
combination are measured initially at their fair values at the acquisition date, irrespective of the extent of any minority interest.
Any excess of the cost of the business combination over the Group’s interest in the net fair value of the identifi able assets,
liabilities and contingent liabilities represents goodwill.
Any excess of the Group’s interest in the net fair value of the identifi able assets, liabilities and contingent liabilities over the
cost of business combination is recognised in the profi t and loss account on the date of acquisition.
Minority interests represent the portion of profit or loss and net assets in subsidiaries not held by the Group. They are
presented in the consolidated balance sheet within equity, separately from the parent shareholders’ equity, and are
separately disclosed in the consolidated profit and loss account.
2.6 Associates
An associate is an entity, not being a subsidiary or a joint venture, in which the Group has significant influence. This generally
coincides with the Group having 20% or more of the voting power, or has representation on the board of directors.
The Group’s investments in associates are accounted for using the equity method. Under the equity method, the investment
in associate is carried in the balance sheet at cost plus post-acquisition changes in the Group's share of net assets of
the associate. The Group's share of the profit or loss of the associate is recognised in the consolidated profit and loss
account.
Where there has been a change recognised directly in the equity of the associate, the Group recognises its share of such
changes. After application of the equity method, the Group determines whether it is necessary to recognise any additional
impairment loss with respect to the Group's net investment in the associate. 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.
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 assets, liabilities and contingent liabilities
over the cost of the investment is excluded from the carrying amount of the investment and is instead included as income in
the determination of the Group's share of the associate's profi t or loss in the period in which the investment is acquired.
When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or made payments
40

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
on behalf of the associate.
2. Summary of Significant Accounting Policies (cont’d)
2.6 Associates (cont’d)
The most recent available audited financial statements of the associates are used by the Group in applying the equity
method. Where the dates of the audited financial statements used are not co-terminous with those of the Group, the share
of results is arrived at from the last audited financial statements available and un-audited management fi nancial statements
to the end of the accounting period. Consistent accounting policies are applied for like transactions and events in similar
circumstances.
In the Company’s separate financial statements, investments in associates are accounted for at cost less impairment
losses.
2.7 Joint Ventures
The Group has interests in jointly controlled entities. A jointly controlled entity is a joint venture that involves the establishment
of a separate entity in which each venturer has an interest. The Group recognises its interest in the jointly controlled entities
using proportionate consolidation. The Group combines its share of each of the assets, liabilities, income and expenses
of the jointly controlled entities with the similar items, line by line, in its consolidated fi nancial statements. The financial
statements of the jointly controlled entities are prepared for the same reporting year as the parent company. Consistent
accounting policies are applied for like transactions and events in similar circumstances.
The jointly controlled entities are proportionately consolidated until the date on which the Group ceases to have joint control over
these entities.
In the Company's separate financial statements, interests in jointly controlled entities are accounted for at cost less
impairment losses.
2.8 Property, Plant and Equipment
All items of property, plant and equipment are initially recorded at cost. Subsequent to initial recognition, property, plant
and equipment are stated at cost less accumulated depreciation and any accumulated impairment losses.
Depreciation of an asset begins when it is available for use and is computed on a straight-line basis over the estimated
useful life of the asset as follows:
• Plant and machinery – 4 - 5 years
• Motor vehicles – 4 - 5 years
• Computers – 1 - 4 years
• Office equipment – 4 - 5 years
• Leasehold properties and improvements – over the lease period
• Furniture and fittings – 4 to 5 years
• Renovation – 4 to 5 years
Construction-in-progress included in plant and equipment are not depreciated as these assets are not 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 values may not be recoverable.
The residual values, 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 arising on derecognition of the asset is included in the profit and loss account in
the year the asset is derecognised.
41

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
2. Summary of Significant Accounting Policies (cont’d)
2.9 Intangible Assets
Intangible assets acquired separately are measured on initial recognition at cost. The cost of intangible assets acquired in
a business combination is their fair values as at the date of acquisition. Following initial recognition, intangible assets are
carried at cost less any accumulated amortisation and any accumulated impairment losses. The useful lives of intangible
assets are assessed to be either finite or indefinite. Intangible assets with finite lives are amortised on a straight-line basis
over the estimated economic 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 for an intangible asset with a fi nite useful life
are reviewed at least at each financial year-end. The amortisation expense on intangible assets with fi nite lives is recognised
in the profit and loss account through the 'depreciation and amortisation expenses' line item.
Intangible assets with indefinite useful lives are tested for impairment annually or more frequently if the events or changes in
circumstances indicate that the carrying value may be impaired either individually or at the cash-generating unit level. Such
intangibles are not amortised. The useful life of an intangible asset with an indefi nite life is reviewed annually to determine
whether the useful life assessment continues to be supportable.
(a)
Research and Development Costs
Research costs are expensed as incurred. An intangible asset arising from development expenditure on an individual
project is recognised only 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 over the estimated useful life and assessed for impairment whenever there is an indication that
the intangible asset may be impaired.
(b)
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 5 years.
(c)
Licensing Fees
The initial cost of acquiring licenses is capitalised and amortised on a straight-line basis over the period of the
licensing agreement.
2.10 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 indefi nite 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 infl ows 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 using a pre-tax discount rate that reflects current market assessments of the time value
of money and the risks specific to the asset. 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 profit and loss account as ‘impairment losses’.
42

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
2. Summary of Significant Accounting Policies (cont’d)
2.10 Impairment of Non-Financial Assets (cont’d)
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. If such indication exists,
the recoverable amount is estimated. 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 profit and loss account. After such a reversal, the
depreciation charge is adjusted in future periods to allocate the asset’s revised carrying amount, less any residual value, on
a systematic basis over its remaining useful life.
The Group does not reverse in a subsequent period, any impairment loss recognised for goodwill.
2.11 Financial Assets
Financial assets within the scope of FRS 39 are classified as either financial assets at fair value through profit or loss, loans
and receivables, held-to-maturity investments, or available-for-sale financial assets, as appropriate. 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. The Group determines the classifi cation of its
financial assets after initial recognition and, where allowed and appropriate, re-evaluates this designation at each fi nancial
year-end.
All regular way purchases and sales of financial assets are recognised on the trade date i.e. the date that the Group commits
to purchase 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)
Financial Assets at Fair Value through Profit or Loss
Financial assets classified as held for trading are included in the category ‘financial assets at fair value through profit
or loss’. Financial assets are classified as held for trading if they are acquired for the purpose of selling in the near
term. Derivative financial instruments are also classified as held for trading unless they are designated as effective
hedging instruments. Gains or losses on investments held for trading are recognised in the profit and loss account.
The Group does not designate any financial assets not held for trading as fi nancial assets at fair value through profi t
and loss.
(b)
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. Such assets are carried at amortised cost using the effective interest method.
Gains and losses are recognised in profit and loss account when the loans and receivables are derecognised or
impaired, as well as through the amortisation process.
2.12 Cash and Cash Equivalents
Cash and cash equivalents comprise cash on hand, demand 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.
Cash and short term deposits carried in the balance sheets are classified and accounted for as loans and receivables under
FRS 39. The accounting policy for this category of financial assets is stated in Note 2.11.
43

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
2. Summary of Significant Accounting Policies (cont’d)
2.13 Trade and Other Receivables
Trade and other receivables, including amounts due from subsidiaries, associates, related companies and loans to related
companies are classified and accounted for as loans and receivables under FRS 39. The accounting policy for this category
of financial assets is stated in Note 2.11.
An allowance is made for uncollectible amounts when there is objective evidence that the Group will not be able to collect
the debt. Bad debts are written off when identified. Further details on the accounting policy for impairment of fi nancial
assets are stated in Note 2.14 below.
2.14 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 loans and receivables 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 (excluding future credit losses that have not been incurred) discounted at
the financial asset’s original effective interest rate (i.e. the effective interest rate computed at initial recognition).
The carrying amount of the asset is reduced through the use of an allowance account. The amount of the loss is
recognised in the profit and loss account.
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 profit and loss account, to the extent that the
carrying value of the asset does not exceed its amortised cost at the reversal date.
(b)
Assets Carried at Cost
If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value
because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery
of such an unquoted equity instrument 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 current market rate of
return for a similar financial asset. Such impairment losses are not reversed in subsequent periods.
2.15 Inventories
Inventories are valued 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 but
excluding borrowing costs.
Cost of inventories includes the transfer from equity of gains and losses on qualifying cash fl ow hedges in respect of the
purchases of raw materials.
Net realisable value is the estimated selling price in the ordinary course of business, less estimated costs of completion and
the estimated costs necessary to make the sale.
2.16 Construction Contracts
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, when the outcome of a construction contract can be estimated
reliably. An expected loss on the construction contract is recognised as an expense immediately when it is probable that
total contract costs will exceed total contract revenue.
44

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
2. Summary of Significant Accounting Policies (cont’d)
2.17 Trade and Other Payables
Liabilities for trade and other amounts payable, which are normally settled on 30-90 day terms, and payables to related parties
are initially recognised at fair value and subsequently measured at amortised cost using the effective interest method.
Gains and losses are recognised in the profit and loss account when the liabilities are derecognised as well as through the
amortisation process.
2.18 Interest Bearing Loans and Borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received less directly attributable
transaction costs.
After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the
effective interest method.
Gains and losses are recognised in the profit and loss account when the liabilities are derecognised as well as through the
amortisation process.
2.19 Borrowing Costs
Borrowing costs are generally expensed as incurred. 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
being incurred. Borrowing costs are capitalised until the assets are ready for their intended use. If the resulting carrying
amount of the asset exceeds its recoverable amount, an impairment loss is recorded.
2.20 Derecognition of Financial Assets and Liabilities
(a)
Financial Assets
A financial asset (or, where applicable a part of a financial asset or part of a Group of similar financial assets) is
derecognised when it is sold or settled.
(b)
Financial Liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires.
2.21 Provisions
Provisions are recognised when the Group has a present obligation (legal or constructive) where, 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
a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be
reimbursed, the reimbursement is recognised as a separate asset but only when the reimbursement is virtually certain. The
expense relating to any provision is presented in the profi t and loss account net of any reimbursement.
If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects, where
appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of
time is recognised as finance costs.
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.
45

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
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 defi ned 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 (including senior executives) of the Group receive remuneration in the form of share-based payment
transactions, whereby employees render services as consideration for share options (‘equity-settled transactions’).
The cost of equity-settled transactions with employees is measured by reference to the fair value at the date on which
the share options are granted. In valuing the share options, no account is taken of any performance conditions, other
than conditions linked to the price of the shares of the Company (‘market conditions’), if applicable.
The cost of equity-settled transactions is recognised, together with a corresponding increase in the employee share
option reserve, over the period in which the performance and/or service conditions are fulfilled, ending on the date
on which the relevant employees become fully entitled to the award (‘the vesting date’). The cumulative expense
recognised for equity-settled transactions 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 equity instruments that will ultimately
vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognised as
at the beginning and end of that period.
No expense is recognised for awards that do not ultimately vest, except for awards where vesting is conditional
upon a market condition, which are treated as vested irrespective of whether or not the market condition is satisfi ed,
provided that all other performance conditions are satisfied.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the terms had
not been modified. In addition, an expense is recognised for any modification, which increases the total fair value
of the share-based payment arrangement, or is otherwise benefi cial to the employee as measured at the date of
modification.
Where an equity-settled award is cancelled, it is treated as if it had vested on the date of cancellation, and any
expense not yet recognised for the award is recognised immediately. However, if a new award is substituted for
the cancelled award, and designated as a replacement award on the date that it is granted, the cancelled and new
awards are treated as if they were a modifi cation of the original award, as described in the previous paragraph.
The Group has taken advantage of the transitional provisions of FRS 102 in respect of equity-settled awards and has
applied FRS 102 only to equity-settled awards granted after 22 November 2002 that had not vested on or before 1
January 2005.
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 profit and loss
account. 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.
46

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
2. Summary of Significant Accounting Policies (cont’d)
2.23 Leases (cont’d)
(a)
As Lessee (cont’d)
Operating lease payments are recognised as an expense in the profit and loss account 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.
(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 (Note 2.24).
2.24 Revenue
Revenue is recognised to the extent that it is probable that the economic benefi ts will flow to the Group and the revenue
can be reliably measured. The following specifi c recognition criteria must also be met before revenue is recognised:
(a)
Project and Contract Income
When the outcome of a contact can be reliably measured: revenue is recognised using the percentage-of-completion
method, measured by the contract value of work performed to date (based on project milestones) to estimated total
contract value.
When the outcome of a contract cannot be reliably measured: revenue is recognised only to the extent of contract
costs incurred that it is probable will be recoverable.
(b)
Sale of Goods
Revenue is recognised upon the transfer of signifi cant 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.
(c)
Interest income
Interest income is recognised as interest accrues (using the effective interest method) unless collectibility is in doubt.
(d)
Dividends
Dividend income is recognised when the Group’s right to receive payment is established.
2.25 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. When the grant relates to an expense item, it is recognised in the profit and
loss account over the period necessary to match them on a systematic basis to the costs that it is intended to compensate.
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 profit and loss account over the expected useful life of the relevant asset by equal annual instalments.
2.26 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.
47

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
2. Summary of Significant Accounting Policies (cont’d)
2.26 Income Taxes (cont’d)
(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.
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; and
• 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.
Deferred income tax assets are recognised for all deductible temporary differences, 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 except:
• Where the deferred income tax asset relating to the deductible temporary difference arises from the initial
recognition 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; and
• In respect of deductible temporary differences associated with investments in subsidiaries, associates and
interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable that the
temporary differences will reverse in the foreseeable future and taxable profits will be available against which
the temporary differences 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 profits 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 profits 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.
Income tax relating to items recognised directly in equity is recognised in equity.
Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists to set off current tax assets
against current tax liabilities and the deferred taxes relate to the same taxable entity and the same taxation authority.
(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 costs 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.
2.27 Derivative Financial Instruments and Hedging Activities
The Group uses derivative financial instruments such as interest rate swaps to hedge its risks associated with foreign
currency and interest rate fluctuations. Such derivative financial instruments are initially recognised at fair value on the
date on which a derivative contract is entered into and are subsequently remeasured at fair value. Derivative fi nancial
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 fi nancial instruments that do not qualify for hedge
accounting are taken to the profit and loss account for the year.
48
The fair value of interest rate swap contracts is determined by reference to market values for similar instruments.

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
2. Summary of Significant Accounting Policies (cont’d)
2.27 Derivative Financial Instruments and Hedging Activities (cont’d)
For the purpose of hedge accounting, hedges are classified as:
• Fair value hedges when hedging the exposure to changes in the fair value of a recognised asset or liability or an
unrecognised firm commitment, that is attributable to a particular risk and could affect profit or loss;
• Cash flow hedges when hedging exposure to variability in cash flows that is either attributable to a particular risk
associated with a recognised asset or liability or a highly probable forecast transaction and could affect profit or loss;
or
• Hedges of a net investment in a foreign operation.
At the inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which
the Group wishes to apply hedge accounting and the risk management objective and strategy for undertaking the hedge.
The documentation includes identifi cation of the hedging instrument, the hedged item or transaction, the nature of the risk
being hedged and how the entity will assess the hedging instrument’s effectiveness in offsetting the exposure to changes in
the hedged item’s fair value or cash flows attributable to the hedged risk. Such hedges are expected to be highly effective
in achieving offsetting changes in fair value or cash fl ows and are assessed on an ongoing basis to determine that they
actually have been highly effective throughout the financial reporting periods for which they were designated.
Hedges which meet the strict criteria for hedge accounting are accounted for as follows:
(a)
Fair Value Hedges
For fair value hedges, the carrying amount of the hedged item is adjusted for gains and losses attributable to the risk
being hedged, the derivative is remeasured at fair value and gains and losses from both are taken to the profit and
loss account.
For fair value hedges relating to items carried at amortised cost, the adjustment to carrying value is amortised through the
profit and loss account over the remaining term to maturity. Any adjustment to the carrying amount of a hedged financial
instrument for which the effective interest method is used is amortised to the profit and loss account.
Amortisation begins as soon as an adjustment exists but no later than when the hedged item ceases to be adjusted
for changes in its fair value attributable to the risk being hedged.
When an unrecognised firm commitment is designated as a hedged item, the subsequent cumulative change in
the fair value of the firm commitment attributable to the hedged risk is recognised as an asset or liability with a
corresponding gain or loss recognised in the profit and loss account. The changes in the fair value of the hedging
instrument are also recognised in the profit and loss account.
The Group discontinues fair value hedge accounting if the hedging instrument expires or is sold, terminated or
exercised, the hedge no longer meets the criteria for hedge accounting or the Group revokes the designation. Any
adjustment to the carrying amount of a hedged fi nancial instrument for which the effective interest method is used is
amortised to the profit and loss account. Amortisation begins as soon as an adjustment exists but no later than when
the hedged item ceases to be adjusted for changes in its fair value attributable to the risk being hedged.
(b)
Cash Flow Hedges
For cash flow hedges, the effective portion of the gain or loss on the hedging instrument is recognised directly in the
hedging reserve, while the ineffective portion is recognised in the profi t and loss account.
Amounts taken to hedging reserve are transferred to the profit and loss account when the hedged transaction affects profit
or loss, such as when hedged financial income or financial expense is recognised or when a forecast sale or purchase
occurs. Where the hedged item is the cost of a non-financial asset or liability, the amounts taken to hedging reserve are
transferred to the initial carrying amount of the non-financial asset or liability.
If the forecast transaction is no longer expected to occur, amounts previously recognised in hedging reserve are
transferred to the profit and loss account. If the hedging instrument expires or is sold, terminated or exercised without
replacement or rollover, or if its designation as a hedge is revoked, amounts previously recognised in hedging reserve
remain in equity until the forecast transaction occurs. If the related transaction is not expected to occur, the amount
is taken to the profit and loss account.
49

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
3. Revenue
Group
2005 2004
S$’000
S$’000
Revenue from construction contracts 130,753 80,590
Sale of goods 789 8,065
131,542 88,655
4. Other Operating Income
Group
2005 2004
S$’000
S$’000
Bad trade debts recovered – 204
Exchange gain 138 –
Rental income 237 –
Government grant 939 –
Sundry income 442 268
1,756 472
5. Personnel Expenses
Group
2005 2004
S$’000
S$’000
Wages, salaries and bonuses 12,567 6,931
Pension contributions 1,278 1,063
Other personnel expenses 2,831 1,308
16,676 9,302
Compensation of Key Management Personnel
Directors’ fee 235 225
Short-term employee benefits 1,678 1,707
Share-based payments 1,179 367
Total compensation paid to key management personnel 3,092 2,299
Comprise amounts paid to:
- Directors of the Company 1,489 768
- Other key management personnel 1,603 1,531
3,092 2,299
The remuneration of key management personnel is determined by the Remuneration Committee having regard to the
performance of individuals and market trends.
6. Other Operating Expenses
The following items have been included in arriving at other operating expenses:
Group
2005 2004
S$’000
S$’000
Non-audit fees paid for auditors of the Company 82 97
Provision for doubtful trade debts 401 1,769
Provision for doubtful non-trade debts 489 –
50

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
7. Financial Income/(Expenses)
Group
2005 2004
S$’000
S$’000
Interest income
- bank deposits 2,293 333
- short-term bonds 18 17
- others 389 –
2,700 350
Interest expense
- bank term loans (2,545) (668)
- finance lease – (22)
- hire purchase – (13)
- others (2) (7)
(2,547) (710)
153 (360)
8. Earnings Per Share
Earnings per share is calculated by dividing the Group’s profit after taxation and minority interests by the weighted average
number of shares in issue during the financial year of 502,354,722 (2004: 470,444,157) shares.
For fully diluted earnings per share, the weighted average number of shares in issue is adjusted for the effect of all dilutive
potential ordinary shares. Earnings per share is calculated by dividing the Group’s profit after taxation and minority interests
by 519,706,337 (2004: 479,698,439) shares, being the weighted average number of shares adjusted for dilution in respect of
51

NOTES TO THE FINANCIAL STATEMENTS (cont’d) Hyfl ux Ltd and Subsidiaries
Year ended 31 December 2005
unissued shares of the Company pursuant to the Hyflux Employees’ Share Option Scheme.
9. Property, Plant and Equipment
Plant and
machinery
Motor
vehicles Computers
Office
equipment
Leasehold
properties and
improvements
Furniture
and fittings Renovation
Constructionin-progress
Total
Group
S$’000 S$’000 S$’000 S$’000 S$’000 S$’000 S$’000 S$’000 S$’000
Cost
At 1.1.2004 5,165 2,295 1,025 827 7,452 526 2,894 10,071 30,255
Additions 600 348 797 139 10,585 66 1,643 92,529 106,707
Disposals – (251) (13) (86) – – (9) – (359)
Reclassification 56 – 92 90 – (208) (30) – –
Translation difference (75) (50) (12) (14) – (5) (128) (1) (285)
At 31.12.2004 and 1.1.2005 5,746 2,342 1,889 956 18,037 379 4,370 102,599 136,318
Additions 80,332 129 871 190 70 107 174 446 82,319
Disposals (90,927) (314) (22) – (10,804) (9) – – (102,076)
Reclassification 102,418 – – – – – – (102,418) –
Translation difference 68 28 13 17 – 5 110 – 241
At 31.12.2005 97,637 2,185 2,751 1,163 7,303 482 4,654 627 116,802
Accumulated Depreciation
At 1.1.2004 1,906 1,021 617 353 644 224 299 – 5,064
Charge for the year 890 355 495 158 398 43 173 – 2,512
Disposals – (251) (4) (40) – – (2) – (297)
Reclassification 49 – 16 82 – (144) (3) – –
Translation difference (2) (1) (3) (2) – (1) (1) – (10)
At 31.12.2004 and 1.1.2005 2,843 1,124 1,121 551 1,042 122 466 – 7,269
Charge for the year 1,284 353 748 143 311 57 506 – 3,402
Disposals (47) (202) (15) – (294) (2) – – (560)
Translation difference 37 19 5 10 – 2 10 – 83
At 31.12.2005 4,117 1,294 1,859 704 1,059 179 982 – 10,194
Net book value
At 31.12.2004 2,903 1,218 768 405 16,995 257 3,904 102,599 129,049
At 31.12.2005 93,520 891 892 459 6,244 303 3,672 627 106,608
52

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
Included in construction-in-progress is interest capitalised during the year amounting to S$Nil (2004: $S4,403,000).
9. Property, Plant and Equipment (cont’d)
Company
Plant and
machinery
Motor
vehicle Computers
Constructionin-progress
Furniture
and fittings
Total
S$’000 S$’000 S$’000 S$’000 S$’000 S$’000
Cost
At 1.1.2004 1,410 150 232 – – 1,792
Additions 431 – 444 113 – 988
At 31.12.2004 and 1.1.2005 1,841 150 676 113 – 2,780
Additions 508 – 12 94 4 618
At 31.12.2005 2,349 150 688 207 4 3,398
Accumulated Depreciation
At 1.1.2004 587 95 – – – 682
Charge for the year 316 30 169 – – 515
At 31.12.2004 and 1.1.2005 903 125 169 – – 1,197
Charge for the year 401 25 511 – – 937
At 31.12.2005 1,304 150 680 – – 2,134
Net book value
At 31.12.2004 938 25 507 113 – 1,583
At 31.12.2005 1,045 – 8 207 4 1,264
10. Investment in Subsidiaries
Company
2005 2004
S$’000
S$’000
Unquoted equity shares, at cost 33,338 26,099
Loans due from subsidiaries 23,280 –
56,618 26,099
The directors have determined that the loans due from subsidiaries are quasi-equity in nature, non-interest bearing and
are therefore included in the cost of investments in subsidiaries. These quasi-equities have no 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 subsidiaries are as follows:
Name of Company
Held by the Company
Hangzhou Zheda Hyflux Hualu
Membrane Technology Co., Ltd (2)
Country of
incorporation and
place of business
People’s
Republic of
China
Effective equity
interest held by the
Group
2005 (%) 2004 (%)
Principal activities
55 55 Membrane manufacturing
Hydrochem Engineering (S) Pte Ltd Singapore 100 100 Provision of management services and
supply of fabricated components
Hydrochem (S) Pte Ltd Singapore 100 100 Engineering, procurement,
construction (“EPC”), installation,
testing, commissioning, operation and
maintenance of liquid treatment plants
Hyflux Advanced Technology Ltd (1)
British Virgin
Islands
100 100 Investment Holding
53

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
10. Investment in Subsidiaries (cont’d)
54
Hyflux Aquosus (Singapore) Pte Ltd Singapore 75 75 Manufacture and sale of consumer
products
Name of Company
Country of
incorporation and
place of business
Effective equity
interest held by the
Group
Principal activities
2005 (%) 2004 (%)
Held by the Company (cont’d)
Hyflux Engineering Pte Ltd Singapore 100 100 Operation and maintenance of liquid
treatment plants and sale of treated
liquids
Hyflux Filtech (Singapore) Pte Ltd Singapore 71 71 Investment holding
Hyflux Filtration (S) Pte Ltd Singapore 100 100 Inactive
Hyflux International Ltd (1)
British Virgin 100 100 Investment holding
Islands
Hyflux IP Resource Pte Ltd (4) Singapore 100 Investment Holding
Hyflux Lifestyle Products (S)
Pte Ltd (4) Singapore 100 100 Research, development, manufacture,
marketing and distribution of consumer
lifestyle products and merchandise.
Hyflux ME Limited Liability
United
(4) (5)
Company
Hyflux Natural Resources Ltd (1)
Hyflux Newspring Construction People’s
(3) (4)
(Shanghai) Co., Ltd.
Arab
Emirates
British Virgin
Islands
Republic of
China
51 - EPC, installation, testing,
commissioning, operation and
maintenance of liquid treatment plants
100 100 Investment Holding
Nanomax Pte Ltd Singapore 100 100 Inactive
(1) (4)
Spring Environment Ltd British
(1) (4)
Spring China Utility Ltd British
Spring Utility Ltd (1)
Held by Subsidiaries
Hyflux Aquosus Shanghai Co., Ltd (3)
Hydrochem Engineering (Shanghai)
Co., Ltd (3)
Virgin
Islands
Virgin
Islands
British Virgin
Islands
People’s
Republic of
China
People’s
Republic of
China
100 - EPC, installation, testing,
commissioning, operation and
maintenance of liquid treatment plants
100 - Investment Holding
100 - Investment Holding
100 100 Inactive
100 100 Manufacture and sale of consumer
products
100 100 EPC, installation, testing and
commissioning of industrial liquid
separation and treatment systems
Hyflux Engineering India Pte Ltd (4) India 100 - EPC, installation, testing,
commissioning, operation and
maintenance of liquid treatment systems
Hyflux (Middle East) FZCO (4)
Hyflux Filtech Shanghai Co., Ltd (3)
Ningbo Hualu Membrane
Technology Co., Ltd (2)
United Arab
Emirates
People’s
Republic of
China
People’s
Republic of
China
100 100 Inactive
(1) Not required to be audited by the law of the country of incorporation
(2) Audited by Zhejiang Tianping Certified Public Accountants Co., Ltd., PRC
(3) Audited by Shu Lun Pan Certified Public Accountants Co., Ltd., PRC
(4) Incorporated during the year
(5) Audited by Ernst & Young, Dubai
71 71 EPC, installation, testing and
commissioning of industrial liquid
separation and treatment systems
41 41 Development and manufacture of
equipment and parts for membrane
filtration technology

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
The subsidiaries incorporated in Singapore are audited by Ernst & Young, Singapore except for Nanomax Pte Ltd and Hyfl ux
Natural Resources Ltd, which are dormant companies.
11. Investment in Joint Ventures
Company
2005 2004
S$’000
S$’000
Unquoted equity shares, at cost 22,538 –
Name of Company
Country of
incorporation and
place of business
Effective equity
interest held by the
Group
Principal activities
2005 (%) 2004 (%)
Held by the Company
SingSpring Pte Ltd (1) Singapore 50 100 Development and operation of
seawater desalination plant and sale of
treated water.
(2) (4)
SinoSpring Utility Ltd British Virgin
Islands
50 - Investment holding
Held by a Joint Venture
Hyflux Newspring Nantong Co., People’s
(2) (4)
Ltd
Hyflux Utility Ltd (2)
Tianjing Dagang Newspring
Co., Ltd (3)
Republic
of China
British Virgin
Islands
People’s
Republic
of China
50 Development and operation of water
treatment plant and sale of treated
water
50 100 Investment holding
47.5 Development and operation of
seawater desalination plant and sale of
treated water
(1) Audited by Ernst & Young, Singapore
(2) Not required to be audited by the law of the country of incorporation
(3) Audited by Shu Lun Pan Certified Public Accountants Co., Ltd., PRC
(4) Incorporated during the year
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 jointly-controlled entity are as follows:
Group
2005 2004
S$’000
S$’000
Assets and liabilities:
Current assets 12,845 –
Non-current assets 102,862 –
Total assets 115,707 –
Current liabilities (17,136) –
Non-current liabilities (94,935) –
Total liabilities (112,071) –
Results: –
Revenue 702 –
Other income 5,881 –
Expenses (542) –
55

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
Profit for the year 6,041 –
12. Investment in Associates
Group Company
2005 2004 2005 2004
S$’000 S$’000 S$’000 S$’000
Unquoted equity shares, at cost 8,812 – 8,812 –
Share of post-acquisition reserves 2,682 – – –
11,494 – 8,812 –
Details of the associates are as follows:
Name of Company
Held by the Company
Palmwater
United
(1) (2)
(Limited Liability Company)
Held by Joint Venture
New Spring (Huludao)
People’s
(1) (3)
Co Ltd
Country of
incorporation
and place of
business
Arab
Emirates
Republic
of China
Effective equity
interest held by the
Group
2005 (%) 2004 (%)
Principal activities
49 Development and operation of water
treatment plants and sale of treated
water
24.5 49 Development and operation of
seawater desalination plant and sale
of treated water
Held by a Subsidiary
Beijing Shouren Water
People’s
(1) (4)
Engineering Co., Ltd.
Republic of
China
18.5 Development, manufacture and sale
of manufactured equipment and parts
of liquid separation and treatment
systems. Provision of technical and
consultancy services.
(1) Incorporated during the year
(2) Audited by Ernst & Young, Dubai
(3) Audited by Liao Ning Zhong Zhi Certified Public Accountants Co., Ltd., PRC
(4) Audited by Beijing Huatong Certified Public Accountants Co., Ltd., PRC
The summarised financial information of the associates are as follows:
2005 2004
S$’000
S$’000
Assets and liabilities:
Current assets 6,177 –
Non-current assets 1,180 –
Total assets 7,357 –
Current liabilities (852) –
Non-current assets – –
Total liabilities (852) –
Results:
Revenue 22 –
56

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
Loss for the year (354) –
13. Long-term Investments
Group
2005 2004
S$’000
S$’000
Available-for-sale financial assets:
Unquoted equity shares 5,188 3,531
14. Intangible Assets
Group
Goodwill on
consolidation
Intellectual
property rights
Development
costs Licensing fees Total
S$’000 S$’000 S$’000 S$’000 S$’000
Cost
At 1.1.2004 1,430 839 7,308 1,592 11,169
Additions – 1,582 3,997 913 6,492
Disposal (284) – – – (284)
Translation difference – 30 41 22 93
At 31.12.2004 and 1.1.2005 1,146 2,451 11,346 2,527 17,470
Transferred from accumulated
amortisation upon adoption of
FRS 103 (953) – – – (953)
Additions 30 110 6,268 1,062 7,470
Disposal – – (208) – (208)
Translation difference – – 1 2 3
At 31.12.2005 223 2,561 17,407 3,591 23,782
Accumulated Amortisation
At 1.1.2004 814 536 308 394 2,052
Charge for the year 280 17 429 294 1,020
Disposal (141) – – – (141)
Translation difference – (2) (1) (1) (4)
At 31.12.2004 and 1.1.2005 953 551 736 687 2,927
Elimination against cost upon
adoption of FRS 103 (953) – – – (953)
Charge for the year – 41 583 131 755
Translation difference – – 2 1 3
At 31.12.2005 – 592 1,321 819 2,732
Net Book Value
At 31.12.2004 193 1,900 10,610 1,840 14,543
57

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
14. Intangible Assets (cont’d)
At 31.12.2005 223 1,969 16,086 2,772 21,050
Company
Intellectual
property rights
Development
costs
Total
S$’000 S$’000 S$’000
Cost
At 1.1.2004 84 15 99
Additions 1,582 241 1,823
At 31.12.2004 and 1.1.2005 1,666 256 1,922
Additions 45 47 92
Disposals – (44) (44)
At 31.12.2005 1,711 259 1,970
Accumulated Amortisation
At 1.1.2004 – –
Amortisation 8 5 13
At 31.12.2004 and 1.1.2005 8 5 13
Amortisation 11 25 36
At 31.12. 2005 19 30 49
Net Book Value
At 31.12.2004 1,658 251 1,909
At 31.12.2005 1,692 229 1,921
15. Other Receivables
Company
2005 2004
S$’000
S$’000
Due from subsidiaries 70 34,447
Due from a joint venture 800 –
870 34,447
The amounts due from subsidiaries and a joint venture are non-trade related, unsecured, interest-free and not expected to
be repaid within the next 12 months.
16. Cash and Fixed Deposits
Group Company
2005 2004 2005 2004
S$’000 S$’000 S$’000 S$’000
Cash at banks and in hand 32,805 5,212 591 134
Fixed deposits 63,607 56,069 52,186 156
96,412 61,281 52,777 290
Cash at banks earns interest at floating rates based on daily bank deposit rates ranging from 1% to 4% (2004: 0.5% to 3.5%)
per annum. Fixed deposits are made for varying periods of between 1 day and 3 months depending on the immediate cash
requirements of the Group, and earn interests at the respective fixed deposit rates. These fixed deposits bear interest at rates
ranging from 1% to 5.4% (2004: 0.50% to 5.00%) per annum with maturities within the next 12 months.
As at 31 December 2005, the Company had available, $3,537,000 (2004: $50,553,000) of undrawn committed borrowing
facilities in respect of which all conditions prevalent had been met.
58

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
17. Inventories
Group Company
2005 2004 2005 2004
S$’000 S$’000 S$’000 S$’000
Raw materials 7,696 3,918 2,302 941
Work-in-progress (46) 303 2 201
Finished goods 3,419 792 2,769 628
Goods-in-transit – 134 – –
Total inventories at lower cost and net
realisable value
11,069 5,147 5,073 1,770
During the financial year, the Group wrote down S$Nil (2004: S$327,000) of inventories which are recognised as expense in
the profit and loss account.
18. Gross Amount due from Customers for Contract Work
Group Company
2005 2004 2005 2004
S$’000 S$’000 S$’000 S$’000
Contract costs and attributable profits 43,859 34,414 12,095 –
Gross amounts due from customers
for contract work
43,859 34,414 12,095 –
19. Trade Receivables
Group Company
2005 2004 2005 2004
S$’000 S$’000 S$’000 S$’000
Trade receivables 32,177 38,487 221 13,402
Notes receivable 707 682 6 –
Provision for doubtful debts (1,812) (3,332) – –
31,072 35,837 227 13,402
Bad debts written off directly to the profit
and loss account
– 6 – –
Notes receivable which are interest-free relate to bank documents secured from customers for settlement of payment within
the next six months.
Trade receivables are interest-free and are generally on 30 to 90 days’ terms. They are recognised at their original invoice
amounts which represents their fair values on initial recognition.
20. Other Receivables, Deposits and Prepayments
Group Company
2005 2004 2005 2004
S$’000 S$’000 S$’000 S$’000
Deposits 2,626 5,070 1 –
Prepayments 6,982 3,514 74 80
Other receivables 8,013 5,741 1,009 249
59

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
17,621 14,325 1,084 329
21. Due from Related Parties
Group Company
2005 2004 2005 2004
S$’000 S$’000 S$’000 S$’000
Due from subsidiaries (trade) – – – 13,520
Due from subsidiaries (non-trade) – – 24,410 –
Due from joint ventures (non-trade) 4,003 – 2,144 –
Due from joint ventures (trade) 4,102 – – –
Due from associates (non-trade) 3,986 – 103 –
Due from associates (trade) 15,596 – – –
27,687 – 26,657 13,520
The amounts due from subsidiaries and associates are unsecured, interest-free and are not expected to be repaid within the
next 12 months.
The amounts due from subsidiaries are unsecured and are expected to be repaid within the next 12 months. Included in
amounts due from subsidiaries is a receivable which is interest bearing ranging from 3.81% - 5.79% per annum.
22. Short-Term Loans
These loans are unsecured, bear interest ranging from 4.00% to 6.53% (2004: Nil) per annum and expected to be repaid
within the next 12 months.
23. Other Payables and Accruals
Group Company
2005 2004 2005 2004
S$’000 S$’000 S$’000 S$’000
Other payables 4,688 5,134 3,213 427
Accrued operating expenses 11,284 2,856 832 430
15,972 7,990 4,045 857
24. Interest Bearing Loans and Borrowings
Effective
interest
Group Company
rate Maturities 2005 2004 2005 2004
% S$’000 S$’000 S$’000 S$’000
Current
SGD bank loans 2.66^ 2006 385 1,538 385 1,538
Share of a joint
venture’s bank loan
4.6 2006 1,256 – – –
1,641 1,538 385 1,538
Non-current
Share of a joint
venture’s bank loan
4.6 2021 74,535 139,006 – –
SGD bank loans 4.15^ 2007 30,902 385 30,902 385
105,437 139,391 30,902 385
60
SGD bank loans (current) are at floating interest rates, unsecured and are fully repayable in 2006. SGD bank loans (non current)
have interest rates ranging from 3.21% to 3.37%. It is unsecured and is repayable in full by 2007. Share of a joint venture bank
loan (secured) relates to the Group’s 50% share of the joint venture’s S$151,582,320 bank loan (2004: S$139,006,320) with
a floating rate ranging from 2.77% to 4.23%^. The loan is secured by the desalination plant of the joint venture and will be
repayable in full by 2021.

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
^ Swapped to fixed rate with interest rate swap.
25. Taxation/Deferred Tax Liabilities
a) Major Components of Income Tax Expense
The major components of income tax expense for the years ended 31 December 2005 and 2004 are:
2005
$’000
Group
2004
$’000
Current income taxation 1,289 968
Overprovision in respect of previous years (218) –
Income tax expense recognised in the profit and loss account 1,071 968
b) Relationship between Tax Expense and Accounting Profit
A reconciliation between tax expense and the product of accounting profi t multiplied by the applicable corporate tax
rate for the years ended 31 December 2005 and 2004 is as follows:
2005
$’000
Group
2004
$’000
Accounting profit before income tax 50,351 29,507
Tax at the domestic rates applicable to profits in the countries where the
group operates 1
9,974 5,566
Adjustments:
Non-deductible expenses (529) 850
Income not subject to taxation (8,156) (5,448)
(Over)/under provision in respect of previous years (218) -
Income tax expense recognised in the profit and loss account 1,071 968
1
The reconciliation is prepared by aggregating separate reconciliations for each national jurisdiction
As at 31 December 2005, the Group has unutilised tax losses and capital allowances of S$12,866,000 (2004: S$2,618,000)
and S$1,001,000 (2004: S$685,000) respectively which can, subject to the provisions of relevant local tax legislations and
subject to the agreement with the relevant tax authorities, be carried forward and utilised to set off against future taxable
profits. The potential tax benefit arising from such unutilised tax losses and capital allowances has not been recognised
in the financial statements due to the uncertainty of its recoverability.
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 2002, 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”, the subsidiaries, Hydrochem Engineering (Shanghai) Co., Ltd and Hyfl ux Filtech (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. Hydrochem Engineering (Shanghai) Co., Ltd is in its fi fth profitable year after offsetting all accumulated losses.
Accordingly, 50% EIT is payable for the current year. No EIT is payable for Hyflux Filtech (Shanghai) Co., Ltd as it is in its
second profitable year.
In addition, Hydrochem Engineering (Shanghai) Co., Ltd has been granted “Hi-Tech Incentive” for a period of two years
commencing from 1 January 2005. Under this incentive, the Company is refunded 4% of the net value added tax and
100% of the business tax by Pudong New District Treasury Authority.
In accordance with the tax laws of the British Virgin Islands (BVI), the subsidiary, Hyflux International Ltd, is exempt from
61

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
all income taxes in the BVI.
25. Taxation/Deferred Tax Liabilities (cont’d)
b) Relationship between Tax Expense and Accounting Profit (cont’d)
Deferred tax liabilities as at 31 December relate to the following:
Group
2005 2004
S$’000
S$’000
Differences in depreciation 288 288
26. Issued Share Capital
Group and Company
2005 2004
S$’000
S$’000
Authorised:
- 1,000,000,000 ordinary shares of S$0.05 each 50,000 50,000
Issued and fully paid:
At beginning of year
- 315,691,615 (2004: 312,489,740) ordinary shares of S$0.05 each 15,784 15,624
Issued during the year:
- 4,991,438 (2004: 3,196,875) ordinary shares of S$0.05 each issued under
Hyflux Employees’ Share Option Scheme
- 170,151,212 (2004: Nil) bonus issue of ordinary shares of S$0.05 each
by way of capitalizing share premium
- 23,722,595 (2004: Nil) ordinary shares of S$0.05 each at S$1.50 per share
for cash
250 160
8,508 –
1,186 –
At end of year:
- 514,556,860 (2004: 315,691,615) ordinary shares of S$0.05 each 25,728 15,784
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.
27. Share Premium
The share premium account may be applied only for the purposes specifi ed in the Companies Act. The balance is not available
for distribution of dividends except in the form of shares.
28. Capital Reserve
This represents a 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.
62

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
29. Commitments and Contingencies
(a)
Non-Cancellable 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.
Future minimum rentals under non-cancellable leases are as follows as at 31 December:
Group
2005 2004
S$’000
S$’000
Within one year 2,066 803
After one year but not more than five years 8,264 3,211
More than five years 23,601 25,378
33,931 29,392
(b)
Capital Commitments
As at 31 December 2005, the Group has outstanding commitments in respect of uncalled capital to the extent of about
US$20 million (2004: US$9 million) in joint ventures and associates.
As at 31 December 2005, the Group has committed up to US$1,250,000 (2004: US$1,750,000) for the use of technology
that is able to produce potable water from ambient atmospheric water vapour in several countries in Asia, including
ASEAN, the People’s Republic of China, the Indian sub-continent and Australia. The Group has also committed up to
US$2,250,000 (2004: US$2,250,000) for a 10% equity stake in Air to Water Inc of California, USA.
(c)
Performance and Security Bonds
Performance bonds
During the year, a subsidiary issued a performance bond to the Public Utilities Board of Singapore (PUB) under the Water
Purchase Agreement between PUB and SingSpring Pte Ltd in respect of the development of the seawater desalination
plant. The performance bond amounted to S$12,831,000 (2004: S$12,832,000).
In addition, the Group provided bankers’ guarantees to customers and suppliers amounting to S$43,844,000
(2004: S$17,927,000).
Based on information currently available, management does not expect a liability to arise from these guarantees.
Security bonds
As at 31 December 2005, the Group issued security bonds amounting to S$920,000 (2004: S$665,000) to the Controller
of Immigration in relation to the employment of foreign workers.
63

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
30. Employee Share Option Plans
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 of the Company and its
subsidiaries, other than substantial shareholders of the Company, to participate in the equity of the Company.
On 24 November 2004, the members of the Company approved a modification to the Scheme which allowed Lum Ooi Lin, a
substantial shareholder, to participate in the Scheme. The maximum entitlement of Lum Ooi Lin is 10% of the total number of
shares which may be issued by the Company pursuant to the exercise of options under the Scheme.
The Scheme is administered by a committee comprising five directors, namely Teo Kiang Kok, Lee Joo Hai, Gay Chee Cheong,
Christopher Murugasu and Lum Ooi Lin. 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 fair value of 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 2005 and 31 December 2004 are described below.
Discrete dividend payments are based on historical and forecasted dividend trend which range from S$0.005 to S$0.0127.
The expected volatility of 35% 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 0.659%
to 3.096%. The expected life of the options of 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
64

NOTES TO THE FINANCIAL STATEMENTS (cont’d) Hyfl ux Ltd and Subsidiaries
Year ended 31 December 2005
other features of the option grant were incorporated into the measurement of fair value.
30. Employee Share Option Plans (cont’d)
At the end of the financial year, details of the options granted under the Scheme on the unissued ordinary shares of S$0.05 each of the Company were as follows:
Exercise
price Exercisable period
S$
No. of
holders as at
31.12.2005
Balance
as at
31.12.2005
Options
exercised
Bonus
options Option Lapsed
Options
granted
Balance
as at 1.1.2005
Date of grant
of options
15.10.2001 4,146,935 – 1,960,438 (108,873) (2,551,688) 3,446,812 61 0.2688 15.10.2002 - 27.09.2011
11.01.2002 34,312 – 12,438 – (22,000) 24,750 1 0.4123 11.01.2003 - 27.09.2011
25.01.2002 32,500 – – (32,500) – – – 0.6184 25.01.2003 - 27.09.2011
28.03.2002 141,938 – 24,844 (67,251) (25,000) 74,531 2 0.5436 28.03.2003 - 27.09.2011
08.04.2002 31,250 – 10,000 (11,250) – 30,000 1 0.5401 08.04.2003 - 27.09.2011
03.05.2002 188,000 – 62,500 – (63,000) 187,500 1 0.5504 03.05.2003 - 27.09.2011
08.07.2002 42,500 – 16,250 – (10,000) 48,750 2 0.5664 08.07.2003 - 27.09.2011
01.08.2002 468,750 – 234,375 – (234,000) 469,125 1 0.5888 01.08.2003 - 27.09.2011
16.09.2002 385,250 – 190,625 – (82,000) 493,875 5 0.4869 16.09.2003 - 27.09.2011
07.01.2003 571,500 – 213,750 – (144,000) 641,250 5 0.5995 07.01.2004 - 27.09.2011
07.04.2003 413,000 – 181,500 – (144,000) 450,500 4 0.7253 12.04.2004 - 27.09.2011
12.06.2003 50,500 – 19,000 – (12,500) 57,000 1 0.6923 12.06.2004 - 27.09.2011
25.08.2003 461,500 – 75,250 (300,000) (68,000) 168,750 1 0.7627 25.08.2004 - 27.09.2011
16.09.2003 555,000 – 218,250 (50,500) (230,000) 492,750 3 0.8928 16.09.2004 - 27.09.2011
16.10.2003 1,352,000 – 641,500 – (514,250) 1,479,250 10 1.0581 16.10.2004 - 27.09.2011
05.12.2003 1,650,000 – 825,000 – (525,000) 1,950,000 2 1.0197 05.12.2004 - 27.09.2011
29.12.2003 645,000 – 275,000 (60,000) (67,000) 793,000 16 1.0627 29.12.2004 - 27.09.2011
19.02.2004 400,000 – 180,000 – (100,000) 480,000 1 1.0293 19.02.2005 - 27.09.2011
06.05.2004 400,000 – – (320,000) (80,000) – – 1.4520 06.05.2005 - 27.09.2011
14.05.2004 400,000 – 160,000 – (80,000) 480,000 1 0.9600 14.05.2005 - 27.09.2011
17.09.2004 130,000 – 65,000 (96,000) (39,000) 60,000 1 1.0347 17.09.2005 - 27.09.2011
07.02.2005 – 3,721,000 1,670,000 (667,500) – 4,723,500 63 1.8600 07.02.2006 - 27.09.2011
03.05.2005 – 200,000 100,000 – – 300,000 1 2.3227 03.05.2006 - 27.09.2011
09.05.2005 – 3,000,000 1,500,000 – – 4,500,000 1 2.3067 09.05.2006 - 27.09.2011
01.06.2005 – 130,000 65,000 – – 195,000 3 2.5493 01.06.2006 - 27.09.2011
08.06.2005 – 110,000 55,000 – – 165,000 2 2.6507 08.06.2006 - 27.09.2011
12,499,935 7,161,000 8,755,719 (1,713,874) (4,991,438) 21,711,343 189
65

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
31. Related Party Information
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.
Revenue from manufacturing and construction contracts
In addition to those related party information disclosed elsewhere in the financial statements, the following significant
transactions between the group and related parties who are not members of the group took place during the year at terms
agreed between the parties:
Group
2005 2004
S$’000
S$’000
Investee company 6,526 2,663
Associates 27,819 16,167
Joint venture 43,855 –
Details of the options to subscribe for ordinary shares of S$0.05 each of the Company granted to directors of the
Company pursuant to the Hyflux Employee Share Option Scheme:
Options to subscribe for
ordinary shares of S$0.05 each
Options
granted
during the
financial year
Aggregate options granted
(including bonus issue) since
commencement of scheme
to end of
financial year
Aggregate options
exercised since
commencement of
scheme to end of
financial year
Aggregate
options
outstanding
as at end of
financial year
Lum Ooi Lin 5,125,000 6,375,000 375,000 6,000,000
Christopher Murugasu – 862,500 464,063 398,437
32. Financial Risk Management Objectives and Policies
The main risks arising from the Group are interest rate, commodity price, liquidity, foreign exchange and credit risks. The
management reviews, manages and monitors each of these risks and will recommend necessary actions to the Board as
appropriate.
(a)
Interest Rate Risks
The Group obtains additional financing through bank borrowings and leasing arrangements. The Group’s policy is to
obtain the most favourable interest rates available without increasing its foreign currency exposure.
The Group’s policy is to manage its interest cost using a mix of fixed and floating rate debts. To manage this mix in
a cost-efficient manner, the Group enters into interest rate swaps. The interest rate swaps allow the Group to raise
long term borrowings at either fixed or floating rates and swap them into floating and fixed rates respectively, with
the objective to lower the interest costs on the borrowings.
Surplus funds are placed with reputable banks.
Information relating to the Group’s interest rate exposure is also disclosed in the notes on the Group’s borrowings.
(b)
Liquidity Risk
The Group’s main exposure to liquidity risk is in respect of funding of its project costs and other operating expenses.
The Group monitors and maintains cash and cash equivalents deemed adequate by the management to finance the
Group’s operations. Short-term credit facilities are available for working capital purposes.
66

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
32. Financial Risk Management Objectives and Policies (cont’d)
(c)
Foreign Currency Risk
The Group’s income is mainly in Singapore Dollar (S$), United States Dollar (US$) and China Renminbi (RMB). Any
significant fluctuation in US$ and RMB against the Group’s base currency, S$, will result in fluctuation in the Group’s
income.
(d)
Commodity Price Risk
The Group’s policy is to manage its fuel cost using a mix of fi xed and floating fuel prices. The Group’s main exposure
to commodity price risk is in respect of electricity consumed by its 50% joint venture on the seawater desalination
plant and electricity rates are pegged to prevailing oil prices. Volatility in fuel prices may potentially increase cost.
To manage this risk, the joint venture has entered into commodity swaps. These commodity swaps allow the joint
venture to fix source of its electricity cost, ensuring forecasted profit margins are maintained.
33. Financial instruments
(a)
Credit Risk
There are no significant concentrations of credit risk within the Group or the Company.
(b)
Fair Values
The fair value of a financial instrument is the amount at which the instrument could be exchanged or settled between
knowledgeable and willing parties in an arm’s length transaction, other than in a forced or liquidation sale.
Financial instruments carried at fair value
The Group has carried all investment securities that are classified as available-for-sale financial assets and all
derivative financial instruments, at their fair value as required by FRS 39.
Financial instruments whose carrying amount approximate fair value
Management has determined that the carrying amounts of cash and short term deposits, current trade and other
receivables, bank overdrafts, current trade and other payables and current bank loans, based on their notional
amounts, reasonably approximate their fair values because these are mostly short term in nature or are repriced
frequently.
During the financial year, S$12,945,000 (2004: Nil) has been recognised in the profit and loss account in relation to
the change in fair value of financial assets or financial liabilities estimated using a valuation technique.
(c)
Interest Rate Risk
The following tables sets out the carrying amount, by maturity, of the Group’s and the Company’s financial instruments
that are exposed to interest rate risk:
2005 Within 1
year
1-2 years 2-3 years 3-4 years 4-5 years More than
5 years
$’000 $’000 $’000 $’000 $’000 $’000 $’000
Group
Floating rate
Cash assets 96,412 – – – – – 96,412
Bank loans (1,641) (32,885) (2,016) (2,545) (4,429) (63,562) (107,078)
Interest rate swap
(cashflow hedge) 1 1 (73) – – – (5,393) (5,465)
Company
Floating rate
Cash assets 52,777 – – – – – 52,777
Bank loans (385) (30,902) – – – – (31,287)
Interest rate swap
(cashflow hedge) 1 1 (73) – – – – (72)
Total
67

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
33. Financial instruments (cont’d)
(c)
Interest Rate risk (cont’d)
2004 Within 1
year
1-2 years 2-3 years 3-4 years 4-5 years More than
5 years
$’000 $’000 $’000 $’000 $’000 $’000 $’000
Group
Floating rate
Cash assets 61,281 – – – – – 61,281
Bank loans (1,538) (2,897) (3,966) (4,023) (5,090) (123,406) (140,920)
Interest rate swap
(cashflow hedge) 1 – 5 (1,395) – – (16,656) (18,046)
Total
Company
Floating rate
Cash assets 290 – – – – – 290
Bank loans (1,538) (385) – – – – (1,923)
Interest rate swap
(cashflow hedge) 1 – 5 (1,395) – – – (1,390)
Interest on financial instruments subject to floating interest rates is contractually repriced at intervals of less than
six months. Interest on financial instruments at fixed rates are fixed until the maturity of the instrument. The other
financial instruments of the Group and the Company that are not included in the above tables are not subject to
interest rate risks.
(d)
Derivative Financial Instruments and Hedging Activities
Derivative financial instruments included in the balance sheets at 31 December are as follows:
Derivative financial instruments -
Current Assests
Derivative financial instruments -
Current Liabilities
Group Company
2005 2004 2005 2004
S$’000 S$’000 S$’000 S$’000
6,568 – 1 –
5,465 – 73 –
Note 1
Cash Flow Hedges
As at 31st December 2005, the Group held six financial derivatives, namely three interest rate swaps and three
commodity swaps. These swaps are designated as hedges of expected future interest and utilities expenses where
the Group has firm commitments. The interest rate swaps are being used to hedge the interest rate risks of the
Group’s existing bank loans. The commodity swap is used to hedge the fuel price risk that directly impacts the
Group’s existing commitments under an energy supply contract.
The terms of the swaps have been negotiated to match the terms of the commitments.
The cashflow hedge of the expected interest commitments prospectively in the Company’s joint venture is assessed
to be highly effective and a fair value loss of $5,392,000 relating to the interest rate swap is included in the hedging
reserves. The cashflow hedge of the Company’s interest rate swap, however, is assessed to be less than 100%
effective prospectively and the ineffective portion’s fair value gain of $944,000 is included in the profit and loss
account while the effective portion’s fair value gain of S$378,000 is included in the hedging reserve.
The commodity swap was only designated as a cashfl ow hedge in the last quarter of 2005. Hence, fair value gain
of $12,231,000 is included in the profit and loss. The cashflow hedge of the expected utilities commitments is
assessed to be highly effective and $2,129,000 fair value loss is included into the hedging reserve.
68

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
34. Segment information
(a)
Business Segments
The Group is organised into 2 main business segments, namely:
- Municipal
- Industrial
Others include revenue from sale of consumer products and dividend income.
Inter-segment pricing is on an arm’s length basis.
Municipal Industrial Others Group
S$’000 S$’000 S$’000 S$’000
2005
Segmented results
External sales 74,173 56,580 789 131,542
Operating profit 16,777 11,510 (3,001) 25,286
Gain on sale of property, plant and equipment 8,198
Gain on sale of shares in a subsidiary 3,768
Financial expense (2,547)
Financial income 2,700
Fair value gain on financial instruments 12,945
Share of results of associates (93)
Tax expense (1,071)
Net profit for the year 49,186
Balance sheet
Assets 220,824 81,962 7,285 310,071
Unallocated assets 80,289
Total assets 390,360
Liabilities 131,755 25,971 1,322 159,048
Unallocated liabilities 34,143
Total liabilities 193,191
Capital expenditure 86,154 1,116 2,519 89,789
Depreciation and amortisation 2,723 830 604 4,157
2004
Segmented results
External sales 16,641 64,906 7,108 88,655
Operating profit 3,112 27,171 (1,182) 29,101
Gain on sale of property, plant and equipment 103
Financial expenses (710)
Financial income 350
Tax expense (968)
Net profit for the year 27,876
Balance sheet
Assets 169,040 72,404 7,341 248,785
Unallocated assets 56,263
Total assets 305,048
Liabilities 168,108 13,615 1,169 182,892
Unallocated liabilities 6,134
Total liabilities 189,026
Capital expenditure 109,028 2,289 1,882 113,199
Depreciation and amortisation 2,363 788 382 3,533
69

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
34. Segment information (cont’d)
(b)
Geographical Segments
The Group is organised into 2 main geographical segments, based on the location of the customers, namely:
- Singapore
- People’s Republic of China
Others include revenue from Middle East, Malaysia etc.
Inter-segment pricing is on an arm’s length basis.
Singapore
2005
$’000
2004
$’000
People’s Republic of
China Others Total
2005
$’000
2004
$’000
2005
$’000
2004
$’000
2005
$’000
2004
$’0000
Revenue:
External sales 33,961 9,117 73,463 72,885 24,118 6,653 131,542 88,655
Others:
Segment assets 270,745 200,246 31,927 48,250 7,399 289 310,071 248,785
Unallocated assets 80,289 56,263
Total assets 390,360 305,048
Capital expenditure 88,342 112,886 1,183 296 264 17 89,789 113,199
Depreciation and
amortisation
3,714 3,118 432 411 11 4 4,157 3,533
Other non-cash expense 2,325 669 890 1,720 – – 3,215 2,389
35. Dividends
Group and Company
2005 2004
S$’000
S$’000
Dividends paid:
Final exempt income dividend of 1.27 cents per share (2004:0.7 cents
per share less tax at 20%) in respect of the financial year ended
31 December 2004 (2004: 31 December 2003)
4,318 1,753
The directors propose a final dividend of 0.35 cents per ordinary share net of income tax at 20% and a one tier tax exempted
final dividend of 1 cent per ordinary share with total amount of S$6,947,000, in respect of the financial year ended 31 December
2005, subject to approval by shareholders at the Annual General Meeting of the Company. The proposed final dividend has not
been recognised as a liability as at year end in accordance with FRS 10, Events after the Balance Sheet Date.
36. Events after the Balance Sheet Date
On 18 March 2006, the Company announced that it will undergo a restructuring exercise to transfer 44% of its equity in Palm
Water LLC and its entire 51% of its equity in Hyflux Middle East LLC to Istithmar PJSC. After the transfer, the Company will hold
a 5% interest in Palm Water LLC while Hyflux Middle East LLC will be dissolved at an appropriate time.
The financial effects of this event is not reasonably estimable.
70

NOTES TO THE FINANCIAL STATEMENTS (cont’d)
Year ended 31 December 2005
Hyfl ux Ltd and Subsidiaries
37. Comparative Figures
Comparative figures in the financial statements have been restated from the previous year due to the changes in accounting
policies as disclosed in Note 2.
38. Authorisation of Financial Statements
The financial statements for the financial year ended 31 December 2005 were authorised for issue in accordance with a
resolution of the directors on 31 March 2006.
71

SUPPLEMENTARY INFORMATION
Year ended 31 December 2005
Hyflux Ltd and Subsidiaries
SGX-ST LISTING MANUAL REQUIREMENTS
Summary of Major Properties
Approximate Group’s
Site area Existing total lettable effective
Description Location (sq m) 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 from
Singapore 486764 1 March 1997
Office 40 Changi South 2,426 Office 1,328 100 60 years
Street 1,
commencing from
Singapore 486764 1 December 1996
Factory No.99 JuLi Road 5,633 Office and 3,241 100 50 years
building Zhangjiang High Tech factory commencing from
Pudong Shanghai, 26 April 2001
China 01204
Apartment Jinqiao Garden 32 Staff 59 100 70 years
Service Apartment quarters commencing from
Block A, Floor 9, Unit 2, 15 February 1994
Shanghai, China
Interested Person Transactions
The Company 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 carried out on normal commercial terms and will not be prejudicial to the interests of
the Company and its minority shareholders.
Name of Aggregate value of all interested person transactions Aggregrate value of all interested person
interested person during the financial year under review transactions conducted under shareholders’
(excluding transactions conducted under mandate pursuant to Rule 920
shareholders’ mandate pursuant to
under SGX-ST Listing Manual
Rule 920 under SGX-ST Listing Manual)
Shooklin & Bok S$242,000 for legal consultation services Nil
BDO Raffles S$58,000 in respect of internal Nil
Consultants Pte Ltd
audit services rendered
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 if not then
subsisting, entered into since the end of the previous financial year.
72

SUPPLEMENTARY INFORMATION (cont’d)
Year ended 31 December 2005
Hyflux Ltd and Subsidiaries
SGX-ST LISTING MANUAL REQUIREMENTS (CONT’D)
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 to the Code.
Board of Directors (Principles 1, 2, 3 and 4)
Role of the Board
The primary role of the board of directors (the “Board”) is to protect and enhance long-term shareholders’ value. The Board provides
leadership and guidance on corporate strategy, business directions, risk policy and implementation of corporate objectives. Other matters
within the purview of the Board include the appointment of Directors, review of the Group’s financial performance and major funding or
investment proposals and other material transactions.
The Board holds regular meetings each year and has held four meetings during the financial year. The Board may convene additional
meetings to address any specific significant matters that may arise from time to time.
The Directors’ attendance at the Board and Committee Meetings for the financial year ended 31 December 2005 is as follows:-
Board of Audit Nominating Remuneration
Directors Committee Committee Committee
Name No. of No. of No. of No. of No. of No. of No. of No. of
Meetings Meetings Meetings Meetings Meetings Meetings Meetings Meetings
Held Attended Held Attended Held Attended Held Attended
Lum Ooi Lin 4 4 4 4 1 1 1 1
Gay Chee Cheong 4 3 4 3 1 0 1 0
Teo Kiang Kok 4 4 4 4 1 1 1 1
Lee Joo Hai 4 4 4 4 1 1 1 1
S. Iswaran 4 3 NA NA NA NA NA NA
Christopher Murugasu 4 4 NA NA NA NA 1 1
Hamed Ahmed Kazim 4 2 NA NA NA NA NA NA
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. In addition, the Executive Directors have regularly participated in seminars
and/or conferences to keep abreast of the latest developments which are relevant to the Group.
Board Composition and Balance
The directors of the Company in office as at the date of this report are set out in the Director’s report. The Nominating Committee has
reviewed the size and composition of the Board. It is satisfied that the current Board size is appropriate and effective, and that the Board
comprises professionals who are suitably qualified to meet the Company’s objectives. The Directors come from diverse background and
possess varied expertise in finance, legal, industry knowledge and management field.
The Board
Lum Ooi Lin
Ms Lum is the founder of the Group and was appointed as the Managing Director on 31 March 2000. As the Group CEO and President,
she is overall responsible for leading and directing the Group’s business.
She is also an Independent Director of Yeo Hiap Seng Ltd and Matex International Limited as well as a Board Director of Singapore
Exchange Ltd. Ms Lum holds a Bachelor of Science (Hons) degree from the National University of Singapore.
73

SUPPLEMENTARY INFORMATION (cont’d)
Year ended 31 December 2005
Hyflux Ltd and Subsidiaries
SGX-ST LISTING MANUAL REQUIREMENTS (CONT’D)
Corporate Governance Statement (cont’d)
Gay Chee Cheong
Mr Gay was appointed as a Director on 3 August 2001 and is considered an Independent Director. He is the Chairman of the Remuneration
Committee and a member of the Audit and Nominating Committees. Mr Gay holds a Honours degree in Electronic Engineering from the
Royal Military College of Shrivenham, UK and in Economics from the University of London. He also has a Masters in Business Administration
from the National University of Singapore.
He continues to serve on the board of a number of companies including, Raffles Education Corporation, Hartford Education Corporation
Limited and Midas Holdings Limited.
Mr Gay’s last re-election was on 17 May 2002.
Lee Joo Hai
Mr Lee was appointed as a Non-Executive Independent Director on 19 December 2000. He is also the Chairman of the Audit Committee
and a member of the Remuneration and Nominating Committees. He is a Certified Public Accountant of Singapore and is a member of
the Institute of Chartered Accountants in England and Wales. Mr Lee is currently a partner in a public accounting firm in Singapore.
He continues to serve on the board of a number of companies including IPC Corporation and Unisteel Technology Limited.
Mr Lee’s last re-election was on 30 April 2004.
Teo Kiang Kok
Mr Teo was appointed as a Non-Executive Independent Director on 19 December 2000. He is also the Chairman of the Nominating
Committee and a member of the Audit, Renumernation and Risk Management Committees. Mr Teo is a senior partner of Shook Lin &
Bok, a firm of advocates and solicitors. He holds a LLB (Hons) from the University of Hull and is a Barrister-at-Law
(Lincolns Inn).
He continues to serve on the board of a number of other companies including Giant Wireless Technology Limited, Jadason Enterpries
Ltd and Unisteel Technology Limited.
Mr Teo’s last re-election was on 28 April 2005.
S. Iswaran
Mr S. Iswaran was appointed as a Director on 2 June 2003 and is considered as independent. He is also a member of the Risk Managment
Committee. Mr Iswaran is a Member of Parliament for West Coast GRC and Managing Director at Temasek Holdings Pte Ltd.
He continues to serve on the board of a number of other companies including Sunningdale Precision Industries Ltd.
Mr Iswaran’s last re-election was on 28 April 2005.
Christopher Murugasu
Mr Murugasu was appointed as a Non-Independent Director on 1 February 2005 and is a member of the Remuneration and Risk
Management Committees. Mr Murugasu holds a Honours degree from the Imperial College (London) and a Masters degree from the
London School of Economics.
Hamed Ahmed Kazim
Mr Kazim was appointed as Non-Executive Director on 8 May 2005 and is the Chairman of the Risk Management Committee.
Mr Kazim graduated from the University of California, San Diego with a Bachelor degree in Economics. He is a member of the American
Institute of Certified Public Accountants.
His present directorships include Isitithmar PJSC, Nakhell Co. LLC, Tamweel LLC, SpiceJet, Dubai bank and Kerzner International Limited.
74

SUPPLEMENTARY INFORMATION (cont’d)
Year ended 31 December 2005
Hyflux Ltd and Subsidiaries
SGX-ST LISTING MANUAL REQUIREMENTS (CONT’D)
Corporate Governance Statement (Cont’d)
Chairman
The Company currently does not have a Chairman to preside over the Board. The Board is of the opinion that the process of decision
making by the Board has been independent and had been based on collective decisions without any individual exercising any considerable
concentration of power or influence.
Independent and Non-Executive members of the Board of Directors
There is a strong independent element in the Board, with 4 out of 7 directors to be independent. They are Teo Kiang Kok and Lee Joo
Hai, S. Iswaran and Gay Chee Cheong. 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.
Independent and 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.
Committees
To assist in the execution of its responsibilities, the Board has established the following specialized committees:
- the Audit Committee
- the Remuneration Committee
- the Nominating Committee
- the Risk Management Committee
Each of the above Committees has its respective written terms of reference and operating procedures, which will be reviewed on a regular basis.
Audit Committee (Principle 11)
The Audit Committee comprises the following members as at the date of this report:-
Mr Lee Joo Hai (Chairman) appointed on 17 January 2001
Mr Teo Kiang Kok appointed on 17 January 2001
Ms Lum Ooi Lin appointed on 17 January 2001
Mr Gay Chee Cheong appointed on 23 August 2001
with legal, accounting, financial management expertise and business experience and is chaired by a Non-Executive Independent Director.
The primary functions of the Audit Committee are as follows:-
a) review with the external auditor, internal auditor and Management, the Company’s general policies and control procedures, interested
persons transactions, as well as any matters or issue that affect the performance of the Group;
b) review the quarterly, half-yearly and annual results announcements as well as the financial statements of the Group and Company
before they are submitted to the Board for approval;
c) direct matters to be included as special review by the external and internal auditors;
d) meet with the external auditor, without the presence of the Management at least once a year to review the co-operation and assistance
given by the Management to them;
e) review the scope and results of the audit and its cost effectiveness;
f) review the non-audit services provided by the external auditors so as to ensure that any provision of such services would not affect
the independence of external auditors;
g) consider and recommend the appointment or re-appointment of the external auditors;
h) investigate any matter within its terms of reference, having full access to Management and resources to enable it to discharge its
functions; and
i) undertake other functions and duties are may be required by Statue and Listing Rule.
75

SUPPLEMENTARY INFORMATION (cont’d)
Year ended 31 December 2005
Hyflux Ltd and Subsidiaries
SGX-ST LISTING MANUAL REQUIREMENTS (CONT’D)
Corporate Governance Statement (Cont’d)
A majority of the current members are Non-Executive Directors. The Group CEO and President, Ms Lum has remained in the Committee
as the Committee is of the opinion that she plays an important role in contributing in-depth information on the business aspects of the
Group as well as knowledge and understanding of the industry. The Committee has established a set of guidelines such that any decision
made by the Audit Committee requires the votes of all the Independent Non-Executive Directors.
The Committee held four meetings during the year. The Audit Committee had reviewed the non-audit services provided by the external
auditors, including fees paid for non-audit services during the year and is of the opinion that the auditor’s independence has not been
compromised. The Audit Committee also reviewed the services provided by the Independent Directors’ firm and is satisfied that the
provision of such services did not affect their independence.
The Audit Committee also reviewed the performance of the external auditors and recommended to the Board the re-appointment of the
auditors at the 2006 AGM.
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.
Remuneration Committee (Principles 7 and 8)
The Remuneration Committee was established on 3 September 2002 and comprises the following members:-
Mr Gay Chee Cheong (Chairman)
Mr Lee Joo Hai
Mr Teo Kiang Kok
Ms Lum Ooi Lin
Mr Christopher Murugasu
The Remuneration Committee is governed by written terms of reference and is chaired by a Non-Executive Independent Director. A
majority of the current members are Non-Executive Directors. Ms Lum plays an important role in appraising the performance of the top
executives and senior management and is therefore, a Committee member. During the year, a revised Terms of Reference was approved
and adopted by the Remuneration Committee.
The Remuneration Committee undertakes the following responsibilities:-
a) to review and to recommend to the Board a formal and transparent system of remuneration for Directors and key employees of the
Company and its subsidiaries and affiliates;
b) to review and to determine the remuneration packages and terms of appointment of executive Directors, members of the Management
Committee and employees related to Executive Directors or controlling shareholders of the Group;
c) to review and to recommend to the Board a formal, transparent system of performance evaluation for Directors and key employees
of the Group;
d) to recommend to the Board long-term incentive schemes for Directors and employees of the Group; and
e) to serve as the committee referred to in the Hyflux Employee Share Option Scheme and to shall have the powers set out in the
Scheme.
Each member of the Remuneration Committee is not allowed to set his or her own remuneration.
The Committee has established a remuneration framework of its Directors based on individual contribution, attendance at various meetings
and responsibilities held at the Committee level. Such remuneration is subject to the approval of shareholders at the annual general
meeting every year.
The Committee has full authority to engage any external professional advice on matters relating to remuneration as and when the
need arises.
The Committee and the Board are of the view that the remuneration of the Directors is adequate and not excessive.
76

SUPPLEMENTARY INFORMATION (cont’d)
Year ended 31 December 2005
Hyflux Ltd and Subsidiaries
SGX-ST LISTING MANUAL REQUIREMENTS (CONT’D)
Corporate Governance Statement (Cont’d)
Nominating Committee (Principles 4 and 5)
The Nominating Committee was established on 3 September 2002 and comprised three Non-Executive Independent Directors one of
whom is appointed as Chairman and one Executive Director:-
Mr Teo Kiang Kok (Chairman)
Mr Lee Joo Hai
Mr Gay Chee Cheong
Ms Lum Ooi Lin
The Committee is of the opinion that Ms Lum’s business and technical knowledge in this industry will assist the Committee in assessing
the re-appointment of directors as well as in identifying suitable candidates for appointment as members of the Board.
The role of the Nominating Committee is to:-
a) make recommendations to the Board on appointments or re-appointments of members to the Board or its Committees, including
the re-appointment of a member retiring by rotation or who has reached the age of 70;
b) to review the structure, size and composition of the Board and to make the appropriate recommendations to the Board;
c) assess the effectiveness of the Board as a whole and the contribution by each individual director to the effectiveness of the Board
particularly where a Director serves on multiple Boards;
d) assess the contribution by each Director in the Board Committees where the Director is a member; and
e) determine the independence of each Director on annual basis.
The Nominating Committee will also review and recommend to the Board on the appointment of key executives, including the Managing
Director.
The Company’s Articles of Association provide that one-third of the Board is to retire by rotation at the Company’s annual general meeting
annually, with each Director retiring at least once in every three years and newly appointed Directors to retire at the next annual general
meeting following their appointment. The retiring Directors are eligible to offer themselves for re-election.
The Committee has recommended the re-election of Hamid Ahmed Kazim, Lee Joo Hai and Gay Chee Cheong who are retiring at the
forthcoming Annual General Meeting to be held on 20 April 2006. The Board has accepted the recommendations and the retiring directors
would be offering themselves for re-election.
Risk Management Committee
The Risk Management Committee was established on 3 August 2005 and comprises the following members:-
Mr Hamed Ahmed Kazim (Chairman)
Mr Teo Kiang Kok
Mr S. Iswaran
Mr Christopher Murugasu
The Committee would be having its first meeting during the year to establish its terms of reference.
Management Committee
The Management Committee was established on 26 February 2004 as an executive arm of the Board and the Committees of the Board,
namely the Audit Committee, the Nomination Committee, the Remuneration Committee and other committees the Board may form among
its members from time to time.
The main functions of the Management Committee will be:
a) to make recommendations to the Board and the Board Committees on the businesses and the affairs of the Company and its
subsidiaries and affiliates;
b) to participate in the deliberations of the Board and the Board Committees as appropriate, subject to such direction as the Chairman
of the Board or the Board Committee may give;
c) to implement the decisions of the Board and the Board Committees; and
d) to undertake assignments as the Board or any Board Committee may direct from time to time.
77

SUPPLEMENTARY INFORMATION (cont’d)
Year ended 31 December 2005
Hyflux Ltd and Subsidiaries
SGX-ST LISTING MANUAL REQUIREMENTS (CONT’D)
Corporate Governance Statement (Cont’d)
The members of the Management Committee are:-
Ms Lum Ooi Lin (Group CEO and President)
Mr Lim Kim Seng
Mr Foo Hee Kiang
Ms Grace Goh Bee Kheng
Ms Ho Geok Choo
Ms Hoe Kum Yoke
Ms Rose Tong Lay Kuen
Mr Ge Wen Yue
Mr Wu Siu Kin Peter
Access to information (Principle 6)
The Company fully recognizes that the continual flow of relevant information on an accurate and timely basis is critical for the Board to
be effective in the discharge of its duties.
Accordingly, the Directors receive regular and timely information from Management about the Group so that they are fully equipped for
Board meetings. Detailed Board papers are prepared for each meeting and are disseminated to the members before the Board meetings.
The Board papers include sufficient information from Management on financial, business and corporate matters of the Company to enable
the directors to be properly briefed on issues to be considered at Board meetings. The Board has
separate and independent access to the Management of the Group.
Furthermore, the Board seeks independent professionals’ advice, whenever necessary for the furtherance of their duties.
The Board has full and independent access to the Company Secretaries. Apart from ensuring that the Group complies with the Companies
Act, Chapter 50 and the Listing Rules of the SGX-ST, the Company Secretaries are responsible for ensuring that Board procedures are
followed. A Company Secretary is required to attend all Board meetings including the meetings of the various committees.
Remuneration Matters
Disclosure on Remuneration (Principles 8 and 9)
The Group’s remuneration policy is to provide compensation packages at market rates which will reward successful performance and
attract, retain and motivate talent at all levels, including managers and directors.
Details of remuneration to the Directors are set out below:
Company’s Directors receiving remuneration from the Group for the year ended 31 December 2005 and 2004;
Remuneration Band
Number of Directors
2005 2004
S$500,000 and above 0 0
S$250,000 to below S$500,000 1 1
Below S$250,000 6 4
78

SUPPLEMENTARY INFORMATION (cont’d)
Year ended 31 December 2005
Hyflux Ltd and Subsidiaries
SGX-ST LISTING MANUAL REQUIREMENTS (CONT’D)
Corporate Governance Statement (Cont’d)
Summary compensation table for the year ended 31 December 2005 (Group):-
Salary Bonus Fees Allowances and Total
other benefits
Directors
Between S$250,000
to S$500,000
Lum Ooi Lin 81% 7% 10% 2% 100%
Below S$250,000
Lee Joo Hai 0% 0% 100% 0% 100%
Teo Kiang Kok 0% 0% 100% 0% 100%
Gay Chee Cheong 0% 0% 100% 0% 100%
S. Iswaran 0% 0% 100% 0% 100%
Christopher Murugasu 0% 0% 100% 0% 100%
Hamed Ahmed Kazim 0% 0% 100% 0% 100%
Key Executives of the Group
Below S$250,000
Lim Kim Seng 92% 7% 0% 1% 100%
Foo Kee Kiang 90% 7% 0% 3% 100%
Goh Bee Kheng Grace 91% 8% 0% 1% 100%
Hoe Kum Yoke 86% 7% 0% 7% 100%
Tong Lay Kuen Rose 85% 7% 0% 8% 100%
Ge Wen Yue 90% 6% 0% 4% 100%
Wu Siu Kin Peter 80% 7% 0% 13% 100%
Immediate Family Member
of a Director
Below S$250,000
Deidre Murugasu 88% 7% 0% 5% 100%
Teo Yuan Cheng Casey 92% 8% 0% 0% 100%
Accountability and Audit (Principle 10)
In presenting the annual financial statements and quarterly announcements to shareholders, it is the aim of the Board to provide
shareholders with a balanced and comprehensible assessment of the Group’s position and prospects on a quarterly basis.
Management provides the Board with appropriately detailed management accounts of the Group’s performance, position and prospects
on a periodic basis.
Internal Controls (Principle 12)
The Board is responsible for the overall internal control framework but recognises that no cost effective internal control systems will
preclude all errors or irregularities, as a system is designed to manage rather than to eliminate the risk of failure to achieve business
objectives, and can provide only reasonable but not absolute assurance against material misstatement or loss. Nevertheless, the Audit
Committee will:
a) Satisfy itself by such means as it shall consider appropriate counter measures (that is, mechanisms and processes such as sound
internal control systems) are in place to identify and mitigate any material business risks associated with the Group.
b) Ensure that a review of effectiveness of the Group’s material internal controls, including financial, operating and compliance controls
and risk management is conducted at least annually.
c) Ensure that the internal control recommendations made by the external auditors have been addressed or implemented by the
Management.
d) Ensure that the Board is in the position to comment on the adequacy of the internal controls of the Group.
79

SUPPLEMENTARY INFORMATION (cont’d)
Year ended 31 December 2005
Hyflux Ltd and Subsidiaries
SGX-ST LISTING MANUAL REQUIREMENTS (CONT’D)
Corporate Governance Statement (Cont’d)
Internal Audit (Principle 13)
The Group has engaged the services of a professional accounting firm, independent of the external audit function to carry out regular
internal audit review of the Group. It will review the effectiveness of the material internal controls of the Group and report to the Audit
Committee. The internal audit plan is reviewed and approved by the Audit Committee. The internal audit function is expected to meet
or exceed 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 risk incurred by the Group in each major
activity will be identified, analysed and managed by the Management. Internal Audit will also make recommendations to enhance the
effectiveness and security of the Group’s operations.
Communication With Shareholders (Principles 14 and 15)
Hyflux 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 publicly 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, half-yearly 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 meetings (“AGM”) and extraordinary general meetings;
d) media and analyst meetings for the Group’s interim and annual financial results as well as other briefings, as appropriate;
e) participation in roadshows in Hong Kong, UK and Europe during the year;
f) press releases on major developments of the Group;
g) disclosures to the SGX-ST via SGXNET; and
h) the Group’s website at http://www.hyflux.com at which Shareholders can access information on the Group.
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.
Securities Transactions
The Company has issued a policy on dealings in the securities of the Company to its Directors and Management, setting out the
implications of insider trading and guidance on such dealings. It has adopted the Best Practices Guide on Dealings in Securities issued
by SGX-ST.
80

STATISTICS OF SHAREHOLDINGS AS AT 31 MARCH 2006
Hyfl ux Ltd and Subsidiaries
Distribution of Shareholdings
Size of Holdings No. of Shareholders % No. of Shares %
1 - 999 227 2.36 118,485 0.02
1,000 - 10,000 7,931 82.41 32,211,033 6.25
10,001 - 1,000,000 1,442 14.98 52,340,900 10.15
1,000,001 and above 24 0.25 430,870,442 83.58
Total 9,624 100.00 515,540,860 100.00
Twenty Largest Shareholders
Name of Shareholder No. of Shares %
1. Lum Ooi Lin 154,609,141 29.99
2. Raffles Nominees Pte Ltd 59,772,216 11.58
3. United Overseas Bank Nominees Pte Ltd 36,513,764 7.08
4. Citibank Nominees Singapore Pte Ltd 33,515,986 6.50
5. DBS Nominees Pte Ltd 30,632,259 5.94
6. HSBC (Singapore) Nominees Pte Ltd 26,302,908 5.10
7. Merrill Lynch (S’pore) Pte Ltd 25,434,394 4.93
8. 2G Capital Pte Ltd 12,264,375 2.38
9. DBSN Services Pte Ltd 10,299,601 2.00
10. Murugasu Deirdre 9,244,678 1.79
11. UOB Kay Hian Pte Ltd 4,264,374 0.83
12. DB Nominees (S) Pte Ltd 3,372,365 0.65
13. Foo Hee Kiang 3,121,912 0.61
14. ABN Amro Nominees Singapore Pte Ltd 2,886,000 0.56
15. OCBC Securities Private Ltd 2,656,735 0.52
16. Morgan Stanley Asia (S’pore) Securities Pte Ltd 2,570,750 0.50
17. Yong Ying-I 2,250,000 0.44
18. Western Properties Pte Ltd 1,944,375 0.38
19. Hong Leong Finance Nominees Pte Ltd 1,672,875 0.32
20. OCBC Nominees Singapore Pte Ltd 1,645,772 0.32
Total 424,974,480 82.42
Approximately 44% 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.
Substantial Shareholders as at 31 March 2006
Name of Shareholder Direct Interest %
1. Lum Ooi Lin 177,109,141* 34.35
2. Istithmar PJSC 50,834,131* 9.86
3. Matthews International Capital Management, LLC 31,409,499* 6.09
* Include shares held in the name of nominees
81

NOTICE OF ANNUAL GENERAL MEETING
Hyfl ux Ltd and Subsidiaries
NOTICE IS HEREBY GIVEN that the Annual General Meeting of Hyflux Ltd (“the Company”) will be held at 202 Kallang Bahru,
Hyflux Building, Singapore 339339 on 28 April 2006 at 10.30 a.m. for the following purposes:
As Ordinary Business
1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the year ended 31 December
2005 together with the Auditors’ Report thereon
(Resolution 1)
2. To declare a final dividend of 0.35 cents per ordinary share net of income tax 20% and a one tier tax exempted final
dividend of 1 cent per share for the year ended 31 December 2005 (previous year: 1.27 cents per ordinary share).
(Resolution 2)
3. To re-elect the following Directors retiring pursuant to the Company’s Articles of Association:
Mr Hamed Ahmed Kazim (Retiring under Article 88) (Resolution 3)
Mr Lee Joo Hai (Retiring under Article 89) (Resolution 4)
Mr Gay Chee Cheong (Retiring under Article 89) (Resolution 5)
[See Explanatory Note (i)]
4. To approve the payment of Directors’ fees of S$437,100 for the year ended 31 December 2005
(previous year: S$235,000.00).
(Resolution 6)
5. To re-appoint Messrs Ernst & Young as the Company’s Auditors and to authorise the Directors to fix their
remuneration.
(Resolution 7)
6. To transact any other ordinary business which may properly be transacted at an Annual General Meeting
As Special Business
To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications:
7. Authority to allot and issue shares up to 50 per centum (50%) of issued share capital 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 empowered to allot and issue shares and convertible securities
in the Company at any time and upon such terms and conditions and for such purposes as the Directors may,
in their absolute discretion, deem fit provided that the aggregate number of shares (including shares to be issued in
accordance with the terms of convertible securities issued, made or granted pursuant to this Resolution) to be allotted
and issued pursuant to this Resolution shall not exceed fifty per centum (50%) of the issued shares in the capital
of the Company at the time of the passing of this Resolution, of which the aggregate number of shares and convertible
securities to be issued other than on a pro rata basis to all shareholders of the Company shall not exceed twenty
per centum (20%) of the issued shares in the capital of the Company and that such authority shall, unless revoked
or varied by the Company in general meeting, continue in force (i) until the conclusion of the Company’s next Annual
General Meeting 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 accordance with the terms of convertible securities issued,
made or granted pursuant to this Resolution, until the issuance of such shares in accordance with the terms of
such convertible securities.
[See Explanatory Note (ii)]
(Resolution 8)
8. Authority To Allot And Issue Shares Under Hyflux Employees’ Share Option Scheme
That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors be authorised and empowered to allot
and issue shares of the Company to all the holders of options granted by the Company, whether granted during the
subsistence of this authority or otherwise, under the Hyflux Employees’ Share Option Scheme (“the Scheme”) upon
the exercise of such options and in accordance with the terms and conditions of the Scheme, provided always that
the aggregate number of additional ordinary shares to be allotted and issued pursuant to the Scheme shall not exceed
82

NOTICE OF ANNUAL GENERAL MEETING (cont’d)
Hyfl ux Ltd and Subsidiaries
As Special Business (cont’d)
8. Authority To Allot And Issue Shares Under Hyflux Employees’ Share Option Scheme (cont’d)
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 general meeting, continue in force until the conclusion of the
Company’s next Annual General Meeting or the date by which the next Annual General Meeting of the Company is
required by law to be held, whichever is earlier.
[See Explanatory Note (iii)]
(Resolution 9)
By Order of the Board
Lim Kim Seng
Goh Bee Kheng
Joint Secretaries
Singapore, 12 April 2006
Explanatory Notes:
(i) Mr Hamed Ahmed Kazim will, upon re-election as Director of the Company, be considered non-independent.
Mr Lee Joo Hai, will upon re-election as a Director of the Company, remains as a member of the Nominating and Remuneration
Committees and Chairman of the Audit Committee and is considered as independent for the purpose of
Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited.
Mr Gay Chee Cheong, will upon re-election as a Director of the Company, remains as a member of the Audit and Nominating
Committees and Chairman of the Remuneration Committee and is considered as independent for the purpose
of Rule 704(8) of the Listing Manual of the Singapore Exchange Securities Trading Limited.
(ii)
The Ordinary Resolution [8] proposed in item [7] above, 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 when varied or revoked by the Company in general meeting, whichever is the earlier, to
allot and issue shares and convertible securities in the Company. The number of shares and convertible securities that
the Directors may allot and issue under this resolution would not exceed fifty per centum (50%) of the issued shares in
the capital of the Company at the time of the passing of this resolution. For issue of shares and convertible securities
other than on a pro rata basis to all shareholders, the aggregate number of shares and convertible securities to be issued
shall not exceed twenty per centum (20%) of the issued shares in the capital of the Company.
For the purpose of this resolution, the percentage of issued shares is based on the issued shares in the capital of the
Company at the time this proposed Ordinary Resolution is passed after adjusting for new shares arising from the conversion
or exercise of convertible securities, the exercise of share options or the vesting of share awards outstanding or
subsisting at the time when this proposed Ordinary Resolution is passed and any subsequent consolidation or subdivision
of shares.
(iii)
The Ordinary Resolution [9] proposed in item [8] above, 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 when varied or revoke by the Company in general meeting, whichever is the earlier,
to allot and issue shares in the Company of up to a number not exceeding in total fifteen per centum (15%) of the
issued ordinary shares in the capital of the Company from time to time pursuant to the exercise of the options under
the Scheme.
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.
83

NOTICE OF BOOK CLOSURE
Hyfl ux Ltd and Subsidiaries
NOTICE IS HEREBY GIVEN that the Share Transfer Books and Register of Members of Hyflux Ltd (the “Company”) will be
closed at 5 p.m. on 10 May 2006 for the preparation of dividend warrants.
Duly completed registrable transfers received by the Company’s Share Registrar, Lim Associates (Pte) Ltd, 10 Collyer Quay
#19-08 Ocean Building, Singapore 049315 up to 5.00 p.m. on 10 May 2006 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 10 May 2006 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 28 April 2006 will be made
on 22 May 2006.
84

HYFLUX LTD
(Company Registration No. 200002722Z)
(Incorporated In The Republic of Singapore with limited liability)
PROXY FORM
(Please see notes overleaf before completing this Form)
IMPORTANT:
1. For investors who have used their CPF monies to buy Hyfl ux Ltd’s
shares, this Report is forwarded to them at the request of the CPF
Approved Nominees and is sent solely FOR INFORMATION ONLY.
2. This Proxy Form is not valid for use by CPF investors and shall be
ineffective for all intents and purposes if used or purported to be
used by them.
3. CPF investors who wish to attend the Meeting as an observer must
submit their requests through their CPF Approved Nominees within
the time frame specifi ed. If they also wish to vote, they must submit
their voting instructions to the CPF Approved Nominees within the
time frame specifi ed to enable them to vote on their behalf.
I/We,
of
being a member/members of Hyfl ux Ltd (the “Company”), hereby appoint:
Name NRIC/Passport No. Proportion of Shareholdings
No. of Shares %
Address
and/or (delete as appropriate)
Name NRIC/Passport No. Proportion of Shareholdings
No. of Shares %
Address
or failing him/her, the Chairman of the Meeting as my/our proxy/proxies to vote for me/us on my/our behalf at the
Annual General Meeting (the “Meeting”) of the Company to be held on 28 April 2006 at 10.30 a.m. and at any
adjournment thereof. I/We direct my/our proxy/proxies to vote for or against the Resolutions proposed at the
Meeting as indicated hereunder. If no specifi c direction as to voting is given or in the event of any other matter arising
at the Meeting and at any adjournment thereof, the proxy/proxies will vote or abstain from voting at his/her discretion.
The authority herein includes the right to demand or to join in demanding a poll and to vote on a poll.
(Please indicate your vote “For” or “Against” with a tick [√] within the box provided.)
No. Resolutions relating to: For Against
1 Directors’ Report and Audited Accounts for the year ended 31 December 2005
2 Payment of proposed first & final dividend
3 Re-election of Mr Hamed Ahmed Kazim as a Director
4 Re-election of Mr Lee Joo Hai as a Director
5 Re-election of Mr Gay Chee Cheong as a Director
6 Approval of Directors’ fees amounting to S$437,100
7 Re-appointment of Messrs Ernst & Young as Auditors
8 Authority to allot and issue new shares
9 Authority to allot and issue shares under the Hyflux Employees’ Share Option Scheme
Dated this _____________ day _____________ of 2006
Signature of Shareholder(s)
or, Common Seal of Corporate Shareholder
Total number of Shares in:
(a) CDP Register
(b) Register of Members
No. of Shares
* Delete where inapplicable
85

Notes :
1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the Depository Register (as defi ned in Section 130A
of the Companies Act, Chapter 50 of Singapore), you should insert that number of Shares. If you have Shares registered in your name in the Register of
Members, you should insert that number of Shares. If you have Shares entered against your name in the Depository Register and Shares registered in your
name in the Register of Members, you should insert the aggregate number of Shares entered against your name in the Depository Register and registered
in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the Shares
held by you.
2. A member of the Company entitled to attend and vote at a meeting of the Company is entitled to appoint one or two proxies to attend and vote in his/her
stead. A proxy need not be a member of the Company.
3. Where a member appoints two proxies, the member shall specify the proportion of his/her shareholding (expressed as a percentage of the whole) to be
represented by each proxy, failing which the nomination shall be deemed to be alternative.
4. The instrument appointing a proxy or proxies must be deposited at the registered offi ce of the Company at Hyfl ux Building, 202 Kallang Bahru, Singapore
339339 not less than 48 hours before the time appointed for the Meeting.
5. The instrument appointing a proxy or proxies must be under the hand of the appointor or of his attorney duly authorised in writing. Where the instrument
appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of an offi cer or attorney duly
authorised. Where the instrument appointing a proxy or proxies is executed by an attorney on behalf of the appointor, the letter or power of attorney or a
duly certifi ed copy thereof must be lodged with the instrument.
6. A corporation which is a member may authorise by resolution of its directors or other governing body such person as it thinks fi t to act as its representative
at the Meeting, in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore.
General:
The Company shall be entitled to reject the instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true
intentions of the appointor are not ascertainable from the instructions of the appointor specifi ed in the instrument appointing a proxy or proxies. In addition, in
the case of Shares entered in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if the member, being the
appointor, is not shown to have Shares entered against his name in the Depository Register as at 48 hours before the time appointed for holding the Meeting,
as certifi ed by The Central Depository (Pte) Limited to the Company.
FOLD ALONG THIS LINE (1)
PLEASE
AFFIX
POSTAGE
STAMP
The Company Secretary
HYFLUX LTD
Hyfl ux Building
202 Kallang Bahru
Singapore 339339
FOLD ALONG THIS LINE (2)

Everyday,
the buzz
grows
Founded in 1989, Hyflux Ltd has rapidly grown to become one of Asia’s leading water and fluid treatment
companies, with a thriving presence in Singapore, China and the Middle East.
Specialising in membrane technologies, Hyflux is today an integrated solutions provider offering services
that include process design and optimisation, pilot testing, fabrication and installation, and engineering,
procurement and construction. It is also engaged in the commissioning, operation and maintenance of a
wide range of liquid treatment systems on a turnkey or Design-Build-Own-Operate (DBOO) arrangement.
Signalling its arrival on the international scene, in 2006 Hyflux was accorded Water Company of the Year
award by the UK’s Global Water Intelligence at the Global Water Awards.

Hyflux Building
202 Kallang Bahru Singapore 339339
Tel: 65 6214 0777 Fax: 65 6214 1211
www.hyflux.com