Anda di halaman 1dari 158

“A SPECIALIST IN INTEGRATED TREATMENT

SYSTEMS FOR ADVANCED WATER TREATMENT AND


MEMBRANE FILTRATION”

(Incorporated in the Republic of Singapore on 31 March 2000)


Core business
A one-stop shop service for the design, fabrication, installation,
commissioning and maintenance of water treatment systems,
specialising in advanced membrane filtration technologies that
have found diverse applications across industries and markets.

Our headquarters in Singapore Our Shanghai Office

PROSPECTUS DATED 8 JANUARY 2001


Application has been made to the Singapore Exchange Securities Trading Limited (the “SGX-
ST”) for permission to deal in, and for quotation of, all of our ordinary shares of $0.05 each
(the “Shares”) comprising existing issued and fully paid-up shares and the new Shares (the
“New Shares”) which are the subject of this Invitation (as defined herein). Such permission
will be granted when the Company has been admitted to the Official List of the SGX Sesdaq.
Acceptance of applications will be conditional upon permission being granted to deal in, and
for quotation of, all the issued Shares and the New Shares. Moneys paid in respect of any
application accepted will be returned, without interest or any share of revenue or other benefit
arising therefrom and at the applicant’s own risk, if the said permission is not granted.
The SGX-ST assumes no responsibility for the correctness of any of the statements made,
opinions expressed or reports contained in this Prospectus. Admission to the Official List of
the SGX Sesdaq is not to be taken as an indication of the merits of the Invitation, the Company,
its subsidiaries, the Shares or the New Shares.
A copy of this Prospectus, together with copies of the Application Forms, has been lodged
We build specialised systems for:
with and registered by the Registrar of Companies and Businesses in Singapore who takes
no responsibility for its contents.
• Water Purification of raw water for public consumption and industrial applications
• Wastewater Treatment for industries
• Water Recycling of wastewater for reuse
Invitation in respect of 39,470,000 Ordinary Shares of $0.05 each comprising • Advanced Membrane Filtration to recover or purify products, such as antibiotics, Vitamin C, dyes
25,000,000 New Shares and 14,470,000 Vendor Shares as follows:- and urea in manufacturing process
(1) 6,000,000 Offer Shares at $0.32 for each Offer Share by way of public • High-purity piping systems and equipment hook-up to convey pure products, such as compressed
offer, and air, specialty gases, ultra-pure water and chemicals to manufacturing plants
(2) 33,470,000 Placement Shares by way of placement, comprising:-

(i) 32,430,000 Placement Shares at $0.32 for each Placement Share; and

(ii) 1,040,000 Reserved Shares at $0.32 for each Reserved Share reserved
for our Directors, management, employees and others who have
contributed to the success of our Group,

payable in full on application.

Manager, Underwriter and Placement Agent


Water Treatment System Membrane Filtration Plant for water recycling
in an electronic factory
EDI System in a Recycling of brine solution
semiconductor facility in a sugar factory
HYFLUX LTD 40 Changi South Street 1 Singapore 486764
“A SPECIALIST IN INTEGRATED TREATMENT
SYSTEMS FOR ADVANCED WATER TREATMENT AND
MEMBRANE FILTRATION”

(Incorporated in the Republic of Singapore on 31 March 2000)


Core business
A one-stop shop service for the design, fabrication, installation,
commissioning and maintenance of water treatment systems,
specialising in advanced membrane filtration technologies that
have found diverse applications across industries and markets.

Our headquarters in Singapore Our Shanghai Office

PROSPECTUS DATED 8 JANUARY 2001


Application has been made to the Singapore Exchange Securities Trading Limited (the “SGX-
ST”) for permission to deal in, and for quotation of, all of our ordinary shares of $0.05 each
(the “Shares”) comprising existing issued and fully paid-up shares and the new Shares (the
“New Shares”) which are the subject of this Invitation (as defined herein). Such permission
will be granted when the Company has been admitted to the Official List of the SGX Sesdaq.
Acceptance of applications will be conditional upon permission being granted to deal in, and
for quotation of, all the issued Shares and the New Shares. Moneys paid in respect of any
application accepted will be returned, without interest or any share of revenue or other benefit
arising therefrom and at the applicant’s own risk, if the said permission is not granted.
The SGX-ST assumes no responsibility for the correctness of any of the statements made,
opinions expressed or reports contained in this Prospectus. Admission to the Official List of
the SGX Sesdaq is not to be taken as an indication of the merits of the Invitation, the Company,
its subsidiaries, the Shares or the New Shares.
A copy of this Prospectus, together with copies of the Application Forms, has been lodged
We build specialised systems for:
with and registered by the Registrar of Companies and Businesses in Singapore who takes
no responsibility for its contents.
• Water Purification of raw water for public consumption and industrial applications
• Wastewater Treatment for industries
• Water Recycling of wastewater for reuse
Invitation in respect of 39,470,000 Ordinary Shares of $0.05 each comprising • Advanced Membrane Filtration to recover or purify products, such as antibiotics, Vitamin C, dyes
25,000,000 New Shares and 14,470,000 Vendor Shares as follows:- and urea in manufacturing process
(1) 6,000,000 Offer Shares at $0.32 for each Offer Share by way of public • High-purity piping systems and equipment hook-up to convey pure products, such as compressed
offer, and air, specialty gases, ultra-pure water and chemicals to manufacturing plants
(2) 33,470,000 Placement Shares by way of placement, comprising:-

(i) 32,430,000 Placement Shares at $0.32 for each Placement Share; and

(ii) 1,040,000 Reserved Shares at $0.32 for each Reserved Share reserved
for our Directors, management, employees and others who have
contributed to the success of our Group,

payable in full on application.

Manager, Underwriter and Placement Agent


Water Treatment System Membrane Filtration Plant for water recycling
in an electronic factory
EDI System in a Recycling of brine solution
semiconductor facility in a sugar factory
HYFLUX LTD 40 Changi South Street 1 Singapore 486764
Financial
highlights
For financial (’S$ mil)

year ended 20.140 Industry


December 31 20

18
Financial
Financial Performance
Performance prospects
15.775
16 Rising demand for water treatment systems

14
• Shortage of fresh water supply
- less than 1% of world’s fresh water is readily accessible for human use
12 • Growing market for conservation and recycling of water
- Projected growth of 10% to 15% per annum over the next three years,
10 and by 20% to 25% per annum in the longer term in Singapore
8.720

Increasing water consumption
8
6.929 - Water consumption in PRC estimated to grow at 5% per annum
6.391 - Brisk pace of PRC‘s industrial development further compounds the
5.954
Profit before tax
6
Incorporatedshortage
in theofRepublic
potable water
of Singapore on 31 March 2000
3.870 Growth in membrane industry
4
Turnover
• Demand for membrane materials in the US is projected to grow by 7.8% per
2 annum from US$1.2 billion in 1999 to US$1.8 billion in 2004
1.058
0.137 0.430

0
1997 1998 1999 10 mths ended 2000(Estimate)

Our 31 Oct ‘00

Our
competitive
strengths business
Provide integrated services
• Designing • Engineering
strategies
• Installation • Commissioning
• Maintenance Provide fully integrated services
• Continue to provide a wide range of water treatment services
Ability to meet the diverse needs of various industries by utilising
membrane filtration • Plan to provide emergency recovery units to provide uninterrupted
water treatment while servicing or upgrading customers’ water
• Serve industries such as electronics, pharmaceutical and treatment systems
biotechnology
• Not reliant on a single industry or customer Lower direct costs
Experienced management team • Aim to manufacture in-house up to 30% to 50% of the
materials used in our systems
• Led by founder and Managing Director, Ms Olivia Lum, for the past
10 years Incorporate information technology into systems
• Assisted by a dedicated management team • Enhance operational capabilities of our systems
Ability to meet international standards
Strengthen and cultivate relationships with
• Produce water which meets USP standards engineering consultants and companies
• Manufacture equipment which meets ASME standards • Keep abreast of new projects
Customised systems
Tender for projects of larger value
• Provide solutions to suit the various needs of customers
• Customise membrane filtration plants for diverse applications Increase research & development and
required by different industries improve quality standards
Established relationship with customers and suppliers • Develop proprietary membranes
• Approximately 70% of our business is obtained through referrals and • Improve existing membranes
recommendations by our existing customers, engineering consultants • Find new uses and applications
and companies
• Drive quality system to ISO standards
• Supply agreement with E-Cell Corporation of Canada for a patented
electrochemical liquid purification apparatus widely used in industries
requiring ultra-pure water

SNP SPrint Pte Ltd 612004


Financial
highlights
For financial (’S$ mil)

year ended 20.140 Industry


December 31 20

18
Financial
Financial Performance
Performance prospects
15.775
16 Rising demand for water treatment systems

14
• Shortage of fresh water supply
- less than 1% of world’s fresh water is readily accessible for human use
12 • Growing market for conservation and recycling of water
- Projected growth of 10% to 15% per annum over the next three years,
10 and by 20% to 25% per annum in the longer term in Singapore
8.720

Increasing water consumption
8
6.929 - Water consumption in PRC estimated to grow at 5% per annum
6.391 - Brisk pace of PRC‘s industrial development further compounds the
5.954
Profit before tax
6
Incorporatedshortage
in theofRepublic
potable water
of Singapore on 31 March 2000
3.870 Growth in membrane industry
4
Turnover
• Demand for membrane materials in the US is projected to grow by 7.8% per
2 annum from US$1.2 billion in 1999 to US$1.8 billion in 2004
1.058
0.137 0.430

0
1997 1998 1999 10 mths ended 2000(Estimate)

Our 31 Oct ‘00

Our
competitive
strengths business
Provide integrated services
• Designing • Engineering
strategies
• Installation • Commissioning
• Maintenance Provide fully integrated services
• Continue to provide a wide range of water treatment services
Ability to meet the diverse needs of various industries by utilising
membrane filtration • Plan to provide emergency recovery units to provide uninterrupted
water treatment while servicing or upgrading customers’ water
• Serve industries such as electronics, pharmaceutical and treatment systems
biotechnology
• Not reliant on a single industry or customer Lower direct costs
Experienced management team • Aim to manufacture in-house up to 30% to 50% of the
materials used in our systems
• Led by founder and Managing Director, Ms Olivia Lum, for the past
10 years Incorporate information technology into systems
• Assisted by a dedicated management team • Enhance operational capabilities of our systems
Ability to meet international standards
Strengthen and cultivate relationships with
• Produce water which meets USP standards engineering consultants and companies
• Manufacture equipment which meets ASME standards • Keep abreast of new projects
Customised systems
Tender for projects of larger value
• Provide solutions to suit the various needs of customers
• Customise membrane filtration plants for diverse applications Increase research & development and
required by different industries improve quality standards
Established relationship with customers and suppliers • Develop proprietary membranes
• Approximately 70% of our business is obtained through referrals and • Improve existing membranes
recommendations by our existing customers, engineering consultants • Find new uses and applications
and companies
• Drive quality system to ISO standards
• Supply agreement with E-Cell Corporation of Canada for a patented
electrochemical liquid purification apparatus widely used in industries
requiring ultra-pure water

SNP SPrint Pte Ltd 612004


TABLE OF CONTENTS

Page

CORPORATE INFORMATION ..................................................................................................... 4

DEFINITIONS ............................................................................................................................... 5

GLOSSARY OF TECHNICAL TERMS ........................................................................................ 9

DETAILS OF THE INVITATION


— Listing on SGX Sesdaq ....................................................................................................... 11
— Structure of Our Invitation ................................................................................................... 12
— Results of Application and Distribution ............................................................................... 14
— Indicative Timetable for Listing ............................................................................................ 15

PROSPECTUS SUMMARY .......................................................................................................... 16

THE INVITATION .......................................................................................................................... 20

RISK FACTORS ........................................................................................................................... 21

ISSUE STATISTICS ...................................................................................................................... 26

SUMMARY OF PROFORMA GROUP FINANCIAL INFORMATION .......................................... 28

REVIEW OF RESULTS
— Overview .............................................................................................................................. 30
— Results of Operations .......................................................................................................... 34
— Profit Estimate ..................................................................................................................... 37
— Review of Financial Position ............................................................................................... 38
— Capitalisation and Indebtedness ......................................................................................... 41
— Dividends .............................................................................................................................. 42
— Dilution ................................................................................................................................. 42
— Credit Policy on Sales and Purchases ............................................................................... 43
— Foreign Exchange Exposure ............................................................................................... 43

SHARE CAPITAL .......................................................................................................................... 45

HISTORY ...................................................................................................................................... 47

BUSINESS
— Principal Activities ................................................................................................................ 49
— Our Work Process ............................................................................................................... 52
— Major Projects Completed ................................................................................................... 55
— Our Business Strategy ........................................................................................................ 56
— Marketing .............................................................................................................................. 57

1
Page

— Production ............................................................................................................................ 58
— Disputes ............................................................................................................................... 59
— Staff Training ........................................................................................................................ 59
— Research and Development ................................................................................................ 60
— Trademark ............................................................................................................................ 60

COMPETITION
— Competitive Strengths .......................................................................................................... 61

MAJOR SUPPLIERS .................................................................................................................... 63

MAJOR CUSTOMERS ................................................................................................................. 64

GOVERNMENT REGULATIONS .................................................................................................. 65

PROSPECTS AND FUTURE PLANS


— Prospects ............................................................................................................................. 66
— Future Plans ........................................................................................................................ 67

CORPORATE GOVERNANCE ..................................................................................................... 68

DIRECTORS, MANAGEMENT AND STAFF


— Directors ............................................................................................................................... 69
— Management ........................................................................................................................ 72
— Management Structure ........................................................................................................ 73
— Staff ...................................................................................................................................... 76
— Directors’ Remuneration ...................................................................................................... 76
— Remuneration of Employees related to Directors and Substantial Shareholders ............. 76
— Service Agreements ............................................................................................................ 76

GENERAL INFORMATION ON THE GROUP


— Shareholders ........................................................................................................................ 78
— Moratorium ........................................................................................................................... 79
— Restructuring Exercise ......................................................................................................... 79
— Group Structure ................................................................................................................... 83

INTERESTED PERSON TRANSACTIONS ................................................................................. 85

PROPERTY, PLANTS AND EQUIPMENT .................................................................................. 87

GENERAL AND STATUTORY INFORMATION ........................................................................... 89

APPENDIX A — DIRECTORS’ REPORT ................................................................................... 107

2
Page

APPENDIX B — LETTER FROM THE AUDITORS AND REPORTING ACCOUNTANTS


IN RELATION TO THE CONSOLIDATED PROFORMA PROFIT ESTIMATE
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2000 ...................... 108

APPENDIX C — ACCOUNTANTS’ REPORT ............................................................................. 109

APPENDIX D — DESCRIPTION OF SINGAPORE COMPANY LAW RELATING TO


SHARES .......................................................................................................... 129

APPENDIX E — DESCRIPTION OF SINGAPORE LAW AND REGULATIONS RELATING


TO TAXATION ................................................................................................. 133

APPENDIX F — TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION ...... 136

3
CORPORATE INFORMATION

BOARD OF DIRECTORS : Ms Lum Ooi Lin Olivia (Managing Director)


Dr Deirdre Murugasu (Executive Director)
Mr Foo Hee Kiang (Executive Director)
Mr Teo Kiang Kok (Independent Director)
Mr Lee Joo Hai (Independent Director)

COMPANY SECRETARY : Ms Sherry Quark Siew Mui, CPA

REGISTERED OFFICE : 40 Changi South Street 1


Singapore 486764
Tel: (65) 214 0777
Fax: (65) 214 1211

SHARE REGISTRAR AND SHARE : Lim Associates (Pte) Ltd


TRANSFER OFFICE 10 Collyer Quay #19-08
Ocean Building
Singapore 049315

MANAGER, UNDERWRITER AND : The Development Bank of Singapore Ltd


PLACEMENT AGENT 6 Shenton Way
DBS Building Tower One
Singapore 068809

AUDITORS AND REPORTING : Arthur Andersen


ACCOUNTANTS Certified Public Accountants
10 Hoe Chiang Road #18-00
Keppel Towers
Singapore 089315

SOLICITORS TO THE INVITATION : Shook Lin & Bok


1 Robinson Road #18-00
AIA Tower
Singapore 048542

PRINCIPAL BANKER : The Development Bank of Singapore Ltd


6 Shenton Way
DBS Building Tower One
Singapore 068809

4
DEFINITIONS

For the purpose of this Prospectus and the accompanying Application Forms, the following
definitions have, where appropriate, been used:-

Companies
Group Companies

“HSPL” : Hydrochem (S) Pte Ltd

“HEPL” : Hydrochem Engineering (S) Pte Ltd

“HES” : Hydrochem Engineering (Shanghai) Co., Ltd

“HMTS” : Hydrochem Membrane Technology (Shanghai) Co., Ltd

“HFPL” : Hyflux Engineering Pte Ltd

“Hyflux” or the “Company” : Hyflux Ltd

“Hyflux Group” or the “Group” : The Company and its subsidiaries

“Proforma Group” : The Company and its subsidiaries following completion of


the Restructuring Exercise, treated, for the purpose of this
Prospectus, as if it had been in existence since 1 January
1995 on the basis described in the Accountants’ Report

Other Corporations and Agencies

“Amway” : Amway (China) Co. Ltd

“ASME” : American Society of Mechanical Engineers

“CDP” : The Central Depository (Pte) Limited

“CPF” : Central Provident Fund

“DBS Bank”, “Manager”, : The Development Bank of Singapore Ltd


“Placement Agent”, “Underwriter”
or “Receiving Bank”

“DBS Capital” : DBS Capital Investments Ltd having its registered address
at 6 Shenton Way, DBS Building Tower One, Singapore
068809

“Dandong” : Dandong Synthetic Fiber Co. Ltd

“EPCOS” : EPCOS Pte Ltd (formerly known as Siemens Matsushita


Components Pte Ltd)

“Flextronics” : Flextronics (Malaysia) Sdn Bhd

“Gimmill” : Gimmill Industrial (Pte) Ltd having its registered address at


43 Tampines Street 92, Singapore 528887

“HP” : Hewlett Packard Singapore (Pte) Ltd

5
“Jacobs-Lend Lease” : Jacobs-Lend Lease Pte Ltd

“JTC” : Jurong Town Corporation

“MPW” : Membrane Products Kiryat Weizman Ltd

“Ramatex” : Ramatex Textiles Industrial Sdn Bhd

“Ramatex Suzhou” : Ramatex Industrial (Suzhou) Ltd

“SCCS” : Securities Clearing & Computer Services (Pte) Ltd

“Siegle and Epple” : Siegle and Epple Asia Pte Ltd

“SGX-ST” or “Exchange” : Singapore Exchange Securities Trading Limited

“VTS Batteries” : VTS Batteries Pte Ltd

“Wyeth” : Wyeth Pharmaceuticals (Singapore) Pte Ltd

General
“Act” : The Companies Act, Chapter 50 of Singapore

“Application Forms” : The official application forms to be used for the purpose of
the Invitation and which form part of this Prospectus

“Application List” : List of applications for subscription and/or purchase of the


Invitation Shares

“Articles of Association” or “Article” : The articles of association of the Company

“ATM” : Automated teller machine

“Audit Committee” : The audit committee of the Company

“Board” : The board of Directors of the Company

“Directors” : The directors of the Company as at the date of this


Prospectus, unless otherwise stated

“e-commerce” : Refers to commercial transactions based on the electronic


submission of data over communication networks

“EPS” : Earnings per Share

“Electronic Applications” : Applications for the Invitation Shares through an ATM or


Internet Banking website, where applicable, of one of the
Participating Banks in accordance with the terms and
conditions of this Prospectus

“Executive Officers” : The executive officers of the Company as at the date of


this Prospectus, unless otherwise stated

“FY” : Financial year ended or ending 31 December

Independent Director : A non-executive Director whose relationship would not, in


the individual case, be likely to affect the Director’s
exercise of independent judgement

6
“Invitation” : The invitation to the public in respect of the Invitation
Shares, subject to and on the terms of this Prospectus

“Invitation Shares” : The New Shares and Vendor Shares

“ISO” : International Standards Organisation, a world-wide


federation of national standards bodies

“Issue Price” : $0.32 for each Invitation Share

“Market Day” : A day on which the SGX-ST is open for trading in


securities

“MNC” : Multi-National Corporation

“NA” : Not applicable

“NTA” : Net tangible asset

“New Shares” : The 25,000,000 New Shares for which the Company
invites applications to subscribe, subject to and on the
terms of this Prospectus

“Offer” : The offer by the Company and the Vendors to the public
for subscription and/or purchase of the Offer Shares and
the Vendor Shares respectively at the Issue Price, subject
to and on the terms and conditions of this Prospectus

“Offer Shares” : The 6,000,000 Invitation Shares which are the subject of
the Offer

“Participating Banks” : DBS Bank (including its POSBank Services division);


Keppel TatLee Bank Limited (“KTB”); Oversea-Chinese
Banking Corporation Limited (“OCBC”) Group (comprising
OCBC and Bank of Singapore Limited); Overseas Union
Bank Limited (“OUB”) and United Overseas Bank Limited
(“UOB”) Group (comprising UOB, Far Eastern Bank
Limited and Industrial & Commercial Bank Limited)

“Placement” : The placement of the Placement Shares by the Placement


Agent on behalf of the Company and the Vendors for
subscription and/or purchase at the Issue Price, subject to
the terms and conditions of this Prospectus

“Placement Shares” : The 32,430,000 Invitation Shares which are the subject of
the Placement (including the Reserved Shares)

“PRC” : The People’s Republic of China

“R&D” : Research and development

“Reserved Shares” : 1,040,000 Placement Shares reserved for the Directors,


management, employees and others who have contributed
to the success of the Group

“Restructuring Exercise” : The restructuring exercise of the Group undertaken in


connection with the Invitation, as described in pages 79 to
82 of this Prospectus

7
“Securities Account” : Securities account maintained by a depositor with CDP

“Shares” : Ordinary shares of $0.05 each in the capital of the


Company

“Shareholders” : Shareholders of the Company

“Strategic Investors” : DBS Capital and Gimmill

“USA” or “US” : United States of America

“Vendors” : DBS Capital, Gimmill and Ms Lum Ooi Lin Olivia

“Vendor Shares” : 14,470,000 Shares for which the Vendors invite


applications to purchase subject to and on the terms of
this Prospectus

Currencies, Units and Others


“m3” : Cubic metres

“S$” or “$” and “cents” : Singapore dollars and cents respectively, unless otherwise
stated

“US Dollar”, “US$” and “US cents” : United States dollar and cents, respectively

“%” or “per cent.” : Per centum or percentage

“RMB” : Chinese Renminbi

“sq ft” : Square feet

“sq m” : Square metre

“PBT” : Profit before tax

Words importing the singular shall, where applicable, include the plural and vice versa and words
importing the masculine gender shall, where applicable, include the feminine and neuter genders
and vice versa. References to persons shall include corporations.

Any reference in this Prospectus and the Application Forms to any enactment is a reference to that
enactment as for the time being amended or re-enacted. Any word defined under the Act or any
statutory modification thereof and used in this Prospectus and the Application Forms shall have the
meaning assigned to it under the said Act or statutory modification as the case may be.

Any reference in this Prospectus and the Application Forms to shares being allotted to an applicant
includes allotment to CDP for the account of that applicant.

A reference to a time of day in this Prospectus and the Application Forms shall be a reference to
Singapore time unless otherwise stated.

8
GLOSSARY OF TECHNICAL TERMS

For the purpose of this Prospectus, the following technical terms and abbreviations have, where
appropriate, been used:-

“activated carbon filtration” : The removal of chlorine by passing liquid through a bed of highly
adsorptive carbon material

“biological treatment” : The use of bacteria to consume unwanted organics

“city water” : Potable grade water in accordance with World Health


Organisation’s standards

“Cleaning-in-place” or “CIP” : A built-in cleaning system within a production line that facilitates
periodic cleaning

“coagulation” : A process of agglomeration of minute charged particles into


larger particles which can be removed by settling and/or filtration

“concentrate” : The portion of the feed stream that is rejected from the
membrane surface

“concentration” : The removal of liquid from a suspension or solution

“degasification” : The process of removing dissolved gases in water

“deionisation” or “DI” : The removal of all ionised minerals and salts from a solution

“dissolved air flotation” : The injection of micro air bubbles into a stream to cause the
lighter particles to float thereby causing a separation

“distillation” : The process in which a liquid is converted into its vapour state
by heating, and the vapour is subsequently cooled and
condensed to the liquid state and collected

“flocculation” : The agglomeration of finely divided suspended solids into larger,


usually gelatinous, particles

“fractionation” : The separation of materials from a homogeneous mixture or


from the common parental source

“granular media filtration” : Filtration using granular materials such as sand and coal

“ion exchange” : A process in which certain ions of a given charge may be


absorbed from solution and replaced in the solution by different
ions of a similar charge from the resin

“membrane” : Media through which a liquid is passed and refers to the


functional filter material

“permeate” : The portion of the feed stream that passes through the
membrane

“PFA” : Perfluoroalkoxy, a type of material used for high purity water


tubing

“pH” : An expression of the acidity of a solution. A pH of 1 is very


acidic; pH 7 is neutral; pH 14 is very alkaline

9
“pH adjustment” : The introduction of acids or alkalines into a solution to achieve
the desired pH range

“potable water” : Water that is suitable for human consumption

“PVDF” : Polyvinylidene Floride, a type of material used for high purity


water piping

“recovery” : Expressed in %. The amount of useful material gained from the


feed stream

“refractory organic” : An organic compound that cannot be oxidised by normal


biological treatments

“reverse osmosis” or “RO” : The process by which a solution under pressure is forced
through a semi-permeable membrane from a more concentrated
to a less concentrated solution

“sand filtration” : Filtration through a packed bed of sand that can remove
particles down to less than 25 microns

“screening” : The use of a mesh or screen to stop large particles from


passing through

“sedimentation” : Settling of suspended solids in a fluid by gravity

“sludge dewatering” : The process of reducing or eliminating moisture content

“suspension” : Undissolved particles in a liquid

“UF” : Ultra-filtration

“USP” : US Pharmacopoeia, a guide with lists and directions for the use
of drugs

“water softening” : The process of removing the hardness of water, the applications
include improving the lathering of soap, and reducing scale build-
up

10
DETAILS OF THE INVITATION

LISTING ON SGX SESDAQ


Application has been made to the SGX-ST for permission to deal in, and for quotation of, all the
Shares already issued as well as the New Shares on the SGX Sesdaq. Such permission will be
granted when the Company has been admitted to the Official List of the SGX Sesdaq. Acceptance
of applications will be conditional upon permission being granted to deal in and for quotation for all
the issued Shares as well as the New Shares. Moneys paid in respect of any application accepted
will be returned, without interest or any share of revenue or benefit arising therefrom and at the
applicant’s own risk, if the said permission is not granted.

The SGX-ST assumes no responsibility for the correctness of any of the statements made, opinions
expressed or reports contained in this Prospectus. Admission to the Official List of the SGX Sesdaq
is not to be taken as an indication of the merits of the Invitation, the Company, its subsidiaries or
the Shares.

The Directors and the Vendors individually and collectively accept full responsibility for the accuracy
of the information given in this Prospectus and confirm, having made all reasonable enquiries, that
to the best of their knowledge and belief, there are no other material facts the omission of which
would make any statement in this Prospectus misleading and that this Prospectus constitutes full
and true disclosure of all material facts about the Invitation and the Company and its subsidiaries.

No person is authorised to give any information or to make any representation not contained in this
Prospectus in connection with the Invitation and, if given or made, such information or
representation must not be relied upon as having been authorised by the Company, the Vendors or
the Manager. Neither the delivery of this Prospectus and the Application Forms nor the Invitation
shall, under any circumstances, constitute a continuing representation or create any suggestion or
implication that there has been no change in the affairs of the Company or of its subsidiaries or in
any statements of fact or information contained in this Prospectus since the date of this Prospectus.
Where such changes occur, the Company may make an announcement of the same to the SGX-ST.
All applicants should take note of any such announcement and, upon release of such an
announcement, shall be deemed to have notice of such changes. Save as expressly stated in this
Prospectus, nothing herein is, or may be relied upon as, a promise or representation as to the future
performance or policies of the Company or its subsidiaries.

This Prospectus has been prepared solely for the purpose of the Invitation and may not be relied
upon by any persons other than the applicants in connection with their application for the Invitation
Shares or for any other purpose. This Prospectus does not constitute an offer of, or invitation or
solicitation to subscribe for, the Invitation Shares in any jurisdiction in which such offer or invitation
is unauthorised or unlawful nor does it constitute an offer, invitation or solicitation to any person to
whom it is unlawful to make such offer, invitation or solicitation.

Copies of this Prospectus and the Application Forms and envelopes may be obtained on request,
subject to availability, from:-

The Development Bank of Singapore Ltd


6 Shenton Way
DBS Building Tower One
Singapore 068809

and from DBS Bank branches (including its POSBank Services division), members of the
Association of Banks in Singapore, members of the SGX-ST and merchant banks in Singapore.

The Application List will open at 10.00 a.m. on 15 January 2001 and will remain open until
12.00 noon on the same day or for such further period or periods as the Directors and
Vendors may in their absolute discretion decide, subject to any limitation under all applicable
laws.

11
STRUCTURE OF OUR INVITATION

Issue Price
The Issue Price, determined by us, the Vendors and DBS Bank based on the estimated market
valuation of our Company and the market demand for our Shares, is $0.32 for each Invitation Share
offered in our Invitation. The Issue Price is the same for all Invitation Shares offered in the various
tranches of our Invitation and is payable in full on application.

Our Invitation
The Invitation comprises the following tranches:-

PUBLIC OFFER
TRANCHE
6,000,000 Offer Shares
INVITATION (15.20% of Invitation) 1,040,000 Reserved Shares
39,470,000 (2.64 % of Invitation)
Ordinary Shares
PLACEMENT
TRANCHE
33,470,000 32,430,000
Placement Shares Placement Shares
(84.80 % of Invitation) (82.16 % of Invitation)

Investors may subscribe for any number of Invitation Shares in integral multiples of 1,000 Invitation
Shares.

(i) Public Offer Tranche


The Public Offer is open to members of the public in Singapore as well as to institutional and
professional investors. Investors may apply for Invitation Shares under the Public Offer Tranche
by way of printed Offer Shares Application Forms or by way of electronic applications through
the ATMs belonging to the Participating Banks (“ATM Electronic Applications”) or through
Internet Banking (“IB”) websites of the relevant Participating Banks (“Internet Electronic
Applications”, which together with ATM Electronic Applications, shall be referred to as
“Electronic Applications”).

The terms and conditions and the procedures for application of Invitation Shares under the
Public Offer Tranche are set out on pages 136 to 149 in Appendix F of this Prospectus.

Only one application may be made for the benefit of a person for Invitation Shares
under the Public Offer Tranche. A person submitting an application for Invitation Shares
in the Public Offer Tranche by way of a printed Offer Shares Application Form may not
submit another application of Invitation Shares by way of an Electronic Application and
vice versa. A person submitting an application for the Invitation Shares in the Public
Offer Tranche by way of ATM may not submit another application of Invitation Shares by
way of an Internet Electronic Application and vice versa. Such separate applications
shall be deemed to be multiple applications and shall be rejected.

The Public Offer Tranche of initially 6,000,000 Invitation Shares at the Issue Price represents
15.20% of the total number of Invitation Shares initially available under the Invitation and
3.54% of our post-IPO issued and paid-up share capital.

12
Allocation of Invitation Shares under the Public Offer Tranche will be based on the level of valid
applications received. In the event that the Public Offer Tranche and the Invitation on the whole
are substantially over-subscribed, there will be balloting and applicants who are not successful
in the ballot will not receive any Invitation Shares under the Public Offer Tranche while
successful applicants in the ballot may receive less than the number of Invitation Shares they
applied for under the Public Offer Tranche.

The Placement Tranche comprises Reserved Shares and Placement Shares.

(ii) Reserved Tranche


1,040,000 Invitation Shares under our Invitation are subject to priority allocation to persons in
the following categories who have contributed to our success:- (a) the Directors, (b) the
executive officers and employees of our Group and (c) others who have contributed to our
success.

Application for the Reserved Shares may only be made by way of printed Reserved Shares
Application Forms. The terms and conditions and the procedures for application of Reserved
Shares are set out on pages 136 to 149 in Appendix F of this Prospectus.

An applicant making an application for the Reserved Shares using the Reserved Shares
Application Form may submit one separate application for Invitation Shares under the Public
Offer Tranche in his own name either by way of an Offer Shares Application Form or through
an Electronic Application or submit one separate application for Placement Shares (other than
Reserved Shares) by way of a Placement Shares Application Form, provided he adheres to
the terms and conditions of this Prospectus. Such separate applications will not be treated as
multiple applications.

The Reserved Tranche of 1,040,000 Invitation Shares at the Issue Price represents 2.64% of
the total number of Invitation Shares available under the Invitation and 0.61% of our post-IPO
issued and paid-up capital.

(iii) Placement Tranche


The Placement will involve selective marketing of Invitation Shares to institutional and
professional investors and other investors expected to have a sizeable demand for the
Invitation Shares. Professional investors generally include brokers, dealers, companies
(including fund managers) whose ordinary business involves dealing in shares and other
securities and corporate entities which regularly invest in shares and other securities.
Application for Placement Shares may only be made by way of printed Placement Shares
Application Forms. The terms and conditions and the procedures for application of Placement
Shares are set out on pages 136 to 149 in Appendix F of this Prospectus.

An investor who has agreed to subscribe for Placement Shares (other than Reserved Shares)
or who otherwise subscribes for Placement Shares shall not make or procure to be made any
separate application for Offer Shares. Such separate application will be deemed to be multiple
applications and shall be rejected.

The Placement Tranche (other than Reserved Shares) of 32,430,000 Invitation Shares at the
Issue Price represents 82.16% of the total number of Invitation Shares initially available under
the Invitation and 19.11% of our post-IPO issued and paid-up share capital.

13
RESULTS OF APPLICATION AND DISTRIBUTION
We will publicly announce the level of subscription for Invitation Shares and the basis of allocation
of the Invitation Shares, as soon as it is practicable after the closing date for applications:-
(i) through a MASNET announcement to be posted on the Internet at the SGX-ST website
http://www.singaporeexchange.com; and
(ii) in the local English and Chinese newspapers.

Applicants who make ATM Electronic Applications through the ATMs of the following banks may
check the provisional results of their Electronic Applications as follows:-

Bank Telephone Available at ATM/Internet Operating Hours Service Expected From


DBS Bank 1800-222 2222 Internet Banking or 24 hours a day 7.00 p.m. on the balloting
327 4767 Internet Kiosk day
www.dbs.com*
KTB 222 8228 ATM ATM - 24 hours a day ATM - Evening of the
balloting day
Phone Banking - Phone Banking -
Mon-Fri: 0800-2200 8.00 a.m. on the day after
Sat: 0800-1500 the balloting day
OCBC 1800-363 3333 ATM ATM - 24 hours a day Evening of the balloting day
Phone Banking -
24 hours a day
OUB 1800-224 2000 OUB Personal Internet Phone Banking/ Evening of the balloting day
Banking Internet Banking -
www.oub2000.com.sg* 24 hours a day
OUB Mobile Buzz OUB Mobile Buzz** -
24 hours a day
UOB 1800-533-5533 ATM (Other Transactions – Phone Banking***/ 6.00 p.m. on the balloting day
1800-222-2121 “IPO Enquiry”) ATM - 24 hours a day
www.uobcyberbank.com.sg***

* Applicants who have made Internet Electronic Applications through the Internet Banking websites of DBS Bank or
OUB may also check the results of their application through the same channels listed in the table above in relation to
ATM Electronic Applications made at the ATMs of DBS Bank or OUB.
** Applicants who have made Electronic Applications through the ATMs or the Internet Banking website of OUB and who
have activated their OUB Mobile Buzz service will be notified of the results of their Electronic Applications, via their
mobile phones.
*** Applicants who have made Electronic Applications through the ATMs or the Internet Banking website of UOB, may
check the results of their application through UOB CyberBank, UOB Group’s ATMs or UOB Phone Banking services.

If the Applicant’s Electronic Application is made through the ATMs of the UOB Group and is
unsuccessful, it is expected that a computer-generated notice will be sent to the Applicant by the
relevant Participating Bank (at the address of the Applicant as stated in the records of the relevant
Participating Bank at the date of his ATM Electronic Application) by ordinary post at the Applicant’s
own risk within three Market Days after the close of the Application List. If the Applicant’s ATM
Electronic Application is made through the ATMs of KTB, the OCBC Group, OUB or DBS Bank
(including its POSBank Services division) and is unsuccessful, no notification will be sent by the
relevant Participating Bank.

If the Applicant’s Internet Electronic Application made through the IB websites of UOB, OUB or DBS
Bank is unsuccessful, no notification will be sent by such Participating Banks.

14
INDICATIVE TIMETABLE FOR LISTING
In accordance with the SGX-ST’s News Release of 28 May 1993 on the trading of initial public
offering shares on a “when issued” basis, an indicative timetable is set out below for the reference
of applicants:-

Indicative date/time Event

15 January 2001, 12 noon Closing of Application List

16 January 2001 Balloting of applications, if necessary (in the event of an over-


subscription for the Offer Shares (other than the Reserved
Shares))

17 January 2001, 9.00 a.m. Commence trading on a “when issued” basis

26 January 2001 Last day of trading on a “when issued” basis

29 January 2001, 9.00 a.m. Commence trading on a “ready” basis

1 February 2001 Settlement date for all trades done on a “when issued” basis and
for all trades done on a “ready” basis on 29 January 2001

The above timetable is only indicative as it assumes that the closing date of the Application List is
15 January 2001, the date of admission of the Company to the Official List of SGX Sesdaq will be
17 January 2001, the SGX-ST’s shareholding spread requirement will be complied with and the
Invitation Shares will be issued and fully paid up prior to 17 January 2001. The actual date on which
the Shares will commence trading on a “when issued” basis will be announced when it is confirmed
by the SGX-ST.

The above timetable and procedure may be subject to such modifications as the SGX-ST may in its
discretion decide, including the decision to permit trading on a “when issued” basis, and the
commencement date of such trading. The commencement of trading on a “when issued” basis
will be entirely at the discretion of the SGX-ST. All persons trading in the Shares on a “when
issued” basis, if implemented, do so at their own risk. In particular, persons trading in the
Shares before their Securities Accounts with CDP are credited with the relevant number of
Shares do so at the risk of selling Shares which neither they nor their nominees, if
applicable, have been allotted with or are otherwise beneficially entitled to. Such persons are
also exposed to the risk of having to cover their net sell positions earlier if “when issued”
trading ends sooner than the indicative date mentioned above. Persons who have a net sell
position traded on a “when issued” basis should close their position on or before the first
day of “ready” basis trading.

Investors should consult the SGX-ST announcement on the “ready” listing date on the Internet (at
the SGX-ST website http:// www.singaporeexchange.com), INTV or the newspapers, or check with
their brokers on the date on which trading on a “ready” basis will commence.

15
PROSPECTUS SUMMARY

The information contained in this summary is derived from and should be read in conjunction with
the full text of this Prospectus.

Company
Our Company was incorporated in Singapore on 31 March 2000 under the Act as an exempt private
limited company in the Republic of Singapore, under the name of Hyflux Pte Ltd. Our Company was
subsequently converted to a public limited company on 20 December 2000 and changed its name
to Hyflux Ltd.

To prepare for a listing on the SGX Sesdaq pursuant to the Invitation, the Restructuring Exercise
was undertaken to rationalise the shareholding structure and to consolidate the principal entities of
our Group as directly or indirectly wholly owned subsidiaries under the listing vehicle of Hyflux Ltd.

We operate from our Singapore registered office at 40 Changi South Street 1 Singapore 486764
and our branch office in Shanghai. Our sales personnel are also stationed in Guangzhou and Beijing
for close proximity to our customers.

Business
We are a specialist company that provides integrated treatment systems for advanced water
treatment and membrane filtration. We provide one-stop shop service for the design, fabrication,
installation, commissioning and maintenance of treatment systems for water purification, wastewater
treatment and water recycling. In the specialised field of membrane processing, we utilise membrane
filtration technologies that have found diverse applications across industries such as electronics,
pharmaceuticals and biotechnology.

Water Purification
This involves the purification of raw water from various sources (such as river water, seawater, well
water and rainwater, etc) for public consumption and industrial applications including the production
of deionised water and ultra-pure water for use in industries such as electronics, pharmaceutical and
biotechnology.

Wastewater Treatment
We manufacture treatment plants that treat wastewater of industries so that such water may be
discharged in accordance with the standards of the relevant regulatory authorities in the respective
countries in which our clients operate. Besides treatment, we also review the water streams in our
clients’ manufacturing processes and recommend ways to minimise waste effluent and the number
of subsequent treatments.

Water Recycling
Water recycling is the recovery of water for reuse. For companies that use substantial volumes of
water, our water treatment systems assist them to recycle their wastewater. Depending on the
characteristics of the wastewater, we can recover between 50% to 90% of the wastewater for reuse
using mainly membrane filtration technology.

16
Advanced Membrane Filtration
We utilise advanced membrane filtration technology to recover or purify certain products (such as
antibiotics, Vitamin C, dyes, urea, etc.) in our clients’ manufacturing process. Advanced membrane
filtration is distinguished from simple membrane filtration, in that the former includes a range of
technologies such as ultrafiltration, nanofiltration and reverse osmosis while the latter generally
refers to the use of reverse osmosis only. Advanced membrane filtration involves four physical
separation processes: purification, recovery, concentration and fractionation. We offer applications of
the four separation processes individually or together across many industries including electronics,
pharmaceutical, biotechnology, chemical and food. We use membranes designed and manufactured
in-house as well as third party membranes.

High-purity piping systems and equipment hook-up


High-purity piping systems are required to convey pure products such as compressed air, specialty
gases, ultra-pure water and chemicals to manufacturing plants. Proper hooking-up of the distribution
piping to the equipment is vital to prevent contamination.

Servicing and maintenance


Servicing and maintenance are part of our after-sale services that are essential to ensure smooth
operation of our customers’ plant.

Our Customers
We service customers in several industries, including the electronics, pharmaceutical, chemical, food
and beverage, biotechnology and textile industries. Our sales to the electronics and pharmaceutical
industries each constitutes about 33% of our revenue in FY1999 with the remainder from the other
industries. In FY1999, approximately 35% of our revenue was generated through sales in Singapore
while 60% came from our operations in the People’s Republic of China (“PRC”). The balance 5%
was generated through sales in other countries such as Malaysia and Taiwan.

Our Competitive Strengths

Integrated Services
We offer a one-stop shop service to our customers and provide integrated services of designing,
engineering, installation, commissioning and maintenance of systems that treat liquids utilising
mainly membrane filtration technology.

Diverse Industries
Through our research and development (“R&D”) efforts, we have managed to utilise membrane
filtration for water purification, wastewater treatment, water recycling and liquid separation as
opposed to conventional methods. This has allowed us to meet the diverse needs of various
industries such as electronics, pharmaceutical and biotechnology by applying the four separation
processes of advanced membrane filtration individually or together (please refer to “Advanced
Membrane Filtration” as set out above for more details). This provides us with a competitive edge
over some of our competitors who utilise other technologies and hence focus on specific industries.

Though our current focus is on the electronics, pharmaceutical and biotechnology industries, we do
not rely on a single industry or customer. We have always adopted an approach of serving at least
three to four industries that are not closely linked, for example, the electronics and pharmaceutical
industries.

17
Experienced Management
We have an experienced management team who is familiar with the business and is well positioned
to lead our Group forward to continued growth and profitability. We have been led by our Managing
Director, Ms Lum Ooi Lin Olivia, for the past ten (10) years.

Ability to Meet International Standards


Our products and services are able to meet international standards for different industries. For
example, we are able to produce water which meets US Pharmacopoeia (“USP”) standards and our
equipment can be manufactured to meet American Society of Mechanical Engineers (“ASME”)
standards.

Customised Systems
A key feature of our water treatment systems is the identification and adoption of modern
technologies to provide solutions to the various needs of our customers. For example, we utilise
advanced membrane filtration technology to customise the water treatment plants to meet the
specific needs of various industries. This is possible as we are able to manufacture the membranes
and water treatment systems in-house.

Established relationships with customers and suppliers


We estimate that 70% of our business is obtained through referrals and recommendations by our
existing customers and engineering consultants and companies. We are on the approved vendor list
of several of our customers. This allows us to tender for jobs from these customers without having
to undergo a pre-selection process, which typically involves the evaluation of track record and capital
base. This has enabled us to secure new projects without having to increase our marketing activities
and thus, our marketing expenses.

The equipment which we source from our suppliers to incorporate into our customers’ water
treatment and advanced membrane filtration systems require a high degree of expertise in
installation and commissioning. Our suppliers have to be assured that we, as the solution provider,
are able to successfully install their products for the benefit of the end users. We have built up such
a relationship with our suppliers and this allows us to offer a range of products and services. This
enhances our position as an integrated water treatment provider.

For details of our competitive strengths, please see pages 61 to 62 of this Prospectus.

Our Strategy

Provide fully integrated services


We will continue to focus on being an integrated service provider that treats liquids utilising mainly
membrane filtration technology. In order to provide uninterrupted water treatment while servicing or
upgrading is carried out on our customers’ water treatment systems, we plan to provide emergency
recovery units, which are specially designed truck-trailers containing water treatment systems, once
we have ascertained that there is sufficient demand from our customers. We are able to provide
such a service due to our experience in building water treatment systems.

Lower direct costs


In order to remain competitive, we will continue to lower our direct costs by moving towards
manufacturing more materials in-house. We currently aim to manufacture up to 30% to 50% of the
materials used in our systems.

18
Incorporate information technology into our systems
With the advent of information technology, we will be developing and incorporating more of such
tools to enhance the operational capability of our systems.

Strengthen and cultivate relationships with engineering consultants and companies


We estimate approximately 30% of our business is obtained through referrals and recommendations
by engineering consultants and companies. As such, we recognise the need to build ties and
cultivate relationships with international engineering consultants and companies such as Siegle and
Epple Asia Pte Ltd (“Siegle and Epple”), a German engineering consulting firm and Jacobs-Lend
Lease Pte Ltd (“Jacobs-Lend Lease”), an engineering joint venture company between a US and an
Australian company. These companies specialise in the designing and building of pharmaceutical
plants, electronics manufacturing plants, chemical processing plants and other industrial plants.

Increase the value of the projects


After having secured projects of up to $5,000,000 each in value in 1999 and 2000, we intend to
develop the next phase of our business by tendering and obtaining projects of values of above
$5,000,000 each.

Increase research and development (“R&D”) and improve quality standards


To remain competitive and be at the fore-front of the water treatment business, we will continue to
commit our resources in research and development both internally and also in collaboration with
universities and environmental institutes to develop proprietary membranes, improve existing ones
and to seek new uses for membrane filtration technology in the food and pharmaceutical industries.
To meet the rising demand of our customers for products and services of the highest quality, we
shall also seek to drive our quality system to International Standards Organisation (“ISO”) standards
by 2001. We are currently reviewing the documentation of our work procedures in preparation of
meeting the ISO standards. We will apply for the ISO certification upon the completion of the review.

For details of our strategy, please see pages 56 to 57 of this Prospectus.

19
THE INVITATION

Size : 39,470,000 Invitation Shares, comprising 25,000,000 New Shares


and 14,470,000 Vendor Shares. The Vendor Shares and the New
Shares will, upon registration in the name of CDP or its nominee,
rank pari passu in all respects with the then existing issued Shares.

Issue Price : $0.32 for each Invitation Share.

Purpose of the Invitation : Our Directors consider that the listing of our Company and the
quotation of the Shares on the Offical List of the SGX Sesdaq will
enhance our Company’s public image. It will also provide members
of the public, our Directors, management, employees and others
who have contributed to the success of our Group an opportunity to
participate in the equity of our Company.

Use of proceeds : The net proceeds from the Invitation (after deducting estimated
expenses in relation to the Invitation) is estimated to be $6.8 million.
Our Company proposes to use the net proceeds of the Invitation as
follows:-
1. approximately $0.5 million for setting up sales and service
centres in PRC;
2. approximately $2.5 million for the expansion of our manufacturing
and research facilities in Singapore and Shanghai;
3. approximately $3.0 million for acquisition of new technologies;
and
4. the balance of approximately $0.8 million for working capital.

Pending the deployment of the net proceeds for purposes mentioned


above, the proceeds from the New Shares may be placed on
deposits with banks or financial institutions or invested in short term
money market instruments or used to repay short-term bank
borrowings or used as working capital, as our Directors may in their
absolute discretion deem fit.
Please see page 67 on “Future Plans” for more details.
Reserved Shares : 1,040,000 of the 33,470,000 Placement Shares will be reserved for
our Group’s Directors, management, employees and others who
have contributed to the success of our Group. In the event that any
of the Reserved Shares are not taken up, they will be made
available to satisfy applications for the Placement Shares, or in the
event of an under-subscription for the Placement Shares, to satisfy
applications made by members of the public for the Offer Shares.
Listing Status : The Shares will be quoted on the SGX Sesdaq, subject to
admission of our Company to the Official List of the SGX Sesdaq
and permission for dealing in and quotation of our Shares being
granted by the SGX-ST.

20
RISK FACTORS

You should carefully evaluate each of the following considerations and all of the other information
set forth in this Prospectus before deciding to invest in the Company’s Shares. The following
considerations relate principally to the industry in which the Group operates and its business in
general.

If any of the following considerations and uncertainties develop into actual events, our business,
financial conditions or results of operations could be materially and adversely affected. In such case,
the trading price of our Shares could decline due to any of these considerations, and you may lose
all or part of your investment.

This Prospectus also contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in these forward-looking statements as a
result of certain factors, including the risks faced by us described below and elsewhere in this
Prospectus.

Mismanagement of projects could have an adverse effect on our profitability


As our business is project-based, it is important that we manage our projects in terms of time,
procurement of materials and allocation of resources. Mismanagement will result in rectification
costs and delays in the completion of the projects and hence adversely affect our profitability.

Our profit will depend on our ability to secure new projects


As mentioned earlier, our business is project-based. Our financial performance will depend on our
ability to secure new projects that are profitable. If we are unable to do so, our profitability will be
adversely affected.

Our profit for fixed price contracts may be adversely affected if our cost estimates are
incorrect or if there are delays in completion of the projects
Almost all of our revenue is derived from contracts with fixed prices. If our initial cost estimates are
incorrect or delays occur during the contract progress resulting in cost overruns, our profitability
under that contract will be adversely affected. In addition, we may be liable for liquidated damages
should there be a delay in the completion of our projects. This will increase our costs and adversely
affect our financial position. We have not encountered such a situation in the past but there can be
no assurance that there will not be any delays in existing and future projects which we undertake
resulting in payment of liquidated damages which could have a material impact on our financial
performance and financial condition.

We are dependent on the electronics and pharmaceutical industries


We design, install and commission water treatment plants mainly for the electronics and
pharmaceutical industries. Sales to the electronics industry accounted for 49.3%, 41.8%, 32.9% and
38.0% of our turnover for FY1997, FY1998, FY1999 and the ten months ended 31 October 2000
respectively. Sales to the pharmaceutical industry accounted for 36.9%, 2.5%, 33.2% and 51.8% of
our turnover for FY1997, FY1998, FY1999 and the ten months ended 31 October 2000 respectively.
Should there be any downturn in both the electronics and pharmaceutical industries and if we are
not able to seek new customers in other industries on a timely basis, our financial performance
would be adversely affected.

21
We are subject to risks associated with technological and regulatory changes
In 1999, we commenced the manufacture of filtration membranes. As a result, we will be exposed
to changes in technology such as the development of water treatment processes and filtration
membranes, changes in industrial standards such as US Pharmacopoeia (“USP”) and regulatory
requirements, each of which influences the demand for our products and services. Any changes in
legislative, regulatory or industrial requirements may render certain of our purification and filtration
products and processes obsolete. Acceptance of new products may also be affected by the adoption
of new government regulations requiring stricter standards. For example, if a new government
regulation requires industries’ water discharge to be of a higher standard, and should our water
treatment plants not be able to meet these standards, our performance will be adversely affected.
Our ability to anticipate changes in technology and regulatory standards and to develop and
introduce new and enhanced products successfully on a timely basis will be a significant factor in
our ability to grow and to remain competitive. There can be no assurance that we will be able to
achieve the technological advances that may be necessary for us to remain competitive or that
certain of our products will not become obsolete. In addition, we are subject to the risks generally
associated with new product introductions and applications, including the lack of market acceptance,
delays in development or failure of products to operate properly.

We are exposed to foreign currency risks


Our projects are carried over a span of a few months to two (2) years. We provide quotations to our
customers mainly in S$ and US$ and make purchases mainly in S$ and US$. In FY1999, the
proportion of our revenue in S$ and US$ was 28.3% and 53.5% respectively while the proportion of
purchases and expenses in S$ and US$ was 67.6% and 24.1% respectively. Any significant
fluctuation in foreign exchange rates during the course of our projects will have an impact on our
Group’s profits. For example, profits derived from our projects denominated in US$ would be lower
in S$ should there be any depreciation in the exchange rate of US$ against S$.

Our foreign exchange gains/losses for the past three financial years and for the ten months ended
31 October 2000 are as follows:

Ten months
ended
FY1997 FY1998 FY1999 31 October 2000

Net foreign exchange gain (loss) ($’000) 27 (9) (9) 42


Percentage of turnover 0.7% (0.1%) (0.1%) 0.3%
Percentage of profit before tax (“PBT”) 19.7% (0.9%) (2.1%) 0.7%

Currently, our Group does not have a foreign currency hedging policy as our foreign exchange gains
and losses over the past three financial years had been relatively low. We will continue to monitor
our foreign exchange exposure in the future and will consider hedging any material foreign
exchange exposure should the need arise. Please refer to “Foreign Exchange Exposure” on pages
43 to 44 for more details.

Our customers are subject to environmental laws and regulations of the countries in which
they operate and they may seek recourse from us should there be any violation
The environmental laws and regulations of the countries in which we support our clients require our
clients to meet certain standards and impose liability if these are not met (please refer to page 65
on “Government Regulations” for more details). Though we are not directly regulated by these
environmental laws and regulations, there is no assurance that our customers or the relevant
authorities will not seek recourse from us in the event of non-compliance with such laws and
regulations, even if our plants were commissioned and tested to be satisfactory at the point of hand
over to our customers.

22
In addition, the liabilities and risks imposed on our customers by environmental laws may adversely
impact demand for some of our products or services or impose greater liabilities and risks on us,
which could also have an adverse effect on our competitive and financial position.

We are dependent on the availability of adequately skilled engineers and our key personnel
Owing to the specialised nature of our work, there is a limited supply for adequately skilled
engineers. The cost of labour has been steadily increasing due to staff remuneration and training
costs. Furthermore, to the extent that we are unable to recruit the required number of skilled
engineers, locally or from overseas, to meet the expected increase in both production and R&D, our
turnover and profitability will be negatively affected.

We have been dependent on the continued efforts of our senior management, in particular our
Managing Director Ms Lum Ooi Lin Olivia, our Executive Director Dr Deirdre Murugasu, who steers
the R&D and business development activities, and Sales Director Mr Foo Hee Kiang, who oversees
sales and marketing. The loss of services of these senior management could have an adverse effect
on our ability to achieve our objectives.

We do not have patents to protect our products and proprietary technology against claims by
other parties
We have developed designs and applications of the advanced membrane filtration system in various
industries such as electronics, pharmaceutical and food and beverage. Such applications arose from
our R&D efforts. We have not applied for any patents in respect of the designs and applications as
the technology is evolving and our R&D efforts are still on-going. We will apply for patents when
further research shows more conclusive results and we assess that it is feasible to do so.
Meanwhile, we will not have any legal recourse for these designs and applications which are not
patented in the event that such solutions are successfully replicated by third parties. In the event
that the applications are replicated, our turnover and profitability on these applications may be
adversely affected.

Furthermore, third parties may subsequently assert claims to certain applications. In such an event,
we may need to acquire licenses to, or to contest the validity of, issued or pending patents or claims
of third parties. There can be no assurance that any license acquired under such patents would be
made available to us on acceptable terms, if at all, or that we would prevail in any such contest. In
addition, we could incur substantial costs in defending ourselves in suits brought against us for
alleged infringement of another party’s patents.

We rely on trade secrets, proprietary know-how and technology, which we seek to protect, in part,
by confidentiality agreements with our prospective working partners and collaborators, employees
and consultants. To the best of our knowledge, there were no breaches of such agreements in the
past. However, there can be no assurance that these agreements will not be breached, that we will
have adequate remedies for any breach, or that our trade secrets and proprietary know-how will not
otherwise become known or be independently discovered by others.

We are dependent on foreign labour


Foreign workers account for approximately 40% of our workforce in Singapore. Due to the tight
labour supply, we will continue to be reliant on foreign workers. Any changes in governmental
policies which restrict the employment of foreign workers in Singapore would affect our profitability
as such restrictions may allow us to employ only Singaporean workers who are relatively more
costly to employ. In addition, the Singapore government imposes levies on the employment of
foreign workers. Should there be any significant increase in such levies, our profitability will be
affected by higher production costs.

23
Risks of conducting business in People’s Republic of China (“PRC”)
As we derived a substantial portion of our revenue from PRC, we face risks of conducting business
in PRC.

General risks associated with doing business in PRC


The PRC economy has primarily been a planned and centralised economy, characterised by state
ownership of productive assets. However, PRC has experienced significant economic growth and
social progress since its adoption of the “open door” reform policy in 1978 and the “socialist market
economy” policy in 1993, even though such growth has been uneven across geographic and
economic sectors. Even in the wake of the recent Asian economic crisis, the PRC government has
continued to adopt an economic expansion policy. We cannot assure you that such growth will not
decrease or that any slowdown will not have a negative effect on our business.

It is recognised that PRC lacks an adequate infrastructure and a well-established financial system to
keep pace with its rapidly growing economy. These conditions could have the effect of limiting our
growth potential in PRC. For instance, PRC has experienced various periods of severe inflationary
pressures as a result of an over-heated economy, and the Chinese government had to introduce
anti-inflationary measures from time to time. These measures, which included credit tightening
policies and adjustment to interest rates, may affect the demand of our products and services in
PRC.

Any significant change in PRC laws and regulations and legal system may affect us
Our business and operations in PRC are governed by the legal system of PRC. The PRC legal
system is a codified system with written laws, regulations, circulars, administrative directives and
internal guidelines. Prior decisions by PRC courts may be cited as authority but they do not have
any effect as binding precedents. As a result, the administration of PRC laws and regulations by
PRC government agencies may be subject to considerable discretion. For example, the
Administrative Body of State Council in charge of Environmental Protection regulates under the PRC
Environmental Protection Law of 1989. Under this law, the Administrative Body of the State Council
has developed a system of water standards which comprises five levels of quality standards. Our
role is to assist our customers to achieve these standards pertaining to the discharge of water
treated by our plants. The fabrication and commissioning of our plants is based on our
understanding of the standards required. Should the interpretation of these standards be subject to
discretion, our customers may be found to be non-compliant with the regulatory standards. As
mentioned on page 22, there is no assurance that our customers or the relevant authorities will not
seek recourse from us in the event of non-compliance with such regulatory laws and regulations,
even if our plants were commissioned and tested to be satisfactory at the point of hand-over to our
customers.

Experience in the implementation, interpretation and enforcement of such laws and regulations and
of commercial contracts, undertakings and commitments entered into are also limited. An application
for approval to conduct certain activities in PRC may be unduly protracted with the involvement of
several government agencies or the enforcement of laws and regulations and the outcome of a
dispute resolution may not be as predictable as in more developed jurisdictions. Consequently, our
business and operations and hence, our financial performance, will be adversely affected by
unnecessary delays in obtaining approvals from the governmental bodies in PRC, the introduction of
new laws, changes to existing laws or interpretations thereof, and pre-emption of provincial or local
laws by national laws.

24
PRC foreign exchange control may limit our ability to utilise our revenue effectively
Our PRC subsidiary is subject to PRC rules and regulations on currency conversion. In PRC, the
State Administration for Foreign Exchange (“SAFE”) regulates the conversion of Renminbi into
foreign currencies. Currently, foreign investment enterprises (“FIEs”) are required to apply to the
SAFE for “Foreign Exchange Registration Certificates for FIEs”. With such registration certifications
(which need to be renewed annually), FIEs are allowed to open foreign currency accounts including
the “basic account” and “capital account”. Currency translation within the scope of the “basic
account” (for example, remittance of foreign currencies for payment of dividends, etc.) can be
effected without requiring the approval of the SAFE. However, conversion of currency in the “capital
account” (for example, for capital items like direct investments, loans, securities, etc.) still requires
the approval of the SAFE.

Although the Directors do not presently anticipate any difficulty in meeting our foreign exchange
needs, there can be no assurance that the current foreign exchange rulings will not be changed to
our detriment. As such, there can be no assurance that we will continue to be able to obtain
sufficient foreign exchange to pay dividends or to satisfy our foreign exchange requirements.

Risks relating to an investment in shares

Future sale of Shares could adversely affect our Share price


Any future sale or availability of Shares can have a downward pressure on our Share price. The sale
of a significant amount of Shares in the public market after the Invitation, or the perception that such
sales may occur, could materially and adversely affect the market price of our Shares. These factors
also affect our ability to sell additional equity securities. Except as otherwise described in
“Moratorium” (see page 79 of this Prospectus), there will be no restriction on the ability of the
substantial shareholders to sell their Shares either on the SGX-ST or otherwise.

Investors in our Shares would face immediate and substantial dilution in the book value per Share
and may experience future dilution
Our Issue Price of $0.32 is substantially higher than our Group’s net tangible assets per share of
10.11 cents (adjusted for the net proceeds from the Invitation) as at 31 October 2000. Thus, there
is an immediate and substantial dilution in the book value per Share (please refer to page 42 on
“Dilution”).

Our Share price may be volatile, which could result in substantial losses for investors purchasing our
Shares in this Invitation
The market price of our Shares could be subject to significant fluctuations in response to various
factors and events, including the liquidity of the market for our Shares, differences between our
actual financial or operating results and those expected by investors and analysts, changes in
analysts’ recommendations or projections, changes in general market conditions and broad market
fluctuations.

In addition, our Share price will be under downward pressure if certain of our Directors or
management staff or employees sold their respective Shares immediately after the Invitation or
Moratorium.

No prior market for our Shares


Prior to this Invitation, there has been no public market for our Shares. The Issue Price may not be
indicative of the market price for our Shares after the completion of this Invitation. We have applied
to the SGX-ST for the listing and quotation of our Shares on the Official List of the SGX Sesdaq.
However, no assurance can be given that an active trading market for the Shares will develop or, if
developed, will be sustained.

25
ISSUE STATISTICS

Issue Price for each Invitation Share S$0.32

NET TANGIBLE ASSETS

NTA per Share based on the consolidated balance sheet of our Group as at 31
October 2000, after taking into account the Restructuring Exercise referred to on
pages 79 to 82 of this Prospectus and the Stock Split:-
(a) before adjusting for the estimated net proceeds from the issue of the New
Shares based on the pre-flotation share capital of 144,687,994
Shares 5.35 cents
(b) after adjusting for the proceeds from the issue of new shares to our
Strategic Investors (please refer to pages 81 to 82 of this Prospectus), and
the estimated net proceeds from the issue of the New Shares based on the
post-flotation share capital of 169,687,994 Shares 10.11 cents
Premium of Issue Price per Share over the NTA per Share as at 31 October
2000:-
(a) before adjusting for the estimated net proceeds from the issue of the New
Shares based on the pre-flotation share capital of 144,687,994
Shares 498%
(b) after adjusting for the proceeds from the issue of new shares to our
Strategic Investors (please refer to pages 81 to 82 of this Prospectus), and
the estimated net proceeds from the issue of the New Shares based on the
post-flotation share capital of 169,687,994 Shares 217%

EARNINGS
Historical net EPS of our Group for the financial year ended 31 December 1999
based on the pre-flotation share capital of 144,687,994 Shares 0.05 cents

Historical net EPS of our Group had the Service Agreements (as defined
on pages 76 to 77 of this Prospectus) been in effect for the financial year ended
31 December 1999 based on the pre-flotation share capital of 144,687,994
Shares (0.01) cents(1)

Estimate net EPS of our Group for the financial year ended 31 December 2000
based on the pre-flotation share capital of 144,687,994 Shares 4.40 cents

PRICE EARNINGS RATIO


Historical price earnings ratio based on the historical net EPS of our Group for
the financial year ended 31 December 1999 based on the pre-flotation
share capital of 144,687,994 Shares 640.00 times

Historical price earnings ratio based on the historical net EPS of our Group for
the financial year ended 31 December 1999 based on the pre-flotation share
capital of 144,687,994 Shares, assuming the Service Agreements (as defined on
pages 76 to 77 of this Prospectus) had been in effect for the financial year
ended 31 December 1999 and taking into account the remuneration payable to
Executive Directors, Executive Officers and employees who are related to
substantial shareholders and based on the pre-flotation share capital
of 144,687,994 Shares NA

Estimate price earnings ratio based on the estimate net EPS of our Group for
the financial year ended 31 December 2000 based on the pre-flotation
share capital of 144,687,994 Shares 7.27 times
26
NET OPERATING CASH FLOW(2)
Historical net operating cash flow per Share for the financial year ended 31
December 1999 based on the pre-flotation share capital of 144,687,994
Shares 0.15 cents

Estimate net operating cash flow per Share for the financial year ended 31
December 2000 based on the pre-flotation share capital of 144,687,994 Shares 4.58 cents

PRICE TO NET OPERATING CASH FLOW RATIO


Historical price to net operating cash flow based on the historical net operating
cash flow per Share for the financial year ended 31 December 1999 based
on the pre-flotation share capital of 144,687,994 Shares 213.33 times

Estimate price to net operating cash flow based on the estimate net operating
cash flow per Share for the financial year ended 31 December 2000 based
on the pre-flotation share capital of 144,687,994 Shares 6.99 times

Notes:-
(1) Had the Service Agreements (as defined on pages 76 to 77 of this Prospectus) been in effect for the financial year
ended 31 December 1999, the proforma consolidated profit before tax and profit after taxation would have been
approximately $295,000 and $(21,000) instead of $430,000 and $79,000 respectively.
(2) Net operating cash flow is defined as net profit after tax with provision for depreciation added back.

27
SUMMARY OF PROFORMA GROUP FINANCIAL INFORMATION

The following selected financial information should be read in conjunction with the full text of this
Prospectus, including the Accountants’ Report set out on pages 109 to 128 of this Prospectus.

Operating Results of the Proforma Group(1)

Financial Year Ended 31 December Unaudited Audited


10 months 10 months
ended ended
31 October 1999 31 October 2000
(S$’000) 1997 1998 1999

Turnover 3,870 6,391 6,929 4,293 15,775


Operating profit before
depreciation, interest &
taxation 235 1,184 408 293 6,013
Other Income — — 186 113 181
Profit before depreciation,
interest & taxation 235 1,184 594 406 6,194
Depreciation (74) (106) (143) (110) (220)
Interest expense (24) (20) (21) (11) (20)
Profit before taxation 137 1,058 430 285 5,954
Taxation (12) (377) (351) (233) (1,596)
Profit after taxation
attributable to shareholders
of the Company(2) 125 681 79 52 4,358
EPS (cents) (3)
0.09 0.47 0.05 0.04 3.01

Notes:-
(1) The financial results of the Proforma Group for the periods under review have been prepared on the basis that the
Proforma Group had been in existence throughout the periods under review.
(2) Had the Service Agreements as described on pages 76 to 77 of this Prospectus been in effect for the financial year
ended 31 December 1999, the profit before taxation, the profit after taxation and EPS for FY1999 would have been
$0.30 million, $(0.02 million) and (0.01) cents respectively. The profit before tax, the profit after taxation and EPS for
period ended 31 October 2000 would have been $5.83 million, $4.27 million and 2.95 cents respectively. The adjusted
price earnings ratio would have been 10.85 times based on the Issue Price of S$0.32.
(3) For comparative purposes, the EPS is calculated using profit after taxation and divided by the pre-flotation share
capital of 144,687,994 Shares.

28
Financial Position of the Proforma Group(1)

Audited
As at 31 December as at
(S$’000) 1997 1998 1999 31 October 2000

Fixed assets 362 332 795 4,726


Preliminary expenses 46 27 9 20
Current assets
Stocks 553 450 648 452
Trade debtors 516 1,739 1,024 3,587
Work-in-progress — — — 3,968
Other debtors, deposits and prepayments 621 506 160 980
Amount due from Directors 68 15 24 —
Fixed deposits 57 60 61 659
Short term notes — — — 500
Cash and bank balances 325 1,469 2,550 298
2,140 4,239 4,467 10,444
Current liabilities
Trade creditors 433 614 1,307 905
Other creditors and accruals 743 1,032 982 1,349
Bank overdraft & bills payable 297 545 575 561
Amount due to Directors — 242 209 —
Proposed dividend — 37 894 1,700
Provision for taxation — 120 427 1,948
Hire purchase creditors — — 80 216
Finance lease creditors — 5 5 4
Term loan due within a year — — — 295
(1,473) (2,595) (4,479) (6,978)

Net current assets/(liabilities) 667 1,644 (12)(2) 3,466


Non-current liabilities — (284) (482) (447)
1,075 1,719 310 7,765

Shareholders’ equity 1,075 1,719 310 7,765

NTA per Share (cents)(3) 0.71 1.17 0.21 5.35

Notes:-
1. The financial positions of the Proforma Group for the periods under review have been prepared on the basis that the
Proforma Group had been in existence throughout the periods under review.
2. Our Group incurred negative working capital of $0.01 million for FY1999 mainly due to an increase in proposed
dividend of $0.86 million.
3. For comparative purposes, the NTA per Share is calculated based on the pre-flotation share capital of 144,687,994
Shares.

29
REVIEW OF RESULTS

The information in this section, except for the historical information, contains forward-looking
statements. These statements are subject to risks and uncertainties. You should not place undue
reliance on these forward-looking statements as our actual results could differ materially. We do not
assume any obligation to publicly release the results of any revision or updates to these forward-
looking statements to reflect future events or unanticipated occurrences. However, we are subject to
the corporate disclosure policy of the SGX-ST Listing Manual.

This discussion and analysis should be read in conjunction with our consolidated financial
statements and the related notes, which are included elsewhere in this Prospectus.

OVERVIEW

Revenue
Our main sources of revenue are as follows:-

Unaudited
10 months 10 months
ended ended
31 October 31 October
FY1997 FY1998 FY1999 1999 2000
$’000 % $’000 % $’000 % $’000 % $’000 %

Designing, installing and


commissioning 3,447 89.1 5,824 91.1 6,489 93.6 3,935 91.7 15,212 96.4
Service and
maintenance 423 10.9 567 8.9 440 6.4 358 8.3 563 3.6
TOTAL REVENUE 3,870 100 6,391 100 6,929 100 4,293 100 15,775 100

Designing, installing and commissioning of water treatment systems and advanced membrane
filtration plants
The majority of our revenue is project-based and these contracts are secured through our marketing
efforts and referrals from our customers as well as engineering consultants and companies. Our
contract price is determined after having budgeted for all cost components, which consist mainly of
material costs and labour costs. Our contract revenue is recognised using the percentage-of-
completion method, measured by reference to the value of work performed to total estimated
contract value.

Service and maintenance


This source of revenue arises after hand-over of a completed system. Customers will either sign a
yearly service contract with us or engage us on an on-call basis. Yearly service contracts account
for approximately 10% of this source of revenue while the balance is from on-call service. The
typical nature of work in a yearly service contract comprises mainly analysis of water quality,
servicing of instruments and checking of system performance. In addition, such servicing may also
involve the changing of consumables, wearable parts and water treatment chemicals, which
constitute about 2-3% of our total revenue.

The main factors affecting our revenue are as follows:-

1. we derive a majority of our revenue from projects. Hence, our revenue will fluctuate with the
number and size of the projects secured and completed;
2. the value of each project is dependent on the range of services required by our customers. For
example, some customers may appoint us to provide a full range of services from design to
construction and maintenance while others may contract us just to build and install the plant;
30
3. the size of our capital base will affect our success in securing projects as this is often one of
the considerations of our potential customers. This will in turn affect our revenue; and
4. any delays in the completion of a project may delay the recognition of the revenue associated
with the project. In addition, being able to deliver a project as scheduled will allow us to
commence or plan for another project quickly.
Please refer to page 21 on “Risk Factors” for more details.

As more than 90% of our revenue is derived from designing, installing and commissioning of plants,
it is less meaningful for our results to be classified by activity. As such, we do not classify our direct
costs and expenses, and thus profit, according to activity.

Direct Costs
Our direct costs comprise mainly material costs and direct labour costs such as salaries and
bonuses.

Material costs
Material costs consist mainly of equipment, materials, component parts for water treatment and
other membrane process systems. Material costs have increased from $1.74 million in FY1997 to
$2.57 million for FY1998 and increased to $3.12 million for FY1999.

Material costs as a percentage of turnover was 45.0%, 46.7% and 45.0% for FY1997, FY1998 and
FY1999 respectively. The turnover in FY1998 had been adjusted from $6.39 million to $5.49 million
after the exclusion of one project with Dandong Synthetic Fiber Co. Ltd as further explained on page
35 of the Prospectus.

For the ten months ended 31 October 2000, material costs accounted for 34.9% of total revenue as
compared to 45.0% in FY1999. This is due to the fact that in FY2000, we manufactured most of the
components instead of subcontracting the manufacturing process, thus allowing us to control and
lower our material costs.

The proportion of components manufactured in-house versus components purchased from third
parties will thus affect our material costs.

Labour costs
Direct labour costs consist of salaries, bonuses and other staff-related costs of engineers,
technicians and contract workers who are working on the projects or providing maintenance
services. Such costs had increased from $0.26 million in FY1997 to $0.38 million and $0.41 million
in FY1998 and FY1999 respectively. The increase was due to an increase in manpower,
corresponding to a higher turnover as we took on more projects in FY1998 and FY1999. For the ten
months ended 31 October 2000, our direct labour costs have reached 172.0% of that for the whole
of FY1999. This was due to our efforts to manufacture most of our components in-house.

Factors that will affect our direct labour costs include:-

1. any delay in the completion of a project will incur additional manpower costs, especially when
we have employed contract workers for the project;
2. inability to retain our trained engineers and technicians for membrane filtration. As we focus on
membrane filtration, a specialised technology of water treatment, we will need to train our
engineers and technicians for an average of 6 and 12 months respectively before they can be
put on a project. If we are unable to retain such trained staff, we have to incur high training
costs for the new employees; and

31
3. any changes in the levies imposed by the Singapore government on the employment of foreign
workers in Singapore which would affect our labour costs. As we employ foreign workers for
our operation in Singapore, any changes in governmental policies that restrict the employment
of foreign workers in Singapore would also affect our labour costs if we have to employ more
locals in Singapore, who are relatively more costly compared to workers from low cost
countries such as India.

Gross Profit Margin


Contracts with fixed prices constitute a significant portion of our revenue. Prior to entering into such
contracts, we have to estimate the number of man-hours and materials required. If our estimates
deviate widely from the actual time and resources required for a project, our actual profit margin will
be affected.

Factors that increase our revenue and/or lower our direct costs will increase our gross profit margin
accordingly. Please refer to pages 30 to 32 for factors affecting our revenue and direct costs.

Expenses

Operating expenses
For the past three financial periods and the ten months ended 31 October 2000, our operating
expenses were as follows:-

Unaudited
10 months 10 months
ended ended
Year Ended 31 December 31 October 31 October
1997 1998 1999 1999 2000
$’000 % $’000 % $’000 % $’000 % $’000 %
Pilot plants and
marketing 124 7.2 355 14.9 461 14.6 280 13.5 91 2.4
R&D 131 7.5 191 8.0 387 12.3 285 13.8 539 14.2
Manpower 508 29.4 699 29.3 679 21.6 480 23.2 1,247 32.9
General and
administration (“G&A”) 868 50.2 1,015 42.5 1,458 46.3 903 43.7 1,677 44.2
Depreciation 74 4.3 106 4.5 143 4.5 110 5.3 220 5.8
Interest 24 1.4 20 0.8 21 0.7 11 0.5 20 0.5
Total 1,729 100 2,386 100 3,149 100 2,069 100 3,794 100

Pilot plants and marketing expenses


These expenses include direct material and manpower costs for building pilot plants, related
transportation and freight costs, and other ancillary expenses such as exhibitions, seminars and
marketing material expenses.

Pilot plants are small-scale plants, normally representing approximately 2% to 5% of the actual
industrial size and are built to test certain new processes or to demonstrate to customers the
capabilities and the effectiveness of the systems before concluding contracts. We will bear the cost
of building pilot plants and any subsequent manpower costs incurred to demonstrate the
performance of pilot plants. Such a marketing approach was essential during our initial entrance to
the market as we intended to serve customers such as VTS Batteries Pte Ltd (“VTS Batteries”) and
Hitachi Chemical Asia Pacific Pte Ltd.

However, not all pilot plants built will result in secured contracts. There may be instances where the
pilot plant results were not satisfactory to the potential customers, or where the customers decide to
abort the planned investment regardless of the pilot test outcome.

32
Whether or not a pilot plant results in a sales contract, its construction costs are expensed when
incurred. These expenses have increased from $0.12 million in FY1997 to $0.36 million in FY1998,
and have further increased to $0.46 million in FY1999. These expenses represented 7.2%, 14.9%
and 14.6% of our total operating expenses for FY1997, FY1998 and FY1999 respectively. The
increase in FY1998 and FY1999 was a result of our emphasis on more pilot testing in these two
years to increase market awareness of our services and capabilities, to have wider applications of
membrane used in different processes and to strive for market share in the membrane filtration
industry.

For the ten months ended 31 October 2000, our pilot plants and marketing expenses declined to
$0.09 million, representing 19.7% of that for the whole of FY1999. Despite this decrease, our
turnover for the same period had reached $15.78 million, an increase of 127.7% over the whole of
FY1999. This was because we have established our presence in this industry and hence, we no
longer need to use pilot plants to market our systems to every customer. In addition, we need not
build every pilot plant from scratch. Over the years, we have built up a database of pilot plants and
we are usually able to modify an existing pilot plant for demonstration to a new customer.

R&D expenses
R&D expenses consist primarily of salaries of R&D personnel, equipment and related material costs.
Our R&D expenses have increased from $0.13 million in FY1997 to $0.19 million in FY1998 and
further increased to $0.39 million in FY1999.

R&D expenses in FY1997 and FY1998 were primarily incurred for membrane applications on
different types of processes. In FY1999, in addition to continuing development of membrane
applications, we embarked on the research of producing specialised application membranes. Going
forward, we expect to spend up to 80% of our R&D expenses on developing a greater variety of
specialised application membranes that are suitable for diverse applications in the pharmaceutical
and biotechnology industries. As a result, for the ten months ended 31 October 2000 we have
already incurred R&D expenses amounting to 139.3% of our R&D expenses for FY1999. We believe
that our R&D work is crucial in ensuring our competitiveness.

As we implement our strategy to develop our R&D capability, especially in membrane technology, we
will need to increase the number of research staff (please refer to page 67 on “Future Plans” for
more details). This will increase our R&D expenses accordingly.

Manpower costs
Manpower costs consist mainly of salaries, bonuses and staff-related costs of general management,
logistics, financial and administrative personnel. As we are in a specialised industry, such costs are
major cost components. Manpower costs have increased from $0.51 million in FY1997 to $0.70
million in FY1998 and remained relatively constant at $0.68 million for FY1999. For the ten months
ended 31 October 2000, we have already incurred indirect manpower costs amounting to 183.7% of
our indirect manpower costs for the whole of FY1999.

General and administrative expenses


Our general and administrative expenses consist mainly of office rental, professional fees, travelling
expenses and provision for doubtful debts. These expenses have increased from $0.87 million in
FY1997 to $1.02 million in FY1998 and to $1.46 million in FY1999. The increase in general and
administrative expenses in FY1999 was mainly due to the general provision and write-off of doubtful
debts amounting to $0.26 million. Of this amount, $0.18 million was due to the write-off of non-trade
bad debts and the balance was for general provision. For the ten months ended 31 October 2000,
we had incurred general and administrative expenses amounting to $1.68 million, representing
115.0% of our general and administrative expenses for FY1999. The increase in our general and
administrative expenses was largely due to an increase in travelling and entertainment expenses.

33
Depreciation of fixed assets
Our Group’s fixed assets consist primarily of leasehold property, motor vehicles and plant and
machinery.

Depreciation of fixed assets of our Group had increased from $0.07 million in FY1997 to $0.11
million in FY1998 due to the purchase of office equipment and furniture when we moved to larger
office premises at Kaki Bukit Industrial Terrace.

For FY1999, depreciation of fixed assets increased to $0.14 million due to our Group’s acquisition
of additional plant and machinery to meet the increase in demand of our products and services.

Depreciation expenses for the ten months ended 31 October 2000 amounted to $0.22 million,
accounting for 153.8% of the depreciation expenses for the whole of FY1999. Depreciation
expenses increased as we acquired more plant and machinery for the manufacture of our
components instead of subcontracting the manufacturing process. The increase was also due to the
acquisition of motor vehicles during that period.

RESULTS OF OPERATIONS
Our segmental results can be classified by customers’ industry; namely electronics, pharmaceutical
and others. As more than 90% of our revenue is derived from designing, installing and
commissioning of plants, it is less meaningful for our results to be classified by activity. As such, we
do not classify our direct costs and expenses, and thus profit, according to activity.

Our segmental results by geographical region are based on the location of our customers, and can
be classified into Singapore, PRC and others.

Review of Past Performance by Customers’ Industry


Unaudited
10 months 10 months
ended ended
Year Ended 31 December 31 October 31 October
1997 1998 1999 1999 2000
$’000 % $’000 % $’000 % $’000 % $’000 %
Turnover
Electronics 1,908 49.3 2,671 41.8 2,277 32.9 1,579 36.8 5,996 38.0
Pharmaceutical 1,427 36.9 159 2.5 2,301 33.2 2,219 51.7 8,169 51.8
Others (1)
535 13.8 3,561 55.7 2,351 33.9 495 11.5 1,610 10.2
Total 3,870 100 6,391 100 6,929 100 4,293 100 15,775 100

PBT
Electronics 41 30.0 64 6.1 140 32.6 109 38.3 1,958 32.9
Pharmaceutical 75 54.7 11 1.0 143 33.2 142 49.8 3,460 58.1
Others (1)
21 15.3 983 92.9 147 34.2 34 11.9 536 9.0
Total 137 100 1,058 100 430 100 285 100 5,954 100

PBT Margin (%)


Electronics 2.1 2.4 6.1 6.9 32.7
Pharmaceutical 5.3 6.9 6.2 6.4 42.4
Others (1)
3.9 27.6 6.3 6.9 33.3
Total 3.5 16.6 6.2 6.6 37.7

Note:-
1. Others include biotechnology, textile, sugar and edible oil refinery, food and beverage, chemical processing, paper and
pulp and battery manufacturing.

34
Review of Past Performance by Geographical Region
Unaudited
10 months 10 months
ended ended
Year Ended 31 December 31 October 31 October
1997 1998 1999 1999 2000
$’000 % $’000 % $’000 % $’000 % $’000 %
Turnover
Singapore 1,756 45.4 2,388 37.4 2,450 35.4 1,731 40.3 8,519 54.0
PRC 1,647 42.5 2,678 41.9 4,147 59.8 2,410 56.1 6,310 40.0
Others (1)
467 12.1 1,325 20.7 332 4.8 152 3.6 946 6.0
Total 3,870 100 6,391 100 6,929 100 4,293 100 15,775 100

PBT
Singapore 38 27.7 37 3.5 140 32.6 113 39.6 3,254 54.7
PRC 79 57.7 966 91.3 274 63.7 159 55.8 2,480 41.6
Others (1)
20 14.6 55 5.2 16 3.7 13 4.6 220 3.7
Total 137 100 1,058 100 430 100 285 100 5,954 100

PBT Margin
Singapore 2.2 1.5 5.7 6.5 38.2
PRC 4.8 36.1 6.6 6.6 39.3
Others (1)
4.3 4.2 4.8 8.6 23.3
Total 3.5 16.6 6.2 6.6 37.7

Note:-
1. Others include Malaysia and Taiwan.

FY1997 to FY1998
For FY1998, turnover increased by 65.1% over FY1997 to $6.39 million. This was due to an
increase in turnover from the electronics industry by 40.0% from $1.91 million in FY1997 to $2.67
million in FY1998. In FY1998, we had secured and completed projects for EPCOS Pte Ltd
(“EPCOS”), Hewlett Packard Singapore (Pte) Ltd (“HP”) and Hyundai Electronics (Shanghai) Co,.
Ltd. Our work for EPCOS also contributed to the increase in sales activities in Singapore from $1.76
million for FY1997 to $2.39 million for FY1998.

In addition, turnover from other industries increased from $0.54 million in FY1997 to $3.56 million in
FY1998 as we secured and commenced a few major projects in FY1998, such as Ramatex Textiles
Industrial Sdn Bhd (“Ramatex”) with a contract value of approximately $1.10 million. This accounted
for the increase in our sales to other regions from $0.47 million to $1.33 million in FY1998. Another
reason for the increase in turnover from other industries was due to the project with Dandong
Synthetic Fiber Co. Ltd (“Dandong”) of about $0.90 million (the “Dandong Project”), which was
completed in FY1997 and project revenue was recognised only in FY1998. The recognition of
revenue was made only in FY1998, instead of in the year of completion, due to uncertainty in
realisation of revenue in the year of project completion. Dandong had experienced difficulties in
paying us the contract sum. In FY1998, we reached an agreement with Dandong to honour the
contract sum (please refer to page 43 on “Credit Policy on Sales and Purchases” for more details).
This also resulted in an increase of our sales to PRC from $1.65 million in FY1997 to $2.68 million
in FY1998.

The increase in turnover was partially offset by the decline in turnover from the pharmaceutical
industry from $1.43 million in FY1997 to $0.16 million in FY1998 as we had completed a non-
recurring $1.20 million project in FY1997 with Jiangsu Jiangan Pharmaceutical Co. Ltd. In addition,
our resources were committed to meet the growth in new projects that we have secured from the
electronics and other industries. Thus, we had not actively sought new projects from the
pharmaceutical industry and the contribution of the pharmaceutical industry to our turnover declined.
35
Our PBT increased from $0.14 million in FY1997 to $1.06 million in FY1998 as a result of the
Dandong Project. Although the project was completed in FY1997, the revenue generated of $0.90
million was recognised in FY1998 due to uncertainty in revenue realisation in the year the project
was completed. The costs associated with this project had been charged in earlier years. Therefore,
the full amount of $0.90 million contributed to the profit for FY1998.

Our operating expenses increased from $1.73 million in FY1997 to $2.39 million in FY1998. The
increase in operating expenses is mainly due to an increase in pilot plants and marketing expenses
of $0.23 million and manpower costs of $0.19 million, corresponding to the increase in turnover in
FY1998.

Our PBT margin increased from 3.5% in FY1997 to 16.6% in FY1998. The increase was mainly due
to the Dandong Project. Had such a non-recurring transaction been excluded from the FY1998
results, the PBT margin would have been 2.5% for FY1998.

FY1998 to FY1999
Turnover for FY1999 increased by 8.4% to $6.93 million. There was an increase in turnover from the
pharmaceutical industry from $0.16 million in FY1998 to $2.30 million in FY1999, due to a new
contract that we secured from Amway (China) Co. Ltd (“Amway”). The contract value amounted to
approximately $4.00 million, of which we had recognised progressive billing of about $2.00 million in
FY1999. As such, our turnover from PRC also increased from $2.68 million in FY1998 to $4.15
million in FY1999.

The increase in turnover was offset, to some extent, by a decline in turnover from the electronics
and other industries. Turnover from the electronics industry decreased marginally from $2.67 million
in FY1998 to $2.28 million in FY1999. The turnover from other industries decreased by $1.21 million
from $3.56 million in FY1998 to $2.35 million in FY1999. However, FY1998 was an exceptional year
due to the recognition of revenue for the Dandong Project. Had the turnover for the Dandong Project
been excluded for FY1998, the decline in turnover from other industries would have been $0.31
million instead, from $2.66 million in FY1998 to $2.35 million in FY1999.

Our sales in Singapore remained stable from FY1998 to FY1999. Sales in other countries
decreased by 74.9% due to the completion of the Ramatex project of $1.10 million in FY1998.

Despite the increase in turnover, our PBT decreased from $1.06 million in FY1998 to $0.43 million
in FY1999. This was mainly due to the decline in PBT from other industries from $0.98 million in
FY1998 to $0.15 million in FY1999. For FY1998, the PBT was exceptionally high due to the
recognition of revenue and profits associated with the Dandong Project, which was completed in
FY1997. If the revenue from the Dandong Project were excluded, the PBT for FY1998 would have
been about $0.16 million and we would have recorded an increase in our PBT of $0.27 million in
FY1999 instead.

Operating expenses increased by $0.76 million from $2.39 million in FY1998 to $3.15 million in
FY1999. This was mainly due to the increase of $0.44 million in general and administrative costs,
largely due to the general provision and write off of doubtful debts of $0.26 million. As mentioned on
page 33, $0.18 million arose from the write-off of non-trade doubtful debts.

PBT margin declined from 16.6% in FY1998 to 6.2% in FY1999. Had the Dandong Project been
excluded for the purpose of analysis, our PBT margin would have shown an increase from 2.5% in
FY1998 to 6.2% in FY1999.

36
Ten months ended 31 October 2000 versus unaudited ten months ended 31 October 1999
For the 10 months ended 31 October 2000, our turnover of $15.78 million surpassed the sales for
the whole of FY1999 by $8.85 million or an increase of 127.7%; and by $11.48 million or an
increase of 267.5% over the ten months ended 31 October 1999. The increase in turnover was
mainly due to an increase in turnover from the pharmaceutical industry from $2.22 million for the ten
months ended 31 October 1999 to $8.17 million for the ten months ended 31 October 2000. This
was mainly attributable to the $4.60 million total contract value secured in March 2000 from Jacobs-
Lend Lease, which was substantially completed as at 31 October 2000. As a result, turnover from
Singapore increased to $8.52 million for the ten months ended 31 October 2000, compared to $1.73
million for the corresponding period in FY1999. The realisation of the balance of the contract value
for Amway’s project that amounted to $2.00 million also contributed to the increase in turnover for
the pharmaceutical industry for the period ended 31 October 2000. This also resulted in an increase
in sales from the PRC market.

In addition, the turnover from the electronics industry also grew from $1.58 million for the ten
months ended 31 October 1999 to $6.00 million for the ten months ended 31 October 2000. This
was mainly attributable to new projects such as EPCOS (phase 5) and WUS Printed Circuit (S) Pte
Ltd in Singapore. In addition, we also secured a project for Gultech (Suzhou) Electronics Co Ltd
(“Gultech”) in PRC with a contract value of $1.5 million. This also partially accounted for the
increase in turnover from PRC to $6.31 million for the ten months ended 31 October 2000,
compared to $2.41 million for the corresponding period in FY1999.

Turnover from other industries also increased from $0.50 million for the ten months ended 31
October 1999 to $1.61 million for the 10 months ended 31 October 2000.

Sales to other countries for the 10 months ended 31 October 2000 were $0.95 million as compared
to $0.15 million for the 10 months ended 31 October 1999. This was mainly due to the increase in
the number of projects secured in Malaysia, such as Malayan Sugar Manufacturing Sdn Bhd with a
contract value of about $0.50 million and Flextronics (Malaysia) Sdn Bhd (“Flextronics”) with a
contract value of about $0.20 million.

Our PBT margin was 37.7% for the period ended 31 October 2000, an increase of 31.1% over the
corresponding period in FY1999. The improvement in our PBT margin was because we (1) began to
manufacture filtration membranes and components used in our plant instead of buying them from
external suppliers, thus leading to cost savings of up to 50%; (2) undertake more fabrication of our
treatment plant in-house leading to cost savings of up to 40%. The total cost savings resulting from
the manufacture of more components in-house amounted to approximately $1.30 million for the ten
months ended 31 October 2000. In addition, the increase in our G&A expenses were proportionally
less than the increase in turnover, resulting in higher margins. Our expenses on building pilot plants
for the first 10 months ended 31 October 2000 amounted to $0.09 million, compared to $0.46 million
for the whole of FY1999 and $0.28 million for the corresponding period in FY1999.

PROFIT ESTIMATE
Barring any unforeseen circumstances, our Directors estimate that our Group will achieve a profit
before tax and profit after tax of $8.72 million and $6.37 million respectively, on a turnover of $20.14
million for FY2000.

Our Directors believe that our Group will be able to achieve the profit estimate as most of our
revenue is secured by existing contracts with our customers. Based on the audited results for the
ten months ended 31 October 2000, our Group had already achieved a turnover, profit before tax
and profit after tax of $15.78 million, $5.95 million and $4.36 million respectively, representing
78.4%, 68.2% and 68.4% of the respective estimates.

37
Our turnover is estimated to increase by 190.6% from $6.93 million in FY1999 to $20.14 million in
FY2000 due to higher demand for water treatment systems from our customers (please see
“Prospects” on page 66 of this Prospectus). A significant part of such increase was derived from
existing customers requiring additional water treatment systems. Our efforts in conducting pilot plant
trials and marketing also yielded additional revenue. We have maintained the level of referrals and
recommendations from our existing clients and engineering consultants and companies. There has
also been an increase in the number of contracts with value of more than $1.00 million in FY2000.

We achieved savings in material costs through the manufacture of components in-house instead of
subcontracting. These savings were offset by more favourable terms granted to our existing
customers for new projects secured in the second half of FY2000 for the purpose of maintaining
goodwill. Consequently, the gross profit and the gross profit margin for FY2000 are estimated to be
in line with that of FY1999. In addition, the increase in operating expenses is less than the increase
in turnover. Pre-tax profit is expected to increase by $8.29 million, in line with the increase in
turnover. Profit after tax is estimated to increase correspondingly by $6.29 million to $6.37 million.

For the ten months ended 31 October 2000, we have achieved profit after tax of $4.36 million. For
the remaining two months of FY2000, we expect to recognise additional profit of $2.01 million based
on the projects secured and completed.

REVIEW OF FINANCIAL POSITION


The following discussion is to be read in conjunction with “Financial Position of the Proforma Group”
on page 29 of this Prospectus.

Fixed Assets
Our Group’s fixed assets consist primarily of leasehold property, motor vehicles, plant and
machinery.

For FY1997 to FY1998, we have no significant capital expenditure and disposal. The increase in net
book value from $0.33 million in FY1998 to $0.80 million in FY1999 was mainly due to the purchase
of motor vehicles and plant and machinery for the expansion of our Group’s business.

For the ten months ended 31 October 2000, we acquired a leasehold property located at 40 Changi
South Street 1 for a cash consideration of $2.80 million. The purchase was financed by our own
cash resources and a term loan (please see page 39 for more details). The property is acquired for
the expansion of our business and is used for office, production and research purposes. Together
with other capital additions, our Group’s fixed asset net book value has accordingly increased by
$3.93 million from $0.80 million as at 31 December 1999 to $4.73 million as at 31 October 2000.

Preliminary expenses
Preliminary expenses for FY1997 to FY1999 relate to expenses incurred by our subsidiary,
Hydrochem Engineering (Shanghai) Co., Ltd (“HES”), which were amortised over three years. In
FY2000, we recorded a preliminary expense for the incorporation of our Company.

Current Assets
Current assets comprise mainly stocks, trade debtors, work-in-progress, other debtors, deposits and
prepayments, fixed deposits, short term notes and cash and bank balances.

Our current assets increased by $2.10 million from $2.14 million in FY1997 to $4.24 million in
FY1998 mainly due to the increase in cash and bank balances, and trade debtors. The increase in
cash and bank balances by $1.14 million from $0.33 million in FY1997 to $1.47 million in FY1998
was mainly due to cash generated from operating profits. Trade debtors increased from $0.52 million
to $1.74 million in FY1998, which was consistent with the increase in number of day sales in trade
debtors from 1.6 months in FY1997 to 3.3 months in FY1998.

38
Current assets increased from $4.24 million in FY1998 to $4.47 million in FY1999. This was
attributed mainly to an increase in cash and bank balances, after accounting for a decrease in trade
debtors. Cash and bank balances increased from $1.47 million in FY1998 to $2.55 million in FY1999
mainly due to an improvement in debt collection, evidenced by the decrease in the number of day
sales in trade debtors from 3.3 months in FY1998 to 1.8 months in FY1999. This has also
contributed to the decrease in trade debtors from $1.74 million in FY1998 to $1.02 million in
FY1999, despite the increase in turnover in FY1999.

As at 31 October 2000, current assets increased by $5.98 million from $4.47 million in FY1999 to
$10.44 million. During this period, we issued new shares to DBS Capital Investments Ltd (“DBS
Capital”) and Gimmill Industrial (Pte) Ltd (“Gimmill”) for cash amounting to $4.80 million (please see
pages 79 to 82 on “Restructuring Exercise” for more details of the Shareholders’ Agreement). The
cash was utilised to finance our business expansion, as indicated by the increase in work-in-
progress by $3.97 million and trade debtors by $2.56 million. The higher trade debtors was also due
to an increase in number of day sales in trade debtors from 1.8 months in FY1999 to 2.3 months
for the ten months ended 31 October 2000. We also utilised cash of about $2.20 million in relation
to the repayment of term loan for purchase of the leasehold property at 40 Changi South Street 1.
In addition, we utilised our cash to invest in short term notes of $0.50 million and placed $0.66
million in fixed deposits.

Current Liabilities
Current liabilities comprise mainly trade creditors, bank overdraft and bills payable, other creditors
and accruals, proposed dividend, and provision for taxation.

Current liabilities increased by $1.13 million from $1.47 million in FY1997 to $2.60 million in
FY1998. This was due primarily to an increase in other creditors and accruals from $0.74 million in
FY1997 to $1.03 million in FY1998 as a result of higher accrued operating expenses. Bank overdraft
and bills payable increased from $0.30 million in FY1997 to $0.55 million in FY1998 and trade
creditors increased from $0.43 million in FY1997 to $0.61 million in FY1998. The overall increase in
bills payable and trade creditors was in line with the increased purchase of stocks and the
expansion of operations. Increase in provision for taxation by $0.12 million was due to higher net
profits for FY1998.

In FY1999, current liabilities increased by $1.88 million to $4.48 million. This was attributable mainly
to a $0.70 million increase in trade creditors. Bank overdraft and bills payable also increased by
$0.03 million to $0.58 million. The increase in trade creditors and bills payable was in line with the
increase in the stock balances as at the end of FY1999 to support the Group’s sales. This was also
due to an increase in the number of days purchases in trade creditors from 2.9 months in FY1998
to 5.0 months in FY1999 because proportionately more purchases were made in last quarter of
FY1999. Creditor’s payment period increased despite an increase in cash and bank balances as
cash was used by Hydrochem (S) Pte Ltd (“HSPL”) for the purchase of the 50.5% equity interest in
Hydrochem Engineering (S) Pte Ltd (“HEPL”). Our Group also declared a net dividend of $0.89
million for FY1999.

Current liabilities increased during the ten months ended 31 October 2000 by $2.50 million to $6.98
million. This was due mainly to an increase in provision of dividend by $0.81 million and an increase
in provision for taxation by $1.52 million due to higher profits for the ten months ended 31 October
2000. In addition, we have an outstanding term loan of $0.30 million, which was due within a year
as at 31 October 2000, in relation to the purchase of a leasehold property at 40 Changi South
Street 1. The increases were partially offset by the decrease in trade creditors by $0.40 million to
$0.91 million and decrease in bank overdraft and bills payable by $0.01 million. This was in line with
the lower purchase of stocks and decrease in number of days purchases in trade creditors from 5.0
months in FY1999 to 1.6 months for the ten months ended 31 October 2000.

39
Non-current liabilities

Non-current liabilities comprise leasing and hire purchase creditors and deferred taxation.

There were no non-current liabilities in FY1997. In FY1998, there were non-current liabilities of
$0.28 million due to deferred tax liabilities. In FY1999, non-current liabilities increased by $0.20
million to $0.48 million. For the period ended 31 October 2000, non-current liabilities decreased
marginally from $0.48 million for FY1999 to $0.45 million as at 31 October 2000.

Shareholders’ equity
Shareholders’ equity increased from $1.08 million in FY1997 to $1.72 million in FY1998. This was in
line with the retention of our Group’s profit after taxation for the year. A net dividend of $0.04 million
was declared in FY1998. In FY1999, shareholders’ equity decreased by $1.41 million to $0.31
million. This was mainly a result of declaration of net dividend amounting to $0.89 million.

Shareholders’ equity increased from $0.31 million in FY1999 to $7.77 million during the period
ended 31 October 2000 pursuant to the issue of shares by our Company for cash amounting to
$4.80 million and retained profits for the period amounting to $2.66 million (after declaring an interim
dividend of $1.70 million for the first six months ended 30 June 2000).

Taxation
In FY1997, there was no provision for taxation as we had tax losses carried forward from earlier
years. Provision for taxation increased from $0.12 million in FY1998 to $0.43 million in FY1999. Our
subsidiary in Shanghai, HES, had incurred net losses in FY1999 while our Singapore subsidiaries
recorded profits and were liable to pay taxes. As the tax losses for HES could not be used to offset
the tax liabilities of the profitable subsidiaries, our provision for taxation increased despite the
decrease in our PBT from $1.06 million in FY1998 to $0.43 million in FY1999. For the ten months
ended 31 October 2000, provision for taxation increased to $1.95 million, in line with the higher PBT
of $5.95 million recorded for that period.

Liquidity and Capital Resources


Since our inception, we have funded our operations through operating cash flow, existing and new
shareholders and supplemented by banking facilities.

The cash generated from our operations are mainly from progress billing of contracts. Our principal
uses of cash have been for meeting expenses such as purchase of materials, staff-related expenses
and selling and administrative costs. Cash generated from operations, borrowings from financial
institutions and admission of new shareholders finance our capital expenditure and working capital
requirement.

In FY1999, we experienced a net current liabilities position largely due to the declaration of
dividends amounting to $0.89 million. However, considering our existing banking facilities, we are of
the opinion that we have sufficient working capital for our present operational requirements. In
addition, we have obtained additional banking facilities of $2.20 million, which are secured by our
leasehold property at 40 Changi South Street 1 and joint and several personal guarantees from our
Directors, Ms Lum Ooi Lin Olivia and Dr Deirdre Murugasu.

40
As at 31 October 2000, our working capital stood at $3.47 million compared to $(0.01) million at the
end of FY1999. This was attributable to a cash injection of $4.80 million from the issuance of new
shares to DBS Capital and Gimmill. These cash balances were subsequently used to finance
business growth, invest in short term notes of $0.50 million and fixed deposits of $0.66 million. We
have also utilised cash of about $2.00 million to partially repay the banking facilities which are
secured by our leasehold property. The cash injection by the two Strategic Investors is subject to
certain conditions (please see pages 81 to 82 for details). Specifically, the agreement stipulates that
should the Issue Price of our Shares at the Invitation be below an amount of approximately $0.20
per Share, we will have to pay back an amount to the Strategic Investors, based on an agreed
formula. On the other hand, if the Issue Price is above an amount of approximately $0.20 per Share,
we will receive a top-up payment from the two Strategic Investors, based on an agreed formula.
Based on the actual Issue Price of $0.32 per Share, we will receive a total amount of approximately
$2.60 million from the two Strategic Investors (please refer to pages 81 to 82 for details).

Subsequent to the Invitation, DBS Bank is agreeable to releasing the personal guarantees from our
Directors, Ms Lum Ooi Lin Olivia and Dr Deirdre Murugasu, to secure our Group’s banking facilities.
These will be substituted by the corporate guarantee of our Company. We do not foresee that our
existing facilities will be affected. Our Directors are confident that with our Company’s listing status
and its strengthened financial position from the expected net proceeds from the issue of the New
Shares, our credit rating should improve and we should be able to secure further or alternative
sources of credit facilities at the then prevailing interest rates should the above mentioned facilities
be terminated.

CAPITALISATION AND INDEBTEDNESS


The following table shows our cash and cash equivalents and capitalisation as at 31 October 2000:-
1. on an actual basis; and
2. as adjusted for the issue of Shares to our two Strategic Investors and from the Invitation.

You should read this table in conjunction with our financial statements and the related notes
included in this Prospectus.
As at 31 October 2000
Actual Adjusted
$’000 $’000

Cash and cash equivalents 957 10,365

Hire purchase creditors(1) (369) (369)


Finance lease creditors (1)
(13) (13)
Term loan (2)
(295) (295)
Shareholders’ equity:
Issued and paid up capital 3,042 8,484
Share premium 4,192 8,158
Revenue reserve 1,254 1,254
Translation reserve (2) (2)
Total Shareholders’ Equity 8,486 17,894
Total Capitalisation 9,163 18,571
Notes:
(1) Please refer to pages 124 to 125 of the Accountants’ Report for more details.
(2) Term loan was for the purchase of leasehold property 40 Changi South Street 1. Please refer to page 125 of the
Accountants’ Report for more details.

41
DIVIDENDS
Our Directors have declared an interim dividend of $1.70 million for the first six months ended 30
June 2000 to our existing shareholders. The declaration and payment of dividends will be
determined at the sole discretion of the Board subject to shareholders’ approval, and will depend
upon our Group’s operating results, financial conditions, other cash requirements including capital
expenditures, the terms of its borrowing arrangements (if any), and other factors deemed relevant by
our Directors. We currently do not have any dividend policy. Therefore, there can be no assurance
that dividends will be paid in the future. We intend to distribute another interim dividend of up to
12% of profit after tax (of which profit after tax is net of the first interim dividend of $1.70 million) to
our existing shareholders, as well as new shareholders after the Invitation.

DILUTION
Dilution is the amount by which the Issue Price paid by the purchasers of our Shares in this
Invitation exceeds our NTA per Share after the Invitation. The audited NTA per Share of our Group
as at 31 October 2000 before adjusting for the net proceeds from the Invitation and based on pre-
Invitation issued and paid-up share capital of 144,687,994 Shares was 5.35 cents.

On 3 June 2000, our Strategic Investors, DBS Capital and Gimmill, paid $0.7889096 per share for
3,042,174 ordinary shares of $0.10 each. Subsequently, on 21 June 2000, an agreement was
entered into by our Company and the Strategic Investors, which provides for the cost of investment
to each of these Strategic Investor in our Company to be at a 20% discount to the Issue Price
(please refer to pages 79 to 82 on “Restructuring Exercise” for more details).

Pursuant to the Invitation in respect of 25,000,000 New Shares at the Issue Price of $0.32 per
Share, our Group’s NTA per Share after adjusting for the top-up payment from our two Strategic
Investors and the estimated net proceeds from the Invitation and based on the post-Invitation issued
and paid-up share capital of 169,687,994 Shares would have been 10.11 cents. This represents an
immediate increase in NTA per Share of 4.76 cents per Share to our existing shareholders and an
immediate dilution in NTA per Share of 21.89 cents per Share to our new investors.

The following table illustrates this per Share dilution:-

As at 31 October 2000 Cents

Issue price 32.00

NTA per Share based on the pre-Invitation issued Share capital of


144,687,994 Shares 5.35

NTA per Share after the top-up by our two Strategic Investors and the Invitation 10.11

Increase in NTA per Share attributable to existing shareholders 4.76

Dilution in NTA per Share to new investors 21.89

The following table summarises as at the date of this Prospectus, the total number of Shares Issued
by us, the total consideration paid to us and the average price paid per Share by our existing
shareholders and by our new public investors in the Invitation.

Average price
No. of Consideration per Share
Shares % ($’000) % (cents)

Existing shareholders 144,687,994 85.3 7,234 47.5 5.00


New public investors 25,000,000 14.7 8,000 52.5 32.00
Total 169,687,994 100.0 15,234 100.0

42
CREDIT POLICY ON SALES AND PURCHASES
For our project contracts, depending on the contractual terms, there could be an initial down
payment of 20% to 30%, with another 30% to 50% payment upon delivery of equipment and before
installation, and the balance to be settled upon installation and commissioning. The average number
of day sales in trade debtors for the past three financial years from FY1997 to FY1999 is 2.2
months.

In November 2000, we introduced a new “build, own, operate and transfer” arrangement with one
customer, under which we will build the plant at the premises of the customer. We own the plant and
upon its commissioning, we will operate the plant and our customer will purchase the treated water
from us. The contract is for a five-year period. At the end of each year, the customer has the option
to purchase the plant from us at a pre-specified price. At the end of the five years, the customer has
to purchase the plant from us. Under this arrangement, we do not collect any down payment from
our customer. We will, however, earn income from the sale of treated water. There is a specified
minimum amount that the customer has to pay us on a monthly basis, regardless of the actual
amount of water purchased from us during the month. Full payment is due to us only upon the sale
of the plant to our customer. However, we require our customer to issue a banker’s guarantee in our
favour to cover our estimated costs for the project. We intend to introduce this arrangement to more
customers, in accordance with their needs.

Normally, we offer a guarantee of one year and we provide 2% of the contract sum as warranty
expense. For the PRC projects, we request a letter of credit to secure the contract sum except for
multi-national corporations (“MNCs”). For the past three financial years, we have been able to
maintain our doubtful debts at less than 5% of our turnover.

In FY1997, our collections for a project that we had completed for one of our customers, Dandong,
were delayed as Dandong faced cash flow problems. Subsequently, in FY1998, Dandong managed
to pay the full amount of the outstanding sum to us.

It is our practice to monitor and follow up on the payment status of our customers. We may consider
legal action if a debtor fails to respond to our payment request followed by a letter of demand. For
the last three financial years, there were no such legal actions.

We have typically 30 to 90 days payment terms from our suppliers.

FOREIGN EXCHANGE EXPOSURE


Please refer to “Risk Factors” on page 22 for the discussion on our exposure to foreign exchange
fluctuations. The proportion of our turnover and purchases and expenses in the respective foreign
currency are as follows:-

Turnover
10 months
ended
31 October
FY1997 FY1998 FY1999 2000
% % % %

Singapore Dollar 58.3 57.4 28.3 52.4


US Dollar 37.8 37.7 53.5 41.8
RMB 3.9 4.9 18.2 5.8

Total 100.0 100.0 100.0 100.0

43
Purchases and expenses
10 months
ended
31 October
FY1997 FY1998 FY1999 2000
% % % %

Singapore 64.1 79.6 67.6 60.5


US Dollar 31.1 13.8 24.1 29.3
RMB 3.0 6.6 8.3 9.6

Others(1) 1.8 0.0 0.0 0.6

Total 100.0 100.0 100.0 100.0

Note:
(1) Others include Malaysian ringgit, Deutschemark and Italian lira.

Our net foreign exchange gain or loss as a proportion of turnover and PBT for the last three
financial years and for the ten months ended 31 October 2000 are as follows:-
10 months
ended
31 October
FY1997 FY1998 FY1999 2000

Net foreign exchange gain (loss) ($’000) 27 (9) (9) 42


Percentage of turnover 0.7% (0.1%) (0.1%) 0.3%
Percentage of PBT 19.7% (0.9%) (2.1%) 0.7%

We provide quotations to our customers mainly in S$ and US$ and make purchases also mainly in
S$ and US$. In FY1999, the proportion of our turnover in S$ and US$ was 28.3% and 53.5%
respectively while the proportion of purchases and expenses in S$ and US$ was 67.6% and 24.1%
respectively. For the ten months ended 31 October 2000, the proportion of our turnover in S$ and
US$ was 52.4% and 41.8% respectively while the proportion of purchases and expenses in S$ and
US$ was 60.5% and 29.3% respectively. Any significant fluctuation in foreign exchange rates during
the course of our projects will have an impact on our Group’s profits. For example, profits derived
from our projects denominated in US$ would be lower in S$ should there be any depreciation in the
exchange rate of US$ against S$.

We have not used any financial hedging instruments to manage our foreign exchange risk as our
foreign exchange gain/losses over the past three financial years had been relatively low. We will
continue to monitor our foreign exchange exposure in the future and will consider hedging any
material foreign exchange exposure should the need arise.

44
SHARE CAPITAL

At an Extraordinary General Meeting held on 18 December 2000, our shareholders approved, inter
alia, the following:-

(i) the sub-division of each ordinary share of $0.10 in our authorised as well as our issued and
paid-up share capital into two ordinary shares of $0.05 each (the “Stock Split”);

(ii) the capitalisation of $4,192,225 from share premium by way of a bonus issue of 83,844,500
Shares credited as fully paid to our existing shareholders (the “Bonus Issue”);

(iii) our conversion into a public limited company and the change of our name to “Hyflux Ltd”;

(iv) the adoption of a new set of Articles of Association;

(v) the issue of 25,000,000 New Shares pursuant to the Invitation. The New Shares, when issued
and fully paid, will rank pari passu in all respects with our existing Shares; and

(vi) the authorisation of our Directors, pursuant to Section 161 of the Act, to issue Shares in our
Company (whether by way of rights, bonus or otherwise) at any time and upon such terms and
conditions and for such purposes and to such persons as our Directors may in their absolute
discretion deem fit provided that the aggregate number of Shares issued pursuant to such
authority shall not exceed 50% of the issued share capital of our Company immediately prior
to the proposed issue and provided that the aggregate number of such Shares to be issued
other than on a pro rata basis to the existing shareholders shall not exceed 20% of the issued
share capital of our Company immediately prior to the proposed issue, and, unless revoked or
varied by our Company in general meeting, such authority shall continue in force until the
conclusion of the next Annual General Meeting of our Company or the date by which the next
Annual General Meeting of our Company is required by law to be held, whichever is the
earlier.

Capitalisation
Save as fully described under the section titled “General and Statutory Information - Share Capital”,
details of the changes in the issued and paid-up capital of the Company since 31 March 2000 are
summarised as follows:-

Number of $
Shares
Issued and fully paid-up ordinary shares of $0.10 each
as at 31 March 2000 20 2.00
Issue of Shares pursuant to Restructuring Exercise and to
Strategic Investors 30,421,726 3,042,172.60
30,421,746 3,042,174.60
Subdivision of one ordinary share of $0.10 each into two
shares of $0.05 each 60,843,492 3,042,174.60
New ordinary shares of $0.05 each pursuant to the Bonus
Issue 83,844,500 4,192,225.00
Issue of Shares pursuant to Shareholders’ Agreement 2 0.10

Total issued and paid-up share capital prior to Invitation 144,687,994 7,234,399.70
Issue of New Shares pursuant to Invitation 25,000,000 1,250,000.00
Issued and paid-up capital after the Invitation 169,687,994 8,484,399.70

45
The authorised share capital and the shareholders’ funds of our Company as at 31 October 2000,
after the Restructuring Exercise and the issue of New Shares are set out below. These statements
should be read in conjunction with the Accountant’s Report set out in pages 109 to 128 of this
Prospectus.

After
Restructuring
Exercise, issue
As at to Strategic
31 October Investors and After
2000 Bonus Issue Invitation
($) ($) ($)

Authorised Share Capital


Ordinary shares of $0.10 each 50,000,000 — —
Ordinary shares of $0.05 each — 50,000,000 50,000,000

Shareholders’ Funds
Share capital 3,042,174 7,234,399 8,484,399
Share premium 4,192,225 (1)
2,608,024 8,158,024(2)
7,234,399 9,842,423 16,642,423
Notes:-
(1) This share premium arose from the issue of 435,840 fully paid ordinary shares of $0.10 each at a premium of $3.65
per share for our Company’s acquisition of 49.5% equity interest in HEPL and the issue of 6,084,348 ordinary shares
to DBS Capital and Gimmill (3,042,174 ordinary shares each) at a premium of $0.689 per share, net of expenses of
$550 and an issue of bonus shares via capitalisation of share premium amounting to $1,590,156.
(2) Net issue proceeds of approximately $6.80 million less par value of the New Shares and taking into account Note (1)
above and the bonus issue via capitalisation of share premium amounting to $4,192,225.

46
HISTORY

We started operations with the incorporation of Hydrochem (S) Pte Ltd (“HSPL”) on 30 June 1989.
Founded by our Managing Director, Ms Olivia Lum and a few other minority shareholders, the
principal activity of HSPL then was to provide general water treatment, using traditional water
treatment technologies such as media filtration, chemical treatment and softening of raw water for
potable water and boiler/cooling tower water usage. We started business at Block 9012, Tampines
Industrial Park with a 1,200 sq ft office.

In 1992, we obtained the distribution rights from Membrane Products Kiryat Weizman Ltd (“MPW”),
to distribute their membranes and membrane filtration plants to industrial customers. Through these
distribution rights, we acquired from MPW the knowledge to install the membranes and membrane
filtration plants, which we subsequently used in our water treatment processes. Through our own
R&D, we were able to use the membrane filtration technology for other processes such as removing
protein from fermentation broths in pharmaceutical plants. We believe that we are the first to
introduce the process for this particular use in PRC.

In 1994, HEPL and HES were incorporated to penetrate the PRC market. Our presence in Shanghai
allowed us to service our existing customers in Singapore such as MMI Holdings Ltd and Goldtron
Limited who were setting up manufacturing facilities in PRC. In the same year, we built our first hot
water recycling plant for VTS Batteries using the membrane filtration technology acquired from MPW
in 1992. In this year, we also moved from Tampines Industrial Park to a larger premise at Citimac
Industrial Complex at Macpherson which had a built-in area of 3,000 sq ft, as we expanded our
operations.

In 1995 and 1996, we concentrated on building brand awareness for our services by building
industrial-sized pilot plants to demonstrate the capability and effectiveness of membrane filtration
technology which we believe was not practised in the industry then. We conducted more than 100
pilot plant trials of membrane applications and water treatment technologies for the pharmaceutical,
food and electronics industries.

In 1997, we provided our first integrated water treatment system for the then Siemens Matsushita
Components Pte Ltd (“Siemens”, now known as EPCOS) manufacturing facility in Kallang. We
installed the deionisation (“DI”) water system, water system for dicing machines, chemical supply
and collection system and wastewater treatment system. We also installed for Siemens the
distribution piping from our plants to the point-of-use including equipment hook-up. This capability to
provide hook-up services enhanced our range of services and enabled us to position ourselves as
an integrated water treatment provider. As our business expanded, we shifted to a larger factory
space at 34 Kaki Bukit Industrial Terrace in December 1997 and eventually extended to another unit
at 43 Kaki Bukit Industrial Terrace one and a half years later.

In 1998, we saw our efforts in building pilot plants pay off as we secured larger projects such as the
6,000 m3 per day river water treatment plant for Ramatex in Malaysia. In November of that year, we
received a grant from the National Science and Technology Board (“NSTB”) under the Research and
Development Assistance Scheme (“RDAS”) to carry out research on (1) the purification of industrial
water as an alternative source to city water for industrial uses and (2) the ozonation method for the
treatment of dye effluent and refractory organics.

In November 1998, we also signed an agreement with E-Cell Corporation (“E-Cell”), a subsidiary of
General Electric International to purchase E-Cell manufactured equipment. Pursuant to the signing
of this agreement, E-Cell transferred to us the know-how to build an Electro-Deionisation (“EDI”)
system for chemicals-free deionisation of water using an E-cell component called an E-cell stack.
This enables us to offer a more comprehensive range of systems to our customers.

47
In 1999, we secured a contract from Amway, a pharmaceutical company in PRC, to construct a pure
water treatment system and a high purity piping system in their Guangzhou manufacturing plant. In
the same year, we also commenced R&D to develop our own filtration membranes. This allows us
to customise the water treatment systems to the needs of our customers and also to control the
quality and costs of filtration membranes, which is the key component in our systems. Our in-house
manufactured membranes saw their first industrial application in March 2000 in the Jurong Bird Park
sewage water recycling project and the wastewater treatment of textile dyeing water in Suzhou for
Ramatex Industrial (Suzhou) Ltd (“Ramatex Suzhou”).

In March 2000, we received another grant from the Economic Development Board under the
Innovative Development Scheme (“IDS) for the development of membranes. This scheme spans over
a period of three (3) years and its aim is to encourage development work by subsidising some of
the costs such as salaries of our R&D staff.

With effect from October 2000, we commenced operations from our new premises at 40 Changi
South Street 1 with a built-in area of 17,000 sq ft as our operations continued to grow and we
needed more factory and office space.

In November 2000, we incorporated a new subsidiary, Hyflux Engineering Pte Ltd (“HFPL”). As part
of our marketing efforts, we introduced a new arrangement with one customer, under which we will
build our plant in the premises of the customer. After commissioning, we will operate the plant for a
period of five years, during which our customer will purchase the treated water from us. At the end
of the five years, our customer will have to purchase the plant from us (please refer to page 43 on
“Credit Policy on Sales and Purchases” for more details). HFPL is formed to handle such projects.

Hyflux Ltd was incorporated on 31 March 2000 to assume the role of an investment holding
company for our Group.

48
BUSINESS

PRINCIPAL ACTIVITIES
Our principal activities are project-based and comprise:-

(a) water treatment which involves water purification, wastewater treatment and water recycling
utilising mainly membrane filtration technology;

(b) advanced membrane filtration for process streams; and

(c) designing, engineering, installing, commissioning and maintenance of high purity piping
systems and equipment hook-up.

Water Treatment
For water treatment processes, we carry out water purification, wastewater treatment, water
recycling and advanced membrane filtration. The water treatment services we provide could be any
one of these processes or a combination of some or all of the processes.

Below is a diagrammatic illustration of our water treatment processes:-

Raw Water
City Water
(From river, sea, lake,
ground, etc)

DI/ Ultra-Pure Production


Raw Water
Water ("UPW") (Equipment
Treatment
Treatment High Purity Hook-up)
Piping

Process
Water
Recovery
Recycling
(Membrane
filtration)

Drainage
Waste Water Piping
Treatment

Discharge of Treated Waste


Water
(To sewer, sea, river, etc)

Water Purification
Raw water (such as river water, seawater, well water and rainwater) is purified from its various
sources for consumption and industrial applications. Additional tertiary treatment using membrane
filtration technology and ion exchanges will produce deionised water or even ultra-pure water for use
in industries such as electronics, pharmaceuticals and biotechnology.

The technologies that are adopted by us for water purification include:-


(a) membrane filtration technology;
(b) sand filtration;

49
(c) multi-stage filtration;
(d) activated carbon filtration;
(e) ion exchanges;
(f) degasification;
(g) disinfection by ultraviolet light, ozone or chlorine;
(h) coagulation;
(i) flocculation; and
(j) sedimentation.

Wastewater Treatment
Treatment plants are built to process the wastewater of industries so that such water may be
discharged in accordance with the standards of the relevant regulatory authorities in the respective
countries in which our clients operate. Besides treatment, we also review our customers’ water
streams and recommend ways to minimise waste effluent and the number of subsequent treatments.

We use the following technologies for wastewater treatment:-

(a) pH adjustment;
(b) screening;
(c) sedimentation;
(d) granular media filtration;
(e) biological treatment;
(f) dissolved air flotation;
(g) sludge dewatering;
(h) membrane filtration;
(i) advanced chemical oxidation;
(j) oil and grease removal; and
(k) disinfection.

Water Recycling
Water recycling is the recovery of water for reuse. For companies that use substantial volumes of
water, our water treatment systems assist them to recycle their wastewater. Depending on the
characteristics of the wastewater, we can recover between 50% to 90% of the wastewater for reuse
using mainly membrane filtration technology.

Our water recycling processes are mainly utilised in our Singapore projects. Currently, the main
source of city grade water for industries in Singapore is from the Public Utilities Board (“PUB”). This
water, although excellent in quality, is limited and costs S$2.12 per m3 as at 1 July 2000 (The
Sunday Times 25 June 2000). To ease the demand for city grade water by the industries, the
Ministry of Environment (“ENV”) has set up a supplementary source of water in the Jurong Industrial
Estate by setting up the Jurong Industrial Water Works (the “Works”). The Works treats the final
effluent from the Ulu Pandan Sewage Treatment Works and has an original designed capacity of
45,000 m3 per day which was increased to 125,000 m3 since year 2000 (brochure by the ENV
entitled “Welcome to Jurong Industrial Water Works”). This water is cheap, at S$0.40 per m3, and
can be used for washing and other general purposes. However, because of its lower quality, some
industries such as the food and beverage and pharmaceutical industries are unable to use this
water for their manufacturing processes. Using our water treatment systems, our customers are able
to purify such industrial water to city grade quality for as low as 55% of the cost of city grade water
charged by PUB (including the cost of industrial water).

50
Advanced Membrane Filtration
In advanced membrane filtration, we utilise advanced membrane technology to recover or purify
products such as antibiotics, Vitamin C, dyes and urea in process streams. Membrane filtration
involves four physical separation processes: purification, recovery, concentration and fractionation.
We would select the appropriate type of membranes depending on the needs of our customers.
Currently, we are able to manufacture some of the membranes used in our advanced membrane
filtration plants.

The advantages of advanced membrane filtration are that customers are able to improve yield as a
result of less wastage and save cost on energy and space as the plant is smaller in size compared
to other conventional methods used.

Purification
This is the removal of unwanted elements from the useful material. In membrane separation, the
purification is carried out by the filtration process. The extent of purity and therefore the type of
membranes used depend on the requirements of our customers.

Recovery
Recovery is the percentage of useful material gained from the feed stream expressed as follows:-

Amount in the permeate or the concentrate


Recovery = × 100%
Amount in the feed

The useful material may be the permeate or the concentrate.

Concentration
This is the removal of liquid from the suspension or solution by membrane filtration process. The
advantage of using membranes in concentration, as opposed to distillation, is that the solution need
not undergo any phase changes, thus ensuring no change in the physical and chemical nature of
the concentrated products. This is extremely useful in the bio-pharmaceutical industries as the
concentration of organics are susceptible to heat and will be destroyed in distillation.

Fractionation
This is the separation of materials from the homogenous mixture or from the common parental
source. Membranes are extensively used for this application in the bio-pharmaceutical and food
industries.

Examples of applications of advanced membrane filtration are the removal of proteins from
fermentation streams for the pharmaceutical industry, recovery and purification of acids and
alkalines in Cleaning-in-place (“CIP”) streams in the food and pharmaceutical industries and the
decolourisation of textile waste streams.

As an example of decolourisation of textile waste streams, we have built a wastewater treatment


plant for Ramatex Suzhou. We used a combination of our in-house manufactured membranes with
other membranes to remove suspended solids such as fibres, insoluble additives, dissolved dyes,
divalent salts and organics. The volume of solid sludge generated is minimised and the treated
water is suitable for recycling.

51
High Purity Piping Systems And Equipment Hook-up
As an integrated service provider, we not only treat water but also design, build, install, commission
and maintain water treatment systems. After the water treatment process, especially in the case of
ultra-pure water, it is important that such treated water is delivered through water systems to the
point-of-use in an appropriate medium to prevent contamination. The water must also be delivered
in a controlled manner to ensure the desired pressure and flow. Our work in this area includes the
following:-

High-purity piping systems


We design, engineer and install high-purity piping systems to convey the extremely pure products
such as water, gases and chemicals required to the production area. Special materials such as
Polyvinylidene Floride (“PVDF”), Perfluoroalkoxy (“PFA”), electro-polished stainless steel and
polypropylene together with compatible fittings and valves are used so as to prevent contamination
and leaching of the contact surface. Trained and skilled installation teams operating appropriate
welding equipment are deployed to carry out the construction to ensure a defect-free installation.
Our installation is documented and may be used by the relevant authorities for verification when
necessary.

Equipment hook-up
Most advanced production equipment and machinery employed in the microelectronics and
pharmaceutical manufacturing processes require the supply of several types of services such as
compressed air, specialty gases, cooling water, ultra-pure water and vacuum for their operations.
Proper hooking-up between the distribution piping and the equipment are crucial to guarantee
optimised functions. Customised controls and instrumentation are used to properly monitor and
operate them. We have a team of 20 specially trained technicians and engineers to provide this
service.

OUR WORK PROCESS


All our water treatment systems are handled by our engineering department in our premises under
strict quality controls. Our engineering department of about 75 consists of seven (7) sections as
follows:-

Engineering Department

Process Service Project Electrical Production Design QA/QC


Section Section Section Section Section Section Section

The following is our work process which is carried out for each of our projects under regular quality
control and checks to ensure that all materials, procedures and work are executed in accordance
with the customer’s internal good manufacturing practices and quality requirements.

52
Design
After understanding and clarifying with our customers on their requirements and specifications, our
process and design engineers from our Process Section will produce a detailed Process and
Instrumentation Diagram together with Functional Design Specifications of the proposed treatment
system. These will be checked and approved internally by our manager of the Process Section
before submission to our customer or their consultants for confirmation. Once these diagrams and
specifications are approved, the Process Section together with the Electrical Section will produce the
General Arrangement Layout, the piping and electrical drawings and bill of materials plus data
sheets. Our Design Section will also produce the construction drawings of individual equipment to
be fabricated and assembled. All these will be carried out in accordance with the overall project
schedule and timetable derived at the start of the project.

Procurement
Based on the materials prepared at the design stage, our purchasing officers of our Purchasing
Department will send out enquiries and technical specifications of all relevant components and
equipment to at least three vendors. All quotations received will be assessed and evaluated together
with the Project Manager from our Project Section. The main criteria for evaluation will be the
appropriateness of the product, its cost-competitiveness, delivery, quality and after-sales support.
Final negotiations will be conducted with the eventual selected vendor and the purchasing officer will
issue the purchase order with agreed terms and conditions. The purchasing officer will then track the
delivery schedule of goods ordered and carry out visual inspection of the delivered goods with the
assistance of the Project Manager or Engineer. The delivered goods are either put into our store or
issued directly to the Production or Project Section.

Fabrication and Assembly


For systems which are fabricated in-house, our Production Section takes over after the procurement.
The Production Superintendent will study in detail the relevant drawings, bill of materials and
timetable prepared by the Design Section before executing the manpower and resource planning. A
method statement and the construction sequence are prepared before any physical work is carried
out. All materials and components received are also inspected at this stage before the
commencement of the fabrication and assembly works. Regular inspection by our Quality Assurance
and Control Section (“QA/QC Department”) will be executed to ensure zero defects due to
workmanship. Inspection is executed visually or by non-destructive testing, such as X-rays and dye
penetrant tests, both of which are used to check the integrity of the weldings. Pre-delivery Inspection
will be jointly conducted with the Project Manager, the Designer and the QA officer before the
assembled equipment are delivered to site.

Installation
The Project Manager of each project will carry out a site survey and study all relevant drawings and
documentation before producing his own installation schedule and manpower and resource planning.
He will also prepare the method statement and sequence of construction and provide input or
feedback to the Design Engineer. At the appropriate time, the installation team will be despatched to
site to prepare for the delivery of the equipment. The installation team will install all the equipment,
piping, electrical and pneumatic connections in accordance with the site requirements and technical
specifications. Regular coordination and progress meetings will also be carried out with the
customer, their engineering consultants and other sub-contractors. A pre-commissioning inspection
will be conducted with our Commissioning Engineer and any defects will be rectified.

53
Testing and Commissioning
An initial visual inspection will first be carried out before the commencement of testing of individual
equipment. The mechanical, electrical, instrumentation and process performances of each
equipment is first tested and verified by the Commissioning Engineer of the Process Section before
the performance of the whole plant is tested. Upon the successful testing and commissioning of the
whole plant, the Commissioning Engineer will then compile the Owner’s Manual comprising the
Operation and Maintenance Instructions. This will be handed to the customer and at the same time
the operation and maintenance training will be conducted by our Process Section for the operators
and facilities staff of the customer. Our plants are also subject to performance verification by our
customers. Verification by external parties is not required, unless specifically required by our
customers. For example, we have engaged SETSCO Services Pte Ltd to provide inspection and
testing services on the process pipelines that we have installed. Both classroom and hands-on plant
training will be conducted before the final hand-over of the whole plant.

Service and Maintenance


We provide a one year warranty on all our water treatment systems. Our service and maintenance
team from our Service Section will follow-up with the operational and servicing aspects of the plant
during this period. Very often, they also assist the Commissioning Engineer during the training
phase and after hand-over, they will make regular visits to the plant to ensure that the operators are
familiar with the running of the plant as well as to guide them on regular servicing and maintenance.
If the water treatment systems manufactured by us are of a value of more than S$1 million, we will
also chart the performance of our system based on critical parameters such as temperature, pH of
liquid and operating pressure and despatch our technicians to attend to any problems after detailed
diagnosis from our office.

After the one year warranty period, we provide various levels of maintenance and servicing work
depending on the needs of our customers. We have contracts ranging from the provision of full
service (whereby we operate and maintain the plant) to an on-call basis. Currently, we are also able
to fit our water treatment systems with the Supervisory Control and Data Acquisition (“SCADA”)
system. This system allows us to monitor, from our office, the performance of the plant located at
the customer’s premises. We are thus able to maintain on-line, real-time tracking of the plant
operation. Should there be any problems detected, we can conduct remote troubleshooting from our
office instead of having to travel to the customer’s premises. This will enable a shorter turnaround
time to the customer.

54
MAJOR PROJECTS COMPLETED
Through the years we have managed to enlarge our customer base especially among the MNCs.
This is evidenced by the following major projects (in terms of contract value of more than $1 million
or new innovations through our R&D efforts) successfully completed or currently undertaken by us:-

Completed Projects

Year End-User/Project (Sector) Industry Country

1994 VTS Batteries Pte Ltd Electronics Singapore


Recycling of hot water
100 m3 per day of recycled water

1996 (Shanghai Sunve Pharmaceutical Pharmaceutical PRC


Ltd)
Removal of protein from fermentation broth using UF membrane
technology
Processed 100 tonnes of fermentation broth per day

1997 Siemens Matsushita Components Pte Ltd Electronics Singapore


DI Water Production, Wastewater Treatment, recycling and
chemical delivery system
120 m3 per day

1998 Ramatex Textiles Industrial Sdn Bhd Textile Malaysia


River Water Treatment System using Nano-filtration membrane
6,000m3 per day

1998 (Hyundai Electronics Electronics PRC


(Shanghai) Co Ltd)
DI Water Production
20m3 per hour

2000 (Amway (China) Co Limited) Pharmaceutical PRC


DI Water (USP grade) Production
200 gallons per minute

2000 Hewlett Packard Singapore Pte Ltd Electronics Singapore


Further upgrading of DI Water System
160 gallons per minute

2000 FCI Singapore Pte Ltd Electronics Singapore


DI Water Production and Wastewater Treatment System
180 m3 per day
2000 Jurong BirdPark Theme park Singapore
Recycling of sewage water using UF and Reverse Osmosis
(“RO”) membranes
480 m3 per day

2000 Shanghai Liquid Crystal Co. Ltd Electronics PRC


DI Water Production
20m3 per hour

2000 Flextronics (M) Sdn Bhd Electronics Malaysia


DI Water Production
180m3 per day
2000 EPCOS Pte Ltd Electronics Singapore
DI Water Production – 2 systems
120 m3 per day each system

55
Year End-User/Project (Sector) Industry Country

2000 Gultech (Suzhou) Electronics Co Ltd of China Electronics PRC


Pure water production and Wastewater Treatment System
5,000 m3 per day

2000 China BBCA Biochemical Group Corp of China Pharmaceutical PRC


Membrane separation of fermentation products

Projects currently undertaken by us and expected to be completed by year 2001

End-User/Project (Sector) Industry Country

Wyeth Pharmaceuticals (Singapore) Pte Ltd (“Wyeth”) Pharmaceutical Singapore


Installation of high-purity and utility piping system including equipment
setup

Dovechem Terminals Sdn Bhd Port Malaysia


Wastewater Treatment Plant
10 m3 per hour

Compass Technology Singapore Pte Ltd Electronics Singapore


Production of filtered and DI Water Wastewater treatment
136 m3 per hour

WUS Printed Circuit (S) Pte Ltd Electronics Singapore


Jurong Industrial Water Treatment Plant, RO-DI Water Treatment
Plant and Wastewater Treatment Plant
113m3 per hour, 45m3 per hour and 68m3 per hour, respectively

Hewlett Packard Singapore (Pte) Ltd Electronics Singapore


Supply and installation of Ultra-pure water
distribution system

As at 31 December 1999, the total value of the projects for which we have commenced work and
were expected to be completed in FY2000 was approximately $3.0 million. As at 31 December
2000, the total value of the projects for which work was on-going and expected to be completed in
FY2001 amounted to approximately $4.9 million.

OUR BUSINESS STRATEGY

Provide fully integrated services


Our Group’s mission is to be one of the market leaders in treating liquids utilising mainly membrane
filtration technology. To achieve this, we strive to continue to provide a wide range of water treatment
services from water purification, wastewater treatment, water-recycling, piping and distribution to
equipment hook-up. We also plan to provide emergency recovery units, which are specially designed
truck-trailers containing water treatment systems to provide uninterrupted water treatment while
servicing or upgrading is carried out on our customers’ water treatment systems.

Lower direct costs


In order to remain competitive, we will continue to lower our direct costs by moving towards the
manufacturing of more materials in-house. We currently aim to manufacture up to 30% to 50% of
the materials used in our systems. We will also seek to further automate our manufacturing process.

56
Incorporate information technology into our system
We also intend to develop and incorporate information technology to further enhance the operational
capability of our systems. At the moment, we are capable of monitoring our customers’ plants
through the Internet, interfacing our computer monitoring systems with that of our customers’ central
control system via the SCADA system (please refer to page 54 for more details) and providing on-
line analysis and charting the performance of our plant on critical parameters such as temperature,
pH of liquid and operating pressure. In the future, we intend to allow our customers to purchase
components from us online.

Strengthen and cultivate relationships with engineering consultants and companies


Our fourth strategy is to strengthen and cultivate relationships with major international engineering
consultants and companies such as Siegle and Epple and Jacobs-Lend Lease, both specialists in
the design and building of pharmaceutical plants, electronics manufacturing plants, chemical
processing plants and other industrial plants so as to keep abreast of new projects. Currently, about
30% of our work is obtained through such engineering companies. However, we are not reliant on
any particular engineering company.

Increase the value of the projects


Since we commenced our business, the average value of each project undertaken by us has
increased from $10,000 to $20,000 in our first two years to $1,000,000 to $2,000,000 in value in the
last two years. In 1999 and 2000, we secured 3 projects of between $3,000,000 to $5,000,000 each
in value. Based on what we have achieved so far, we intend to develop the next phase of our
business by tendering and obtaining projects each of value of $5,000,000 and above.

Increase R&D and improve quality standards


To remain competitive and be at the fore-front of the water treatment and advanced membrane
filtration businesses, we will continue to commit our resources in R&D both internally and also in
collaboration with the universities and environmental institutes. Our R&D department will continue to
develop proprietary membranes and improve existing membranes to enhance their performance in
various applications. Our R&D efforts have received support from the government shown through the
grants from EDB and NSTB. With such grants, we intend to develop new and better products for
application in our water treatment and advanced membrane filtration systems.

To meet the rising demand of our customers for quality products and services, we shall seek to drive
our quality system to ISO standards by 2001. Since the beginning of 2000, we have commenced the
process of ensuring that our products and services meet the requirements of ISO.

MARKETING
We position ourselves as a fully integrated water treatment and advanced membrane filtration
company and all our three (3) executive Directors are actively involved in marketing with the
assistance of 6 sales personnel. The value of our services lies in providing a one-stop shop with
innovative products and applications which ultimately results in cost savings and quality
improvement.

We believe in cultivating long-term relationships with engineering consultants and companies such as
Siegle and Epple and Jacobs-Lend Lease and the ultimate users of our systems. We dedicate
ourselves to ensure that all supply, quality and operational issues are expeditiously resolved. We
consult our customers, at least on a quarterly basis, on the development of new products and
projects in the industry so as to be able to respond appropriately and in a pro-active manner.

We raise our public profile and awareness of our services by engaging in advertising through direct
mailers to potential customers. These potential customers are obtained from lists maintained by the
EDB and other investment agencies, and various industrial directories. We also participate in
selected exhibitions held in PRC and Singapore.

57
To avoid the cyclical trend of business, we do not over-rely on any particular customer or industry.
Our water treatment and advanced membrane filtration systems are applicable in many industries
and we have built relationships in the electronics, food and beverage, biotechnology, pharmaceutical,
textile and chemical industries.

PRODUCTION

Production Facilities and Capacity


We have two manufacturing facilities, one located in Changi South with a land area of 2,436 sq m
and another in Shanghai with an area of 1,499 sq m. We are able to carry out the fabrication and
assembly of water treatment and advanced membrane filtration systems, conduct pilot trials and
fabricate special components and parts at both our facilities. We also carry out the manufacture of
membranes in Singapore.

The size of our production facilities in Singapore for the last three years are shown below:-

FY1997 FY1998 FY1999

Production facilities (sq m) 483 483 967(1)

Note:
(1) Excludes factory in Shanghai which we leased for six years, commencing in August 1999.

We have operated at close to full capacity for the past three years. Thus, we have to move to a
larger premise at Changi South in order to handle more projects.

We have invested in advanced equipment to ensure quality fabrication and assembly of our water
treatment and advanced membrane filtration systems. In our Changi South facility, we have a
214 sq m cleanroom (Class 100K) for the manufacture of systems to be installed in high-purity
facilities. We also have a laboratory to carry out analysis of water samples and to conduct trials for
our customers. For the purpose of testing membranes, we have a membrane testing plant that will
allow us to test individual membranes. Both the membrane testing unit and pilot plants are portable
and can be easily deployed to various sites to carry out the same functions.

Quality Assurance and Control


We are committed to product quality. Work procedures are clearly spelt out and checks and controls
are implemented at every step. Work is documented to keep proper records which allow future
verifications.

We continually look to improving our workflow, procedures and methodology for each stage of our
work process to attain (i) zero defects; (ii) on-time delivery and (iii) customer satisfaction.

At the onset of a project, our quality engineers will review all requirements of our customers and
come up with a checklist specific to the project in addition to the usual checks listed in our quality
manual. This is to ensure that each customer’s demands which are unique to itself and its industry
are addressed by all our various departments from design, fabrication, installation, commissioning to
maintenance. These factors will form the basis by which our quality engineers check each process
of work. Periodic internal audits are conducted to measure progress, anticipate quality problems and
measure compliance with established procedures.

All materials, components and equipment purchased will be scrutinised and inspected by our
storekeeper and jointly with the project engineer, if necessary. Any defective item will be rejected
and kept aside or returned. Only approved items are accepted into the store.

58
In all the stages of our work process, we have a system of self-assessment by which the person
executing the task will check his work against the checklist before it is passed to the next party. All
operators of our machines are trained and certified to ensure that they can perform minor setting-
up, adjustments, trouble-shooting and simple maintenance on the machines they operate.

During the installation stage of our systems, all works will be measured against the Inspection
Testing Plan (ITP) as prepared by our quality engineers. Guidelines on remedial action and retest
are also listed. Prior to the handing over of the plant to the client, a series of pre-commissioning
checks and commissioning tests will be carried out. All these are recorded in the commissioning log
which will form part of the owner’s manual. Our commissioning and service teams will follow-up on
the plant’s operation for at least two (2) weeks after handing over to allow for a smooth transition to
our customer.

Work Safety and Environmental Issues


Besides quality of product, our work procedures also strive to maintain a safe working environment
for our workers. Our workers are briefed on safety procedures and the supervisors are responsible
for ensuring compliance with these safety procedures. We have also designated a supervisor to
oversee safety in the production area and the workshop. We do not have any incident of fatalities
over the past five years.

In the course of our work process, we generate industrial wastes which consist of non-toxic solids
such as scrap metal, plastic pipes and other plastic materials. Our liquid wastes include organic
solvents and additives which are classified as non-toxic in small quantities. These are disposed in
accordance with regulations.

Insurance Coverage
We are covered by insurance policies for risks such as damage to property, third party liability and
workmen’s compensation. In addition, we effect all-risk insurance coverage for each project carried
out at our customers’ premises.

DISPUTES
To date, we have not encountered any major industrial disputes with our customers and suppliers.

STAFF TRAINING
We have 135 full-time employees in Singapore and PRC as at 15 December 2000. We place great
emphasis on staff training as we rely on the skills and extensive experience of our staff.

All new staff undergo a one-day orientation programme where they are familiarised with our general
working environment, our products and services as well as the quality requirements. This is followed
by a carefully matched mentoring scheme to impart technical knowledge on the job. In-house
seminars are conducted regularly by the various heads of department to keep everyone updated
with their area of work.

We also adopt a multi-disciplinary approach by rotating our staff to different departments to enable
them to acquire skills in at least two (2) different disciplines. Our staff in Shanghai are occasionally
posted to Singapore to learn from our senior engineers and enhance their working experience. We
also send our engineers to PRC for job exposure and to help train their counterparts there.

59
In order to enable our technicians and engineers to keep abreast of new developments and
technologies in the field of water treatment and advanced membrane filtration, we sponsor our
senior engineers and technicians for external courses conducted by local institutions such as the
Environmental Engineering Research Centre (EERC), ENV and Environment Technology Institute
(ETI). Our workers attend skill courses conducted by the Building Construction Authority (BCA) and
other training institutes to upgrade their skills. We have also sent our senior engineers overseas to
attend international conferences and seminars to enable them to exchange information with other
experts.

We allocate about $60,000 to $80,000 a year for external staff training or about $444 to $593 per
employee.

RESEARCH AND DEVELOPMENT


A team of six (6) full-time R&D staff runs this department. Headed by a scientist with a PhD in
Chemistry and assisted by one (1) engineer, one (1) chemist and four (4) technicians, our R&D
team develops proprietary membranes and also works on improving existing membranes to improve
their performance in various applications.

Since the second quarter of 2000, we have developed in-house membranes manufacturing
capabilities and we are able to customise both our plants and treatment to suit the needs of our
customers.

We continually seek new uses for membrane filtration technology in industries such as electronics,
food and pharmaceutical. The areas of application include wastewater treatments, water purification,
water recycling and separation of liquids.

To improve the operations of our water treatment and advanced membrane filtration systems, our
R&D team also researches on ways of optimising instrumentation and controls.

We have received two (2) grants from NSTB and EDB respectively to be used for R&D purposes. In
November 1998, we received a grant from NSTB under RDAS which we used to carry out research
on (1) the purification of industrial water as an alternative source to city water for industrial user and
(2) the ozonation method for the treatment of dye effluent and refractory organics. This grant, which
is now administered by EDB, will expire in May 2001.

In March 2000, we received another grant from the EDB under IDS for our work in the development
of hollow-fibre membranes. This scheme spans over a period of 3 years.

Our R&D expenses for the last three years and for the ten months ended 31 October 2000, which
were partially financed by the grants, are as follows:-

10 months ended
FY1997 FY1998 FY1999 31 October 2000

$131,000 $191,000 $387,000 $357,000

TRADEMARK
HSPL is the registered owner of the trademark “HYFLUX” with effect from 19 August 1999 under
Class 11 in Singapore for a period of 10 years. HSPL has also applied for the registration of the
name “HYDROCHEM” as trademark under Class 11 in Singapore on 11 May 2000. As at the date
of this Prospectus, this application is still pending.

60
COMPETITION

To the best of our Directors’ knowledge, our main competitors in water treatment business are US
Filter (Asia) Pte Ltd, Ionics Asia-Pacific Pte Ltd, Kurita (S) Pte Ltd, Chemitreat Pte Ltd, United
Professional Services (S) Pte Ltd and Scottscentre Pte Ltd, all based in Singapore; Phillip Muller -
Hager + Elsasser GmbH of Germany and Organo Corporation of Japan. Our main competitors in
the advanced membrane filtration business are Osmonics Inc., Koch Membranes Systems Inc. and
Cuno Incorporated, all of which are US-based.

COMPETITIVE STRENGTHS
Our Directors consider the following to be our competitive strengths:-

Integrated Services
We offer a one-stop shop service to our customers and provide integrated services of designing,
engineering, installing, commissioning and maintenance of systems that treat liquid streams utilising
mainly membrane filtration technology. Starting from the design of the water treatment plants, we
provide the full range of services in the procurement of components, fabrication and assembly,
installation and commissioning of the completed plants. As we employ about 75 technicians and
engineers with relevant expertise in each stage of our work process, we are now able to design and
install completed plants within a shorter time frame of between two (2) months to a year, depending
on the complexity of the project.

Diverse Industries
Through our R&D efforts, we have managed to utilise membrane filtration for water purification,
wastewater treatment, water recycling and liquid separation as opposed to conventional methods.
This has allowed us to meet the diverse needs of various industries such as electronics,
pharmaceutical and biotechnology. This provides us with a competitive edge over some of our
competitors who utilise other technology and hence focus on specific industries.

Though our current focus is on the electronics, pharmaceutical and biotechnology industries, we do
not rely on a single industry or customer. We have always adopted an approach of serving at least
3 to 4 industries that are not closely linked, such as electronics and pharmaceutical. For FY1999,
33% of our sales were derived from the electronics industry, 33% from the pharmaceutical industry
and 34% from other industries such as biotechnology and food and beverage. Therefore, we have
not been affected by a downturn in any specific industry for the past three (3) years.

Experienced Management
We have an experienced management team who is familiar with the business and whom we believe
would be able to lead our Group forward to continued growth and profitability. We are led by our
Managing Director, Ms Lum Ooi Lin Olivia, who has more than ten (10) years of hands-on
experience in all aspects of our business. Ms Lum has been instrumental in propelling the Group’s
growth over the years. Believing that a strong management team is a key factor in ensuring the
continued success of our Group, Ms Lum has also groomed a dedicated and dynamic management
team to assist her in the daily management of the business operations of our Group.

61
Ability to Meet International Standards
Our products and services are able to meet international standards for different industries. For
example, we are able to produce water, which meets USP standards and our equipment can be
manufactured to meet the ASME standards. If required by our customers, our compliance with these
standards is certified by independent third parties and these certifications are provided to our
customers. From the procurement of materials and components to the manufacturing and assembly
of the complete water treatment and advanced membrane filtration system, we have controls and
assurances to check and ensure quality of our products. We have also instituted a system of
monitoring and assessing the service of our staff both internally as well as by our customers to
further improve our services. As a testimony and acceptance of our quality products and services,
we have supplied and installed our systems for big MNCs such as EPCOS, Amway, HP, Wyeth and
FCI.

Customised Systems
A key feature of our water treatment systems is the identification and adoption of the latest
technologies to provide solutions to the various needs faced by our customers. We are now able to
manufacture the membranes used in membrane filtration and this allows us to customise the
membrane filtration plants to the diverse needs required by different industries.

Our application of membrane technology for wastewater treatment also provided benefits over
conventional treatments such as coagulation. Some of these benefits are the saving of space and
energy as the size of our treatment plants using membrane technology are smaller. There is also
little or no addition of chemicals, reduction of solid waste generated and overall increased
effectiveness. Membrane filtration technology is also adopted for the recovery of precious minerals
in certain process streams.

Established relationship with customers and suppliers


We estimate that 70% of our business is obtained through referrals and recommendations by our
existing customers and engineering consultants and companies whom we have worked with. We are
an approved vendor of several of our customers. This allows us to tender for jobs from these
customers without having to undergo a pre-selection process, which typically involves the evaluation
of track record and capital base. This has enabled us to secure new projects without having to
increase our marketing activities and thus, our marketing expenses.

With a track record established with our customers, we are able to build systems for our customers
for each progressive stage of their expansion. For example, we have serviced EPCOS for each of
its phases of business expansion.

We have been dealing with most of our suppliers since the commencement of our business and
have strived to have a minimum of two (2) local and/or international suppliers for each of the
products we purchase. This is to minimise the disruption in supply from any one supplier.

The equipment which we source from our suppliers to incorporate into our customers’ water
treatment and advanced membrane filtration systems require a high degree of expertise in
installation and commissioning. Most of the suppliers of such high technology equipment sell them
selectively to solution providers as they must be confident that the solution provider can successfully
install their products for the benefit of the end-users. We have entered into a supply agreement with
E-Cell Corporation of Canada, a subsidiary of General Electric International, to purchase
electrochemical liquid purification apparatus known as “Stacks” which is patented worldwide and
used in industries requiring ultra-pure water. The addition of this apparatus widens our range of
products and services and enhances our position as an integrated water treatment provider.

62
MAJOR SUPPLIERS

The suppliers who accounted for 5% or more of our Proforma Group’s purchases for the past three
financial years ended 31 December 1997 to 1999 are as follows:-

Year ended 31 December


1997 1998 1999
% % %

Membrane Products Kiryat Weizmann Ltd (“MPW”) 5.6 — —


Nitto Denko (S) Pte Ltd 6.9 3.4 0.4
Osmonics Inc. 0.9 4.3 9.7

We purchase mainly Selro membranes from MPW until 1998 when the company ceased operations.
We purchased reverse osmosis membranes from Nitto Denko (S) Pte Ltd but also sourced these
membranes from other suppliers. Since 1998, we were able to purchase substitutes from Osmonics
Inc., which accounted for the increase in purchases from this supplier in 1998 and 1999. This
increase was also due to our buying directly from Osmonics Inc. instead of going through their
agents. We also purchase other components such as pumps from Osmonics Inc.

None of the Directors or substantial shareholders has any interests, direct or indirect, in the
suppliers mentioned above.

63
MAJOR CUSTOMERS

The customers which accounted for 5% or more of our Group’s turnover for the past three financial
years ended 31 December 1997 to 1999 are listed below. Customers who are related to one
another have been grouped together and treated as a single customer.

Year ended 31 December


1997 1998 1999
% % %

Jiangsu Jiangan Pharmaceutical Corp. Ltd 30.3 — —


SGS Thomson Microelectronics Pte Ltd 17.7 0.5 0.2
Everlight Chemical Industrial Corporation 10.3 — —
Hitachi Chemical Asia-Pacific Pte Ltd 8.9 2.2 0.2
Sanyo Air-Conditioners Manufacturing (S) Pte Ltd 5.7 0.1 0.01
Ramatex Textiles Industrial Sdn Bhd — 17.2 1.0
Dandong Chemical Fiber Co. Ltd — 14.2 —
Takasago Thermal Engineering Co. Ltd — 7.6 —
Tee Yih Jia Food Manufacturing Pte Ltd — 5.5 0.7
Matsushita Refrigeration Industries (S) Pte Ltd — 5.6 0.4
Siegle + Epple Asia Pte Ltd — 5.5 3.3
Amway (China) Co. Ltd — — 28.5
Ramatex Industrial (Suzhou) Ltd — — 16.9
ACP Construction Pte Ltd — — 9.1
FCI Singapore Pte Ltd — — 8.3

As our business is project based, our major customers vary from year to year depending on the
project obtained.

As at 31 October 2000, Gimmill1 holds a 10% equity stake in Hyflux. Gimmill also owns 29.15% of
Ramatex Berhad which in turn owns 100% of our customers, Ramatex and Ramatex Suzhou
(Please refer to page 85 on “Interested Person Transactions” for more details).

Save as disclosed above and in page 85, none of the Directors or substantial shareholders has any
interests, direct or indirect, in the customers mentioned above.

1
Gimmill is a Singapore-incorporated investment holding company. It has an authorised share capital of $10,000,000
comprising 10,000,000 shares of $1 each of which 9,600,008 shares have been issued and paid-up. The shareholders of
Gimmill are Ma Wong Ching (Malaysian) who owns 70% of Gimmill, Wong Lang Piow (Malaysian) who owns 10% and
Ma On May (Singaporean) who owns the balance 20%. These shareholders are not related to the Directors and/or other
substantial shareholders of our Company.

64
GOVERNMENT REGULATIONS

We are not directly regulated by any government regulations. However, our customers’ businesses
are regulated by various environmental regulations and our role is to assist our customers to meet
those standards pertaining to the discharge of water treated by our plant. In Singapore, the Ministry
of Environment regulates under the Environmental Pollution Act 1999, Environmental Pollution
Control (Trade Effluent) Regulations 1999, Sewerage and Drainage Act 1999 and the Sewerage and
Drainage (Trade Effluent) Regulations 1999. These legislations set out the laws and regulations on
the license and use of certain premises and the pollution control, including water pollution control.
In Malaysia the Kementrian Sains Dan Teknologies (the Ministry of Science & Technology) regulates
under the Environmental Quality Act 1974 and the Environmental Quality (Sewerage and Industrial
Effluents) Regulations 1979. The latter was issued under the Environmental Quality Act, 1974 and
set the standards of effluent on parameters such as its temperature, pH value and mineral contents.
In PRC, the Administrative Body of the State Council in charge of Environmental Protection
regulates under the PRC Environmental Protection Law of 1989. Under this law, the Administrative
Body of the State Council in charge of Environmental Protection has developed a system of water
standards which comprises five levels of quality standards. We assist our customers in PRC to meet
these standards according to the level of quality desired.

To the best of our knowledge, we have not encountered any violation of regulations by our
customers in relation to our water treatment plants over the last three years.

65
PROSPECTS AND FUTURE PLANS

PROSPECTS

Water treatment business


Of all water on earth, 97.5% is salt water. Of the remaining 2.5% of fresh water, 70% is frozen in
the polar icecaps and 30% is mostly present as soil moisture or lies in underground acquifers. As a
result, less than 1% of the world’s fresh water is readily accessible for human use (source:
http://strategis.ic.gc.ca, “Water Conservation and Recycling Systems”, Publication Date: 1/11/98, the
US department of commerce). Aggravating the shortage of fresh water supply are higher population
growth, urbanisation, global climate changes and degradation of natural purification capacities.

According to World Bank’s figures, the number of people living in water-stressed countries will rise
from 500 million to 3 billion by 2025. It is estimated that the investment required to meet the
increase will amount to some US$270 billion by the year 2015 in Asia Pacific alone. There is a
growing trend towards using alternative cost-effective water sources including desalinated water and
recycled industrial and sewage waste streams (source: quoted by Asian Water, Volume 16, 6 June
2000).

In Singapore, water consumption is about 1,300,000m3 daily of which 52% is imported from
Malaysia. Singapore’s water consumption has been growing at an annual rate of 4.6% over the past
decade with the manufacturing sector growing at a faster rate of 7.3% a year. To boost Singapore’s
water supply, the Singapore government is implementing various measures including conservation
and recycling of water. The market for conservation and recycling of water is expected to expand by
10% to 15% annually over the next three (3) years and by 20% to 25% a year in the longer term.
According to a report “Water Conservation and Recycling Systems” published in November 1998 by
the US Department of Commerce, the market size of this industry is estimated at US$330 million.

With about 20% of the world’s population, PRC has only 8% of the global fresh water resources.
Water consumption is estimated to be growing at an annual rate of 5%. The brisk pace of PRC’s
industrial development has further compounded the shortage of potable water. PRC is taking several
measures to tackle her water problem such as stricter enforcement of environmental regulations and
expanding infrastructure projects like water treatment facilities (source: http://infoserv2.ita.doc.gov
“Water Treatment in China”, the US Department of Commerce International Trade Administration
Trade Development).

In view of the increasing water demand globally, especially in Singapore and PRC where our
business is mainly carried out, we expect a continual rise in demand for all our water treatment
systems.

Advanced membrane technology


According to a study entitled “Membrane Separation Technologies to 2004” published in August 2000
by the Freedonia Group, an industrial market research firm based in Ohio, USA, demand for
membrane materials in the US totalled US$1.2 billion in 1999 and is projected to grow by 7.8% per
annum to US$1.8 billion in 2004. Consumption will be driven by expanding use in food processing,
medical applications and on-going development of new uses in hazardous waste remediation, air
pollution control and radioactive wastewater testing and treatment. The US currently constitutes
about 60% of the global market, with the balance of the world demand divided approximately evenly
between Europe and Asia (inclusive of Oceania). Asia’s demand is now largely met by the US
producers and our proximity to this market provides opportunities for us to increase our market
share in Asia. Our Directors are of the view that our competitive position has been enhanced since
we started manufacturing our own customised membranes as we are now able to better control cost
and quality of the membranes, which is a key component in our treatment plants.

66
FUTURE PLANS
To remain competitive and to take advantage of the growing trend towards using alternative cost-
effective water sources and the growth in the membrane industry, we intend to adopt the following
strategies and future plans using the Invitation proceeds:-

Increase overseas sales and service centres


Currently, we have sales personnel stationed in Guangzhou and Beijing. In order to provide quicker
response to our existing customers, we intend to set up sales and service centres in Guangzhou
and Beijing within one to two years by employing and deploying more sales and service staff to
support the current personnel. We estimate the setup costs to be $0.5 million.

To increase our sales channel and to increase the ease of the availability of our services, we intend
to set up our own website to enable business-to-business (“B2B”) e-commerce by our customers by
the end of 2001. Our customers would be able to obtain quotations, purchase components and
parts and obtain updates and status on their projects through our website. We are currently
negotiating with an e-business consultant to design our website.

Expansion of manufacturing and research facilities


To increase the production and productivity of the installation of our water treatment and advanced
membrane filtration systems, we will acquire more sophisticated equipment such as computerised
orbital welding machines, infrared welding machines and plasma cutting machine for our Singapore
facilities.

In the area of membrane filtration technology, we will intensify our R&D efforts to further develop
and manufacture different types of membranes using various materials for use in new applications
such as in fermentation processes. The research is in a preliminary stage. We have purchased new
equipment such as mixing vessels and testing equipment and are in the process of increasing our
production facilities in the clean room to assist us in this area. With the increased floor space at our
Changi South facility, we are also in the position to further increase our production capacity in the
future. We will also be increasing our manufacturing facilities in Shanghai in 2001. The costs of
these expansion plans are estimated to be between $2.0 million to $2.5 million.

Acquisition of new filtration technologies


As we are in a specialised industry, we continually seek to acquire new technologies to complement
and improve our current products and services. In this respect, we are in constant contact, through
regular visits, with renowned universities that conduct R&D on membranes or companies that have
such technologies. In particular, we intend to acquire the technology to manufacture membranes for
use in the biotechnology industry. As at the date of this Prospectus, we have not entered into any
agreements.

67
CORPORATE GOVERNANCE

The business and operations of the Group are presently under the management and close
supervision of the executive directors. The overall management of the Group is overseen by Ms Lum
Ooi Lin, Olivia.

After listing, the Directors and Executive Officers will continue to manage the business and
operations of the Group. The Audit Committee will assist the Board with regard to discharging its
responsibility to safeguard the Company’s assets, maintain adequate accounting records, and
develop and maintain effective systems of internal control. The Audit Committee shall have the
overall objective to ensure that the management has created and maintained an effective control
environment in the Company, and that the management demonstrates and stimulates the necessary
aspects of the Group’s internal control structure among all parties.

The Audit Committee comprises Messrs Teo Kiang Kok, Lee Joo Hai and Ms Lum Ooi Lin, Olivia.
The Audit Committee will be chaired by Mr Lee Joo Hai. Ms Lum Ooi Lin, Olivia is an Executive
Director of the Company while Messrs Teo Kiang Kok and Lee Joo Hai are Independent Directors
of the Company.

The Audit Committee will meet periodically to discuss and review the following:-
(a) review with the external auditors the audit plan, their evaluation of the system of internal
controls, their audit report, their management letter and the management’s response;
(b) review the half-year and annual financial statements and balance sheet and profit and loss
accounts before submission to the Board for approval, focusing in particular, on changes in
accounting policies and practices, major risk areas, significant adjustments resulting from the
audit, the going concern statement, compliance with accounting standards as well as
compliance with any stock exchange and statutory/ regulatory requirements;
(c) review the internal control and procedures and ensure co-ordination between the external
auditors and the management, reviewing the assistance given by the management to the
auditors, and discuss problems and concerns, if any arising from the interim and final audits,
and any matters which the auditors may wish to discuss (in the absence of the management
where necessary);
(d) review and discuss with the external auditors any suspected fraud or irregularity, or suspected
infringement of any relevant laws, rules or regulations, which has or is likely to have a material
impact on the Group’s operating results or financial position, and the management’s response;
(e) consider the appointment or re-appointment of the external auditors and matters relating to
resignation or dismissal of the auditors;
(f) review transactions falling within the scope of Chapter 9A and Clause 1006 of the SGX-ST
Listing Manual;
(g) undertake such other reviews and projects as may be requested by the Board and will report
to the Board its findings from time to time on matters arising and requiring the attention of the
Audit Committee; and
(h) generally undertake such other functions and duties as may be required by statute or the
Listing Manual, and by such amendments made thereto from time to time.

68
DIRECTORS, MANAGEMENT AND STAFF

Directors
The Board of Directors is responsible for the overall management of the Company. The names,
ages, addresses and principal occupations of the Directors are listed below:-

Name Age Address Country of Position held


Principal
Residence

Lum Ooi Lin Olivia 39 17 Whitley Road Singapore Managing Director


Singapore 297803

Deirdre Murugasu 39 25 Sunset Heights Singapore Executive Director


Singapore 597411

Foo Hee Kiang 38 58 Burghley Drive Singapore Executive Director


Singapore 559029

Teo Kiang Kok 44 481 Pasir Panjang Road Singapore Independent Director
#02-06 Singapore 117621

Lee Joo Hai 44 95 Paya Lebar Crescent Singapore Independent Director


Singapore 536179

The business and working experience of our Directors are as follows:-

Ms Lum Ooi Lin Olivia is the Managing Director and the founder of our Group. Prior to
incorporating HSPL, Ms Lum was a chemist with Glaxo Pharmaceuticals Pte Ltd for about three
years, where she supervised a team of laboratory supervisors and technicians. Ms Lum has
acquired experience in the water treatment and advanced membrane filtration industry from her
management of our Group for more than 10 years. She is the main driving force behind the growth
and business expansion of our Group and is overall responsible for our Group’s strategic planning,
policies and corporate directions. Ms Lum holds a Bachelor of Science (Hons) degree from the
National University of Singapore.

Ms Deirdre Murugasu, an Executive Director of our Group, is primarily responsible for the
development, application and marketing of new products and services of our Group to relevant
market sectors. Dr Deirdre Murugasu holds a Masters of Medicine (Family Medicine) from the
National University of Singapore. Prior to joining our Group in 1996, Dr Deirdre Murugasu was a
Registrar with the Ministry of Health where she worked for nine years. Her last appointment there
was as a senior doctor specialising in family medicine.

Mr Foo Hee Kiang, an Executive Director of our Group, is also currently our Sales Director. He is
primarily responsible for the marketing and sales of the products and services of our Group. Mr Foo
has more than 14 years of marketing and sales experience. Prior to joining our Group in 1998, Mr
Foo was a Sales Manager with Multico System Engineers Pte Ltd from 1990 to 1998, a company
that deals in construction equipment and building materials, where he was in charge of the building
materials and light construction equipment divisions. Mr Foo holds a Bachelor of Engineering degree
from the National University of Singapore.

Mr Teo Kiang Kok was appointed an Independent Director of our Group on 19 December 2000. He
is a senior partner of Shook Lin & Bok, a firm of advocates and solicitors. He has more than 16
years of experience in legal practice and is currently the head of the corporate finance and China
practice groups of Shook Lin & Bok. His main areas of practice are corporate finance, international
finance and securities.

69
Mr Lee Joo Hai was appointed as an Independent Director of our Group on 19 December 2000. He
is a certified Public Accountant of Singapore and is a member of the Institute of Chartered
Accountants in England and Wales. He has more than 20 years of experience in accounting,
auditing, taxation and company secretarial work. Mr Lee is currently a partner in a public accounting
firm in Singapore.

Mr Teo Kiang Kok is a senior partner of Shook Lin & Bok, which will be receiving a fee paid by us
and the Vendors for legal services rendered in connection with the Invitation. It is envisaged that we
may continue to engage the services of Shook Lin & Bok as and when the need arises. Our
Directors are of the view that the provision by Shook Lin & Bok of such services will not interfere
with Mr Teo Kiang Kok’s independent judgement in his role as a member of the Audit Committee as
matters involving the Group will be handled by other partners and associates of the firm. In the
event that Mr Teo Kiang Kok is interested in any matter handled by Shook Lin & Bok involving our
Group, including and not limited to the Invitation, he will adhere to the guidelines for interested
person transactions as listed on pages 85 and 86 of this Prospectus and abstain from reviewing and
voting on that particular transaction.

The list of present and past directorships of each Director for the last five years, other than that held
in the Company, as at the date of this Prospectus, is set out below:-

Name Present Directorships Past Directorships

Lum Ooi Lin Olivia Group Companies Group Companies


Hydrochem (S) Pte Ltd Nil
Hydrochem Engineering (S) Pte Ltd
Hydrochem Engineering (Shanghai)
Co., Ltd
Hyflux Engineering Pte Ltd

Other Companies Other Companies


Kimic Technologies (S) Pte Ltd Expertech Resources Pte Ltd
Expertech Resources (M) Sdn Bhd
Kimic Technologies (M) Sdn Bhd
Kimic Chemitech (S) Pte Ltd
Selro Technology Sdn Bhd
Finest Flavors Pte Ltd

Deirdre Murugasu Group Companies Group Companies


Hydrochem (S) Pte Ltd Nil
Hydrochem Engineering (S) Pte Ltd
Hydrochem Engineering (Shanghai)
Co., Ltd
Hyflux Engineering Pte Ltd

Other Companies Other Companies


Kimic Technologies (S) Pte Ltd Kimic Chemitech (S) Pte Ltd
People’s Surgery Pte Ltd

Foo Hee Kiang Group Companies Group Companies


Hydrochem (S) Pte Ltd Nil
Hydrochem Engineering (S) Pte Ltd
Hydrochem Engineering (Shanghai)
Co., Ltd

Other Companies Other Companies


Nil Nil

70
Name Present Directorships Past Directorships

Teo Kiang Kok(1) Group Companies Group Companies


Nil Nil

Other Companies Other Companies


Asean Emerging Companies Growth GRP Ltd
Fund Ltd IPC Corporation Ltd
Circuits Plus Holdings Ltd Malaysian Emerging Companies
Giant Wireless Technology Ltd Growth Fund Ltd
Kingboard Copper Foil Holdings Ltd Solid Resources Investment Ltd
Mayfran International Ltd
Miyoshi Precision Ltd
New Wave Technologies Ltd
Praxair Surface Technologies Pte Ltd
SLAB Services Pte Ltd
SM Summit Holdings Ltd
Teamsphere Ltd
The Vittoria Fund Ltd
The Vittoria One Ltd
Unisteel Technology Ltd

Lee Joo Hai(1) Group Companies Group Companies


Nil Nil

Other Companies Other Companies


FDS Networks Group Ltd Solid Resources Investment Ltd
IPC Corporation Ltd
Kian Ho Bearings Ltd
Kingboard Copper Foil Holdings Limited
Lung Kee Metal Holdings Limited
Miyoshi Precision Limited
PSL Holdings Limited
Teamsphere Limited
Unisteel Technology Limited

Note:-
(1) Companies in which Mr Teo Kiang Kok and Mr Lee Joo Hai were appointed as Directors for the purpose of
incorporation or as nominee director only and in the course of their professional practice have not been included.

Independent Directors/Audit Committee


The Independent Directors are Messrs Teo Kiang Kok and Lee Joo Hai. The Audit Committee
comprises Messrs Teo Kiang Kok, Lee Joo Hai and Ms Lum Ooi Lin Olivia. Mr Lee Joo Hai is the
Chairman of the Audit Committee.

71
MANAGEMENT
The day-to-day operations of the Group are entrusted to the Executive Directors and an experienced
and qualified team of Executive Officers responsible for the different functions of our Group. The
particulars of the Executive Officers are set out below:-

Name Age Address Position Held

Lim Kim Seng 49 65 Taman Bedok General Manager


Singapore 487105

Chin Tain Min 50 Blk 862A Tampines Street 83 Finance Manager


#09-414
Singapore 521862

Jennifer Hoalim 41 82H Lorong J Telok Kurau Office Manager


Singapore 425901

Simon Niels Matterson 36 16 Amber Gardens #10-03 Senior Engineering Manager


Amber Park
Singapore 439961

Ricky Chew Ann Meng 30 Blk 429 Tampines Street 41 Construction Manager
#06-507
Singapore 520429

Govindharaju Venkidachalam 36 Blk 367 Bukit Batok Street 31 R&D Manager


#10-227
Singapore 650367

Yap Kiam Wu 28 Blk 453 Pasir Ris Drive 6 Chief Designer


#08-224
Singapore 510453

Bruce Sim Lian Huat 30 Blk 634 Hougang Avenue 8 Electrical Manager
#12-41
Singapore 530634

Tan Yu Ming 27 Blk 437 Yishun Ave 6 Senior Engineer


#08-2072
Singapore 760437

Ge Wen Yue 32 Room 301, No. 3, Head of Sales and Marketing


Avenue 123, (Shanghai)
Zhijiangxi Road,
Shanghai

72
MANAGEMENT STRUCTURE

Managing Director
Lum Ooi Lin Olivia

General Manager Executive Director Executive Director


Lim Kim Seng Deirdre Murugasu Foo Hee Kiang

Senior Engineering R&D Manager


Manager Govindharaju

73
Simon Niels Matterson Venkidachalam

Finance Office Head - Sales & Construction Chief Designer Electrical Senior
Manager Manager Marketing (Shanghai) Manager Yap Kiam Wu Manager Engineer
Chin Tain Min Jennifer Hoalim Ge Wen Yue Ricky Chew Ann Bruce Sim Lian Tan Yu Ming
Meng Huat
Mr Lim Kim Seng is our Group’s General Manager responsible for finance, human resource,
information technology, purchasing and logistics management of our Group. Mr Lim has over 25
years of experience in the banking sector and relevant industries. Prior to joining our Group on 1
October 2000, Mr Lim was a Vice President with DBS Bank’s Private Equity Department for close to
two years, where he was responsible for developing and managing a portfolio of private equity
investments on behalf of the bank or its subsidiaries. Prior to that, he was with the Phillips
Petroleum group of companies in Singapore for 17 years, holding senior managerial positions in
financial management and human resource administration, besides being the Company Secretary.
Mr Lim has a degree in accountancy from the University of Singapore and a Master of Business
Administration from the National University of Singapore. He is a non-practicing member of the
Institute of Certified Public Accountants of Singapore.

Mr Chin Tain Min is our Group’s Finance Manager responsible for the financial management,
internal control and accounting system of the Group. Mr Chin joined our Group in November 1999.
Mr Chin has 20 years of experience in various positions such as public accountant, consultant and
financial controller in Malaysia and Singapore. The last position he held was as director of his own
consultant firm in 1999. Mr Chin graduated from the Nanyang University with a Bachelor of
Commerce (Accountancy) degree. Mr Chin is a public accountant with the Malaysian Institute of
Accountants and is also a Certified Public Accountant of CPA Australia.

Ms Jennifer Hoalim is our Group’s Office Manager responsible for the administration and human
resource management of the Group, and also for organising manpower for projects. Ms Hoalim
joined our Group in June 1994. From 1990 to 1994, Ms Hoalim has worked at Cockpit Hotel as
Executive Housekeeper and Front Office Manager. Ms Hoalim is a Certified Hospitality
Housekeeping Executive of the Educational Institute of the American Hotels and Motels Association.
She holds a Certificate in Hygiene of Food Retailing and Catering from the Royal Society of Health
(London) and a General Diploma from the Business Education Council of Britain. She is a member
of City and Guilds of London in the areas of General Catering, Alcoholic Beverage and
Accommodation Services.

Mr Simon Niels Matterson is our Group’s Senior Engineering Manager responsible for the
engineering services of projects. These services range from design, mechanical, electrical,
fabrication and installation. He joined our Group in April 2000, after having managed his own design
consultancy business, of which water treatment system is one aspect, in Malaysia for the last five
(5) years. Mr Matterson is a Professional Chemical Engineer and he has more than 13 years’
experience in the water and wastewater industry, having worked as Project Engineer for companies
such as Biwater International in UK and Southern Water McDowells in UK and Malaysia. Mr
Matterson has acquired knowledge in design, construction and marketing aspects of the wastewater
treatment business. He has also gained exposure to the wastewater treatment industry in Europe,
Africa, the Middle East and Far East. Mr Matterson holds a Bachelor of Science in Engineering
Product Design from the Polytechnic of the South Bank in London, England.

Mr Ricky Chew Ann Meng is our Group’s Construction Manager responsible for project
management, training of staff and the execution of projects. Mr Chew joined our Group in July 1999.
After his graduation in 1995, Mr Chew worked as a Project Engineer with ETAS Pte Ltd and
acquired project management and technical knowledge in regional wastewater treatment projects.
Leaving ETAS Pte Ltd in 1998 as Senior Project Engineer, he joined Lindeteves Jacoberg Ltd as
Project Engineer. His past experience includes mechanical design, co-ordination of projects,
supervision of plant installation and the commissioning of plants. Mr Chew holds a Diploma in
Mechanical Engineering from Ngee Ann Polytechnic.

Dr Govindharaju Venkidachalam (PhD) is our Group’s R&D Manager responsible for the
development of hollow fiber membranes, pilot studies for water treatment systems, feasibility studies,
trouble-shooting of membrane separation systems and the commissioning of water and wastewater
treatment systems. Dr Venkidachalam joined our Group in April 1999. From 1994 to 1997, Dr
Venkidachalam was Senior Executive of Ion Exchange (India) Ltd, where he was responsible for the
design, organisation and successful completion of membrane development and its application
projects. From 1997 to 1998, he was Senior Membrane Scientist of Membrane Research Technology
Singapore Ltd, and was responsible for managing the research and development activity relating to

74
the development of hollow fiber membranes for various applications. He holds a Doctor of
Philosophy degree from the Indian Institute of Technology (IIT) in Bombay, India, a Master of
Science from the University of Hyderabad, India and a Bachelor of Science from the University of
Madras, India.

Mr Yap Kiam Wu is our Group’s Chief Designer responsible for the design and development of new
equipment as well as serving as an in-house co-ordinator. Mr Yap started his career with AU
Precision Pte Ltd from 1992 as a Machinist and rose to the position of Shift Leader in 1994. He
then joined Tempco Manufacturing (S) Pte Ltd in 1994 as a CNC machinist and was subsequently
promoted to Engineering Assistant. Mr Yap subsequently joined Nortrans Engineering Group Pte Ltd
(now known as Nortrans Offshore (S) Pte Ltd) as a draughtsman for two years before joining our
Group in October 1999. He holds a Diploma in Mechanical Engineering from the Singapore
Polytechnic.

Mr Bruce Sim Lian Huat is our Group’s Electrical Manager responsible for project management,
electrical control systems for water treatment plants and also for leading a group of electricians for
project execution of electrical installations. In 1993, Mr Sim started working as Assistant Engineer in
Flexible Automation Pte Ltd and was promoted to Electrical Engineer one year later. His
responsibilities in Flexible Automation Pte Ltd include panel design and software development for
integrated circuit encapsulation machines. In 1997, Mr Sim joined Takara Engineering (S) Pte Ltd as
Electrical Engineer and was involved in the improvement and development of existing integrated
circuit moulding systems. In 1998, when Takara Engineering (S) Pte Ltd was acquired by Hongguan
Technologies (S) Pte Ltd, he was further assigned to various automation projects. Mr Sim joined our
Group in November 1999. Mr Sim holds a Diploma in Electrical Engineering from the Singapore
Polytechnic.

Mr Tan Yu Ming is our Group’s Senior Engineer responsible for the implementation of projects for
ultra pure water treatment and wastewater treatment. In April 1997, Mr Tan started working as an
Environmental Engineer with Envilab Sdn Bhd where he worked for two and a half years and was
responsible for the implementation of projects for wastewater treatment. Mr Tan holds a Bachelor of
Science (Hons) degree from the University Technology of Malaysia. Mr Tan joined our Group in
September 1999.

Mr Ge Wen Yue is the Head of Sales and Marketing of HES responsible for overseeing the
research, development and sales of the advanced membrane filtration technology in PRC. Mr Ge
has worked as a Technician in Shanghai Dazhonghua Rubber Factory No. 5 in 1990 and advanced
in ranks to Sales Department personnel, then to Technological Development Department personnel
and finally to the position of Technical Deputy. Mr Ge joined our Group in September 1994. Mr Ge
holds a Bachelor of Chemistry from the Shanghai University.

Save as disclosed below, none of the Executive Officers currently hold directorships or held any past
directorships for the last five (5) years:-

Name Present Directorships

Other companies
Chin Tain Min Fidelity Capital Consultants Pte Ltd
Remajaya Sdn Bhd
Optimum Bonus Sdn Bhd

None of our Directors and Executive Officers have any family relationships with one another or with
any substantial Shareholder of our Company.

75
STAFF
We have 135 full-time employees in Singapore and PRC as at 15 December 2000. Of these
employees, 20 are administration staff, 9 are electrical engineers, 17 are mechanical engineers, 9
are chemical engineers, 4 are chemists and the remaining are technicians and other general
workers. We have not experienced any significant seasonal fluctuations in the number of full-time
employees. The employees are not unionised. The relationship between management and staff has
been good. We have not experienced any industrial disputes in the past three years. Please refer to
page 59 on “Staff Training” for details on our training policy for staff.

DIRECTORS’ REMUNERATION
The remuneration of our Directors on an aggregate basis and in remuneration bands for FY1998
and FY1999 are as follows:-

Aggregate Directors’ Remuneration

FY1998 FY1999
$ $

Executive Directors 725,940 427,600


Non-Executive Directors — 7,200
Total 725,940 434,800

Number of Directors in Each Remuneration Bands

FY1998 FY1999

Non- Non-
Executive Executive Executive Executive
Directors Directors Total Directors Directors Total

$500,000 and above — — — — — —


$250,000 to $499,999 — — — — — —
$0 to $249,999 4 — 725,940 2 1 434,800
Total 4 725,940 2 1 434,800

REMUNERATION OF EMPLOYEES RELATED TO DIRECTORS AND SUBSTANTIAL


SHAREHOLDERS
None of our employees are related to our Directors and substantial shareholders.

In the event that any of our employees are related to our Directors and substantial shareholders in
the future, the total remuneration of such employees who are related to the Directors and substantial
shareholders shall be subject to the annual review and majority approval of the Audit Committee.
The total remuneration paid to our Directors, substantial shareholders and employees who are
related to our Directors and substantial shareholders will be disclosed in the annual report of our
Company.

SERVICE AGREEMENTS
On 29 December 2000, the Company entered into separate service agreements (“Service
Agreements”) with Messrs Lum Ooi Lin Olivia, Deirdre Murugasu and Foo Hee Kiang (the “Executive
Directors”). The Service Agreements will continue for a term of three (3) years unless otherwise
terminated by either party giving not less than six (6) months’ notice in writing to the other. The
Service Agreements cover the terms of employment, specifically salaries and bonuses. Directors’
fees do not form part of the terms of the Service Agreements as these require the approval of
shareholders in the Company’s annual general meeting.

76
Under the Service Agreements, the monthly salary payable to Ms Lum Ooi Lin Olivia, Dr Deirdre
Murugasu and Mr Foo Hee Kiang will be $20,000, $15,000 and $10,000 respectively. They will each
be entitled to annual increments as decided by our Board.

In addition, the Executive Directors will each be entitled to participate in a profit sharing scheme
(“PSS”). The amount to be set aside by our Company for the PSS (the “PSS Amount”) shall be in
accordance with the following scale:-

Profit After Tax (“PAT”) Incentive bonus

(in relation to any financial year of our Group, the combined profit after tax
of our Group calculated based on the consolidated audited accounts in
respect of such financial year)

Where PAT is between $3,000,000 and $5,000,000 1.0% of PAT

Where PAT is more than $5,000,000 but less than or equal to $7,000,000 3.0% of PAT

Where PAT is above $7,000,000 5.0% of PAT

Ms Lum Ooi Lin Olivia, Dr Deirdre Murugasu and Mr Foo Hee Kiang are entitled to 60%, 20% and
20% of the PSS Amount respectively.

The Service Agreements also state that the Executive Directors will be entitled to a car, the value
of which shall be not more than $300,000 for Ms Lum Ooi Lin Olivia and $150,000 for each of Dr
Deirdre Murugasu and Mr Foo Hee Kiang. All travelling and travel-related expenses, entertainment
expenses and other out-of-pocket expenses reasonably incurred by the Executive Directors in the
process of discharging their duties on behalf of our Group will be borne by our Company.

Save as disclosed above, there are no other existing or proposed service agreements between the
Company or its subsidiaries and any Director of the Company.

Had the Service Agreements been in place for FY1999, the aggregate remuneration payable to the
Executive Directors (including CPF, year-end bonus, profit sharing and benefits in kind) would have
been $562,000 instead of $427,600 and the PBT of our Group for FY1999 would have been
$295,000 instead of $430,000 (please refer to page 28, footnote (2)). The Executive Directors’
aggregate remuneration of $562,000 represents approximately 66% of the PBT of the Group (with
the aforesaid remuneration added back) in FY1999 had the Service Agreements been in effect for
FY1999.

77
GENERAL INFORMATION ON THE GROUP

SHAREHOLDERS
The shareholders of the Company and their respective direct shareholdings immediately before and
after the Invitation, after taking into account the Restructuring Exercise, Bonus Issue and Stock Split,
are set out below:-

Before Invitation After Invitation


Number of Number of
Shares % Shares %

Directors
Lum Ooi Lin Olivia 101,023,092 69.82 98,691,576 58.16
Deirdre Murugasu 6,886,016 4.76 6,886,016 4.05
Foo Hee Kiang 2,572,326 1.78 2,572,326 1.52
Teo Kiang Kok — — — —
Lee Joo Hai — — — —

Substantial Shareholders
(5% or more)
DBS Capital 14,468,797 10.00 8,399,555 4.95
Gimmill (1)
14,468,797 10.00 8,399,555 4.95

Other Shareholders
Minority Shareholders(2) 5,268,966 3.64 5,268,966 3.11

Reserved Shares to be
offered to non-public(3) — — 110,000 0.06

Public(4) — — 39,360,000 23.20


Total 144,687,994 100.00 169,687,994 100.00

Notes:-
(1) Gimmill Industrial (Pte) Ltd is owned by Ma Wong Ching (70%), Wong Lang Piow (10%) and Ma On May (20%). These
parties are not related to the Directors and other substantial shareholders of our Company. Please refer to page 64 for
more details on Gimmill.
(2) The minority shareholders comprise Wong Ming Keong, Chen Yue Feng, Ng Koon Hwi, Gan Leong Ming, Koh Lip Lin,
Chin Siong Wee, Tan Jin Bee, and Ge Wen Yue, each holding less than 5% of the Company’s share capital (Please
see page 80, paragraph (2) under “Restructuring Exercise” of this Prospectus). These shareholders are not related to
the Directors and substantial shareholders of our Company.
(3) We intend to offer two of our Executive Directors, Dr Deirdre Murugasu and Mr Foo Hee Kiang, Reserved Shares of
55,000 each in view of their past contributions to our Group. This represents 0.06% of our post-float share capital. Any
excess Reserved Shares not subscribed for by other management, employees and others who have contributed to the
success of our Group will be allotted to these two Executive Directors. Should these two Executive Directors accept
the Reserved Shares, they may hold, dispose of or transfer all or part of their respective shareholdings in our
Company after the Shares are listed on the SGX Sesdaq.
(4) Excluding the 110,000 Reserved Shares to be offered to our Directors (please see note 3 above).

78
Vendors
The names of the Vendors and the number of Vendor Shares which they will offer pursuant to the
Invitation are set out below:-

Name No. of Shares No. of shares


held before the No. of Vendor held after the
Invitation Shares Invitation

DBS Capital 14,468,797 6,069,242 8,399,555


Gimmill 14,468,797 6,069,242 8,399,555
Lum Ooi Lin Olivia 101,023,092 2,331,516 98,691,576
Total 129,960,686 14,470,000 115,490,686

MORATORIUM
To demonstrate her commitment to our Group, Ms Lum Ooi Lin Olivia, who will own 58.16% of our
Company’s issued share capital after the Invitation, has undertaken not to dispose of or transfer any
part of her interests in our Company for a period of twelve (12) months commencing from the date
of admission of our Company to the Official List of SGX Sesdaq and in the twelve (12) months
thereafter shall not reduce her shareholding to below 50% of her original interest in our Company.

RESTRUCTURING EXERCISE
The following Restructuring Exercise was effected in preparation for the Invitation and the listing of
the Company on SGX Sesdaq. Hyflux became the holding company of our Group after the
Restructuring Exercise, which involved the following transactions:-

(1) On 1 June 2000 and 31 August 2000 respectively, Hyflux entered into a sale and purchase
agreement (the “HSPL Sale and Purchase Agreement”) and a supplemental agreement thereto
with the following persons to acquire the entire issued and paid-up capital of HSPL to become
the holding company of HSPL with effect from 31 March 2000, consideration of which was
satisfied by the issue of 7,999,980 ordinary shares of $0.10 each in Hyflux:-

Name Number of Number of


HSPL Hyflux Shares
Shares Sold % Issued %

Lum Ooi Lin Olivia 736,252 92.0 7,362,510 92.0


Deirdre Murugasu 45,001 5.6 450,000 5.6
Foo Hee Kiang 18,747 2.4 187,470 2.4
800,000 100.0 7,999,980 100.0

79
(2) On 1 June 2000 and 31 August 2000 respectively, Hyflux entered into a Sale and Purchase
Agreement (the “HEPL Sale and Purchase Agreement”) and a supplemental agreement thereto
with the following persons to acquire 544,800 ordinary shares of $1.00 each constituting 49.5%
of the issued and paid-up capital of HEPL with effect from 31 March 2000, consideration of
which was satisfied by the issue of 435,840 ordinary shares of $0.10 each in Hyflux:-

Name (the “HEPL Number of Number of


Shareholders”) HEPL Shares Hyflux Shares
Sold % Issued %

Wong Ming Keong 80,000 14.7 64,000 14.7


Chen Yue Feng 10,000 1.8 8,000 1.8
Ng Koon Hwi 100,000 18.4 80,000 18.4
Gan Leong Ming 97,000 17.8 77,600 17.8
Koh Lip Lin 88,000 16.2 70,400 16.2
Chin Siong Wee 70,000 12.8 56,000 12.8
Deirdre Murugasu 64,800 11.9 51,840 11.9
Tan Jin Bee 25,000 4.6 20,000 4.6
Ge Wen Yue 10,000 1.8 8,000 1.8
544,800 100.0 435,840 100.0

(3) On 1 June 2000, the sum of $1,590,155.80 was capitalised from the share premium account
of our Company for a bonus issue of 15,901,558 ordinary shares of $0.10 each fully paid to
the shareholders as at 1 June 2000.

(4) Pursuant to a subscription agreement dated 3 June 2000, DBS Capital and Gimmill each
subscribed for 3,042,174 ordinary shares of $0.10 each in the capital of our Company at a
consideration of $0.7889096 per said share, totalling an aggregate of $4,800,000 or
$2,400,000 each.

80
(5) On 21 June 2000, the HEPL Shareholders, DBS Capital, Gimmill and Hyflux entered into a
shareholders’ agreement (the “Shareholders’ Agreement”) to effect their intentions and to
regulate their relationship inter se and in the conduct of the business and affairs of the
Company. The Shareholders’ Agreement is intended to provide for the Strategic Investors’ cost
of investment in our Company to be at a 20% discount to the fair value of their shareholdings,
based on the IPO Price. This price was determined on a willing buyer, willing seller basis. We
have sought the investment of these two investors to finance the purchase of a new factory at
Changi South and working capital. In addition, the capital injection will increase our capital
base, putting us in a better position to tender for projects of larger values. We have thus
offered the Strategic Investors a discount of 20% to the fair value in view of the potential
benefits that would arise from their capital investments. We will benefit from the professional
advice provided by DBS Capital in areas such as business strategy and restructuring, which
aid our efforts to achieve a public listing. Gimmill is a business associate of our Group through
its associate company, Ramatex Berhad. We have provided services to the subsidiaries of
Ramatex Berhad, Ramatex and Ramatex (Suzhou), from FY1998 (please see page 85 on
“Interested Person Transactions” for details). We believe that the inclusion of Gimmill as our
shareholder will strengthen our business relationship with the Ramatex Group.

At the point of cash injection by the Strategic Investors, the fair value of one ordinary share of
our Company was intended to be based on the IPO Price. As the IPO Price was not
determinable then, the Shareholders’ Agreement was drawn up to align the capital investment
of the Strategic Investors to the intended fair value of our Company’s Shares.

The Shareholders’ Agreement provides, inter alia, that in the event our Company achieves an
initial public offering (“IPO”) at any time on or before 30 November 2001 at an offer price (“IPO
Price”) that results in a First Top-up Price (as defined below) greater than zero, our Company
shall issue and allot to DBS Capital and Gimmill, and the two Strategic Investors shall, in
consideration, within five (5) Business Days of fixing the IPO Price subscribe and pay for, one
ordinary share each at a price (“First Top-up Price”) computed as follows:-

First Top-up Price = $(N x 0.8 x IPO Price) - $2,400,000

A B C

where N represents the number of ordinary Shares held by such Strategic Investor prior to
its subscribing for the one Share under this Clause;
B represents the value of the Strategic Investor’s shareholdings in our Company,
based on a 20% discount to the IPO Price; and
C represents the cost of investment of each Strategic Investor (please refer to
paragraph 4 above).

Where A is greater than zero, the Strategic Investor’s earlier cash investment of $2,400,000 is
less than the agreed value, implied by a 20% discount to the IPO Price. In such a scenario,
the Strategic Investor will have to top-up the difference determined as A above. In
consideration for this top-up, our Company will issue one share to each of the Strategic
Investors.

81
In the event that the Company achieves an IPO at any time on or before the 30 November
2001 at an IPO Price that results in the First Top-up Price being negative, our Company shall
as soon as possible buy back one Share each from DBS Capital and Gimmill, via a share
buyback, a capital reduction or such other form of arrangement as may be permitted by the
Act or any other law in existence at the relevant time and upon such terms and conditions
reasonably satisfactory to each of the Strategic Investors. The price of such Share to be
bought back by our Company (“First Buy-back Price”) shall be computed on the following
basis:-

First Buy-back Price = $2,400,000 - $(N x 0.8 x IPO Price)

A B C

where N represents the number of ordinary Shares held by such Strategic Investor prior to
its subscribing for the one Share under this Clause;
B represents the cost of investment of each Strategic Investor (please refer to
paragraph 4 above); and
C represents the value of the Strategic Investor’s shareholdings in our Company,
based on a 20% discount to the IPO Price;

Where A is less than zero, the Strategic Investor’s earlier cash investment of $2,400,000 is
more than the agreed value, implied by a 20% discount to the IPO Price. In such a scenario,
our Company will have to pay the difference determined as A above to each of the Strategic
Investors. In consideration for this payment, our Company will buy back one (1) share each
from the Strategic Investors.

Based on the actual IPO Price of $0.32, the first top-up price will be positive and will be
determined as follows:-

A=$(14,468,796 x 0.8 x 0.32) - $2,400,000 = approximately $1.30 million

Thus, we will receive approximately $1.30 million from each of the Strategic Investors or a total
of about $2.60 million. In consideration of this top-up, we will then issue one (1) new ordinary
share to each of the Strategic Investors. Our issued share capital prior to the Invitation will
increase correspondingly by two (2) shares to 144,687,994. Our cash will increase by the
amount of top-up by the Strategic Investors and our share premium account will also increase
by the same amount.

Each of the Strategic Investors shall be entitled to sell as vendor shares up to one-half of its
shareholding in the Company at IPO or 7,234,399 shares each. After the IPO, there will be no
restriction on the ability of the Strategic Investors to sell their remaining interest in the
Company (please refer to “Risk Factors” on page 25 for details).

Other than as disclosed above, we have not entered into any other agreements with our
Strategic Investors.

(6) On 7 September 2000, Hyflux entered into a sale and purchase agreement with HSPL for the
acquisition by Hyflux of 555,700 ordinary shares of $0.10 each constituting 50.5% of the
issued and paid-up capital of HEPL at a consideration of $646,120, representing HSPL’s cost
of investment in HEPL.

82
GROUP STRUCTURE
Our Group structure after the Restructuring and prior to listing is as shown below:-

Hyflux Ltd

100% 100% 100%

Hydrochem (S) Pte Hyflux Hydrochem


Ltd Engineering Pte Engineering (S) Pte
(ÒHSPLÓ) Ltd (ÒHFPLÓ) Ltd (ÒHEPLÓ)

100%

Hydrochem
Engineering
(Shanghai) Co., Ltd
(ÒHESÓ)

Subsidiaries
The details of our Company’s subsidiaries are as follows:-

Name of company Date and Issued Effective Principal business


place of and paid-up interest owned owned by
incorporation capital by the Group the Group

Hydrochem (S) Pte Ltd 30 Jun 1989 $800,000 100% Manufacturing, processing
Republic of and dealing in water
Singapore treatment equipment and
turnkey engineering
installation of industrial
equipment and machines
and other related activities

Hydrochem Engineering 9 Mar 1994 $1,100,500 100% Consulting in the installation


(S) Pte Ltd Republic of of equipment for chemical
Singapore processing, application of
chemicals and chemical
preparation for commercial
or industrial use and
wholesale of chemical and
fabricated products

Hydrochem Engineering 24 Nov 1994 US$420,000 100% Development, manufacture of


(Shanghai) Co., Ltd PRC equipment and parts primarily
for membrane filtration
technology, sale of
manufactured equipment
and ancillary parts,
provision of installation and
commissioning of relevant
projects and provision of
technical services and
consultation

83
Name of company Date and Issued Effective Principal business
place of and paid-up interest owned owned by
incorporation capital by the Group the Group

Hyflux Engineering Pte 18 November $2.00 100% Operating of water and


Ltd 2000 liquid treatment plants
Republic of and sale of treated water
Singapore

None of our subsidiaries are listed on any stock exchange.

Note:-
(1) Application to wind up Hydrochem Membrane Technology (Shanghai) Co., Ltd (“HMTS”) has been made in PRC as
HMTS has been dormant since incorporation.

84
INTERESTED PERSON TRANSACTIONS

Save as disclosed below, none of our Directors, substantial shareholders or Executive Officers were
or are interested in any material transactions undertaken by our Group within the last three financial
years.

Interested Person Transactions


(a) Gimmill, which has a 10.00% and 4.95% equity stake in our Company prior to and after the
Invitation respectively, owns 29.15% of Ramatex Berhad, a listed company in Malaysia. Two of
our major customers, Ramatex and Ramatex (Suzhou) are wholly-owned subsidiaries of
Ramatex Berhad. We have provided the following services to the Ramatex Group:-
(i) treatment of river water using nano-filtration membranes in Malaysia;
(ii) wastewater treatment of textile dyeing water in Suzhou;
(iii) installation of a wastewater treatment plant in Suzhou; and
(iv) sale of membranes, chemicals and filters.
There were no maintenance and service contracts with Ramatex and Ramatex Suzhou. A
summary of our sales to the Ramatex Group is as follows:-

Ten months
ended
Sales FY1997 FY1998 FY1999 31 October
2000

Ramatex — $1,160,437 $71,000 $182,520


Ramatex Suzhou — — $1,169,000 $450,000
— $1,160,437 $1,240,000 $632,520

Gimmill was not a shareholder of our Company when these projects with the Ramatex Group
were secured. If further services are provided by our Company to the Ramatex Group, we
would ensure that such transactions continue to be on arms’ length basis.
(b) Pursuant to a lease agreement dated 1 November 1997 between our Executive Director, Dr
Deirdre Murugasu, as landlord and Hydrochem (S) Pte Ltd (“HSPL”), our wholly-owned
subsidiary, as tenant, HSPL leased the whole of the premises at 34 Kaki Bukit Industrial
Terrace (the “Property”) from Dr Murugasu for a term of one (1) year commencing 1 November
1997 to 31 October 1998 at a monthly rental of $9,000. The Property is owned jointly by Dr
Deirdre Murugasu and our Managing Director and substantial Shareholder, Ms Lum Ooi Lin
Olivia with each holding equal stakes. Dr Deirdre Murugasu, representing the owners, signed
the lease agreement. The lease was extended on the same terms until 31 October 2000 when
we moved into our new premises at 40 Changi South Street 1. The lease was not renewed
upon its expiry on 31 October 2000.

Guidelines for Future Interested Person Transactions


Our Audit Committee, when formed, will review and approve all interested person transactions as
defined by the SGX-ST Listing Manual (“Interested Person Transactions”) to ensure that they are on
arms’ length basis, that is, the transactions are transacted on terms and prices not more favourable
to the interested persons than if they were transacted with a third party and we have not been
disadvantaged in any other way.

We will prepare relevant information to assist our Audit Committee in its review.

85
Before any agreement or arrangement that is not in the ordinary course of business of our Group is
transacted, prior approval must be obtained from the Audit Committee. In the event that a member
of the Audit Committee is interested in any of the Interested Person Transactions, he will abstain
from reviewing and voting on that particular transaction. Any decision to proceed with such an
agreement or arrangement would be recorded for review by the Audit Committee.

We will also comply with the provisions in Chapter 9A of the SGX-ST Listing Manual in respect of
all future Interested Person Transactions, and if required under the SGX-ST Listing Manual or the
Act, we will seek our Shareholders’ approval for such transaction.

Potential conflicts of interest


As at the date of this Prospectus, save as disclosed in the section on “Interested Person
Transactions” and “Directors”:-
(a) No Director, substantial shareholder or Executive Officer of the Group has any interest, direct
or indirect, in any material transactions to which our Group was or is to be a party;
(b) No Director, substantial shareholder or Executive Officer of our Group has any interest, direct
or indirect, in any company carrying on the same business or carrying on a similar trade as our
Group; and
(c) No Director, substantial shareholder or Executive Officer of our Group has any interest, direct
or indirect, in any enterprise or company that is our Company’s customer or supplier of goods
or services.

86
PROPERTY, PLANTS AND EQUIPMENT

Our Group currently owns the following property:-

Cost as at Accumulated Net book


Description/Location, Area, 31 October Depreciation as at value as at
Tenure, Unexpired term and Date of 2000 31 October 2000 31 October 2000
Annual rental if leasehold Purchase ($) ($) ($)

Description
A 2-storey factory at 22 June 2000 2,884,000 Nil 2,884,000
40 Changi South Street 1
Singapore 486764
Land area/Built-in area
2,436 sq m/1,580 sq m

Tenure
30 years commencing
1 December 1996

Annual Rental
$69,627 per annum, payable to JTC(1)

Note:
(1) A 30-year lease constitutes a legal interest. Nonetheless, an annual land rent is payable under JTC’s terms and
conditions of lease.

87
In addition, our Group currently leases the following property:-

Cost as at Accumulated Net book


Description/Location, Area, 31 October Depreciation as at value as at
Tenure, Unexpired term and Date of 2000 31 October 2000 31 October 2000
Annual rental if leasehold Purchase ($) ($) ($)

Description
Ground floor factory at NA NA NA NA
No 77 E-Shan Road,
Jin Niu Building,
Pudong New District,
Shanghai

Land area/Built-in area


1,498.58 sq m

Tenure
6 years commencing
1 August 1999 to
31 July 2005

Annual Rental
RMB481,344 per annum for the first
two (2) years and an adjusted rental
to be agreed by the parties for the
remaining four (4) years subject to an
upward or downward adjustment of
not more than ten per cent (10%) of
the rental for the first two (2) years
Rental is payable to Shanghai Jin Niu
Property Development Co Ltd(1)

Notes:
(1) Shanghai Jin Niu Property Development Co Ltd, the landlord of the factory at No 77 E-Shan Road, Jin Niu Building,
Pudong New District, Shanghai, is a third party unrelated to our Group.

Our plant and machinery, motor vehicles and furniture, fittings and office equipment, had a net book
value of approximately $1.14 million as at 31 October 2000.

88
GENERAL AND STATUTORY INFORMATION

INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS


1. The names, ages, addresses and current occupations of the Directors of the Company and
Executive Officers of the Group are set out on pages 69 to 72 of this Prospectus.

2. Information on the business and working experience of the Directors is set out on pages 69 to
70 of this Prospectus.

3. The list of present and past directorships of each Director for the last five years, other than the
Company, is set out on pages 70 to 71 of this Prospectus.

4. Information on the business and working experience of the Executive Officers of the Group is
set out on pages 74 to 75 of this Prospectus:-

5. The list of present and past directorships of each Executive Officer for the last five years is set
out on page 75 of this Prospectus.

6. None of the Directors or Executive Officers is or was involved in any of the following events:-
(a) a petition under any bankruptcy laws filed in any jurisdiction against him or any
partnership in which he was a partner or any corporation of which he was a director or an
executive officer in the last 10 years;
(b) unsatisfied judgements outstanding against him;
(c) a conviction of any offence, in Singapore or elsewhere, involving fraud or dishonesty
punishable with imprisonment for three months or more, or charged for violation of any
securities laws or any such pending criminal proceeding against him;
(d) a conviction of any offence, in Singapore or elsewhere, involving a breach of any securities
or financial market laws, rules or regulations;
(e) the subject of judgement in any civil proceeding in Singapore or elsewhere in the last 10
years involving fraud, misrepresentation or dishonesty or any such pending civil
proceeding against him;
(f) a conviction in Singapore or elsewhere of any offence in connection with the formation or
management of any corporation;
(g) disqualification from acting as a director of any company, or from taking part in any way
directly or indirectly in the management of any company;
(h) the subject of any order, judgement or ruling of any court of competent jurisdiction, tribunal
or governmental body permanently or temporarily enjoining him from engaging in any type
of business practice or activity; and
(i) the management or conduct of affairs of any company or partnership which has been
investigated by an inspector appointed under the provisions of the Companies Act, or
other securities enactment or by any other regulatory body in connection with any matter
involving the company or partnership occurring or arising during the period when he was
so concerned with the company or partnership.

7. The aggregate emoluments (including CPF contributions thereon) paid to the then existing
Directors for services rendered in all capacities to the Company and its subsidiaries in FY1999
amounted to approximately $434,800. The aggregate emoluments payable to the present
Directors in FY2000 under the arrangements in force at the date of this Prospectus, including
the Service Agreements referred to on pages 76 to 77 of this Prospectus, is approximately
$862,000.

89
8. Save as disclosed on pages 76 to 77 of this Prospectus, there are no existing or proposed
service contracts between the Directors and the Company or its subsidiaries.

9. The Directors and Executive Officers are unrelated by blood or marriage to one another nor
are they so related to any substantial shareholder of the Company.

10. No option to subscribe for shares in, or debentures of, the Company or its subsidiaries has
been granted to, or was exercised by, any Director or Executive Officer within the last financial
year.

11. Save as disclosed on pages 81 to 82 of this Prospectus, no person has been, or is entitled to
be, given an option to subscribe for any shares in or debentures of the Company or its
subsidiaries.

12. Save as disclosed on page 85 of this Prospectus, no Director or expert is interested, directly
or indirectly, in the promotion of, or in any assets acquired or disposed of by, or leased to, the
Company or its subsidiaries within two years preceding the date of this Prospectus, or in any
proposal for such acquisition or disposal or lease as aforesaid.

13. No Director has any interest in any existing contract or arrangement that is significant in
relation to the business of the Group taken as a whole.

14. No Director, substantial shareholder or Executive Officer has any interest, direct or indirect, in
any business carrying on a similar trade as the Company or its subsidiaries.

15. There is no shareholding qualification for Directors in the Articles of Association of the
Company.

16. The interests of the Directors and substantial shareholders in the Company at the date of this
Prospectus and as recorded in the Register of Directors’ Shareholdings and the Register of
Substantial Shareholders maintained under the provisions of the Companies Act (Chapter 50)
are as follows:-

Number of Shares Number of Shares


registered in the in which the Directors
names of Directors and substantial
and substantial shareholders are deemed
shareholder % to have an interest %

Directors
Lum Ooi Lin Olivia 101,023,092 69.82% — —
Deirdre Murugasu 6,886,016 4.76% — —
Foo Hee Kiang 2,572,326 1.78% — —
Teo Kiang Kok — — — —
Lee Joo Hai — — — —

Holders of 5% or more
DBS Capital 14,468,797 10.00% — —
Gimmill 14,468,797 10.00% — —

Save as disclosed above, no Director has any interest in the Shares, including the New
Shares, which are the subject of this Invitation (please refer to “Shareholders” on page 78 for
more details).

17. Save as disclosed below, no sum has been paid or has been agreed to be paid to any Director
or to any firm in which a Director is a partner in cash or in shares or otherwise by any person
to induce him to become a Director in connection with the promotion or formation of the
Company.

90
Mr Teo Kiang Kok is a senior partner of Shook Lin & Bok which will be receiving a fee paid by
us and the Vendors for legal services rendered in connection with the Invitation. It is envisaged
that we may continue to engage the services of Shook Lin & Bok as and when the need
arises. Our Directors are of the view that the provision by Shook Lin & Bok of such services
will not interfere with Mr Teo Kiang Kok’s independent judgement in his role as a member of
the Audit Committee.

SHARE CAPITAL
18. As at the date of this Prospectus, there is only one class of shares in the capital of the
Company. All of the shares are in registered form. The rights and privileges attached to the
Shares are stated in the Articles of Association of the Company. There are no founder,
management or deferred shares. There are no limitations imposed by Singapore law or the
Articles of Association of the Company on the rights of non-resident shareholders to hold or
vote on the ordinary shares of the Company.

19. Save as disclosed herein and on page 45 of this Prospectus, there were no changes in the
issued and paid-up share capital of the Company or its subsidiaries within the three years
preceding the date of this Prospectus:-

Number of Issue price Purpose of issue/ Resultant issued


Date of issue shares issued per Share consideration share capital

Hyflux Ltd

31 March 2000 20 ordinary shares $0.10 Incorporation $2.00


of $0.10 each

1 June 2000 7,999,980 ordinary $0.10 Pursuant to $800,000


shares of $0.10 each Restructuring Exercise

1 June 2000 435,840 ordinary $3.75 Pursuant to $843,584


shares of $0.10 each Restructuring Exercise

1 June 2000 15,901,558 ordinary $0.10 Capitalisation of $2,433,739.80


shares of $0.10 each share premium account

3 June 2000 6,084,348 ordinary $0.789 Working capital $3,042,174.60


shares of $0.10 each

18 December 2000 83,844,500 ordinary $0.05 Capitalisation of $7,234,399.60


shares of $0.05 each share premium account

8 January 2001 2 ordinary shares of $1.30 Pursuant to the $7,234,399.70


$0.05 each million Shareholders’ Agreement

Hydrochem (S) Pte Ltd


10 May 1999 400,000 ordinary $1.00 Capitalisation of $750,000
shares of $1.00 each revenue reserve account

10 May 1999 50,000 ordinary $1.00 Capitalisation of $800,000


shares of $1.00 each Director’s loan

Hydrochem Engineering (S) Pte Ltd


10 August 1999 10,000 ordinary $1.00 Working capital $1,100,500
shares of $1.00 each

Hyflux Engineering Pte Ltd


18 November 2000 2 ordinary $1.00 Incorporation $2.00
shares of $1.00 each

91
20. Save as disclosed above, no shares or debentures were issued or were agreed to be issued
by the Company or its subsidiaries for cash or for a consideration other than cash during the
last three years preceding the date of this Prospectus.

21. MEMORANDUM AND ARTICLES OF ASSOCIATION

Memorandum of Association
Objects and Purposes
The Memorandum of Association of the Company states, among others, that the liability of
members of the Company is limited, and that the objects for which the Company is established
include those of a holding and investment company.

The objects of the Company are set out in full in Clause 3 of the Memorandum of Association
which is available for inspection at our registered office as stated in the section titled
“Documents Available for Inspection”.

The complete listing of our objects and purposes can be found at page 1 to 5 of our
Company’s Memorandum of Association.

Articles of Association
Provisions relating to Directors
The provisions in the Articles of Association with respect to: (a) a Director’s power to vote on
a proposal, arrangement or contract in which the Director is materially interested; (b) the
Directors’ power, in the absence of an independent quorum, to vote compensation to
themselves or any members of their body; (c) borrowing powers exercisable by the Directors
and how such borrowing powers can be varied; (d) retirement or non-retirement of Directors
under an age limit requirement; and (e) number of shares, if any, required for Directors’
qualification, are as follows:-

Article 76
A Director shall not be required to hold any shares of the Company by way of qualification. A
Director who is not a member of the Company shall nevertheless be entitled to receive notice
of and to attend and speak at General Meetings.

Article 77
The ordinary remuneration of the Directors, which shall from time to time be determined by an
Ordinary Resolution of the Company, shall not be increased except pursuant to an Ordinary
Resolution passed at a General Meeting where notice of the proposed increase shall have
been given in the notice convening the General Meeting and shall (unless such resolution
otherwise provides) be divisible among the Directors as they may agree, or failing agreement,
equally, except that any Director who shall hold office for part only of the period in respect of
which such remuneration is payable shall be entitled only to rank in such division for a
proportion of remuneration related to the period during which he has held office. The ordinary
remuneration of an executive Director may not include a commission on or a percentage of
turnover and the ordinary remuneration of a non-executive Director shall be a fixed sum, and
not by a commission on or a percentage of profits or turnover.

92
Article 78
Any Director who holds any executive office, or who serves on any committee of the Directors,
or who otherwise performs services which in the opinion of the Directors are outside the scope
of the ordinary duties of a Director, may be paid such extra remuneration by way of salary,
commission or otherwise as the Directors may determine, other than by a commission on or
percentage of commission or turnover, Provided that such extra remuneration in case of an
executive Director shall not by way of commission on or a percentage of turnover and in the
case of a non-executive Director shall be by a fixed sum, and not by a commission on or a
percentage of profits or turnover.

Article 90
The Directors to retire by rotation shall include (so far as necessary to obtain the number
required) any Director who is due to retire at the meeting by reason of age or who wishes to
retire and not to offer himself for re-election. Any further Directors so to retire shall be those of
the other Directors subject to retirement by rotation who have been longest in office since their
last re-election or appointment and so that as between persons who became or were last re-
elected Directors on the same day, those to retire shall (unless they otherwise agree among
themselves) be determined by ballot. A retiring Director shall be eligible for re-election.

Article 91
The Company at the meeting at which a Director retires under any provision of these presents
may by Ordinary Resolution fill the office being vacated by electing thereto the retiring Director
or some other person eligible for appointment. In default, the retiring Director shall be deemed
to have been re-elected except in any of the following cases:-
(A) where at such meeting it is expressly resolved not to fill such office or a resolution for the
re-election of such Director is put to the meeting and lost; or
(B) where such Director has given notice in writing to the Company that he is unwilling to be
re-elected; or
(C) where the default is due to the moving of a resolution in contravention of the next following
Article; or
(D) where such Director has attained any retiring age applicable to him as Director.

The retirement shall not have effect until the conclusion of the meeting except where a
resolution is passed to elect some other person in the place of the retiring Director or a
resolution for his re-election is put to the meeting and lost and accordingly a retiring Director
who is re-elected or deemed to have been re-elected will continue in office without a break.

Article 100
A Director shall not vote in respect of any contract or arrangement or any other proposal
whatsoever in which he has any interest, directly or indirectly. A Director shall not be counted
in the quorum at a meeting in relation to any resolution on which he is debarred from voting.

Article 108
Subject as hereinafter provided and to the provisions of the Statutes, the Directors may
exercise all the powers of the Company to borrow money, to mortgage or charge its
undertaking, property and uncalled capital and to issue debentures and other securities,
whether outright or as collateral security for any debt, liability or obligation of the Company or
of any third party.

93
Provisions relating to rights, preferences and restrictions attaching to Shares
The provisions in the Articles of Association relating to the rights, preferences and restrictions
attaching to each class of the shares, including: (a) dividend rights, including the time limit after
which dividend entitlement lapses and an indication of the party in whose favour this
entitlement operates; (b) voting rights, including whether Directors stand for re-election at
staggered intervals and the impact of that arrangement where cumulative voting is permitted or
required; (c) rights to share in the company’s profits; (d) rights to share in any surplus in the
event of liquidation; (e) redemption provisions; (f) sinking fund provisions; (g) liability to further
capital calls by the Company; and (h) any provision discriminating against any existing or
prospective holder of such securities as a result of such shareholder owning a substantial
number of shares, are as follows:-

Article 4(A)
Subject to these presents, no shares may be issued by the Directors without the prior approval
of the Company in General Meeting pursuant to Section 161 of the Act, but subject thereto
and the terms of such approval, and to Article 5, and to any special rights attached to any
shares for the time being issued, the Directors may allot (with or without conferring a right of
renunciation) or grant options over or otherwise dispose of the same to such persons on such
terms and conditions and for such consideration and at such time and whether or not subject
to the payment of any part of the amount thereof in cash or otherwise as the Directors may
think fit, and any shares may, subject to compliance with Sections 70 and 75 of the Act, be
issued with such preferential, deferred, qualified or special rights, privileges, conditions or
restrictions, whether as regards dividend, return of capital, participation in surplus, voting,
conversion or otherwise, as the Directors may think fit, and preference shares may be issued
which are or at the option of the Company are liable to be redeemed, the terms and manner
of redemption being determined by the Directors in accordance with the Act, Provided Always
that:-
(A) no shares shall be issued to transfer a controlling interest in the Company without the
specific prior approval of the Company in General Meeting; and
(B) no shares shall be issued at a discount or options granted over unissued shares except in
accordance with the Act.

Article 18
The Directors may from time to time make calls upon the members in respect of any moneys
unpaid on their shares (whether on account of the nominal value of the shares or, when
permitted, by way of premium) but subject always to the terms of issue of such shares. A call
shall be deemed to have been made at the time when the resolution of the Directors
authorising the call was passed and may be made payable by instalments.

Article 19
Each member shall (subject to receiving at least fourteen days’ notice specifying the time or
times and place of payment) pay to the Company at the time or times and place so specified
the amount called on his shares. The joint holders of a share shall be jointly and severally
liable to pay all calls in respect thereof. A call may be revoked or postponed as the Directors
may determine.

94
Article 21
Any sum (whether on account of the nominal value of the share or by way of premium) which
by the terms of issue of a share becomes payable upon allotment or at any fixed date shall for
all the purposes of these presents be deemed to be a call duly made and payable on the date
on which by the terms of issue the same becomes payable. In the case of non-payment, all the
relevant provisions of these presents as to payment of interest and expenses, forfeiture or
otherwise shall apply as if such sum had become payable by virtue of a call duly made and
notified.

Article 23
The Directors may if they think fit receive from any member willing to advance the same all or
any part of the moneys (whether on account of the nominal value of the shares or by way of
premium) uncalled and unpaid upon the shares held by him and such payment in advance of
calls shall extinguish pro tanto the liability upon the shares in respect of which it is made and
upon the moneys so received (until and to the extent that the same would but for such
advance become payable) the Company may pay interest at such rate (not exceeding eight per
cent. per annum) as the member paying such sum and the Directors may agree. Capital paid
on shares in advance of calls shall not, whilst bearing interest, confer a right to participate in
profits.

Article 63
Subject to any special rights or restrictions as to voting attached by or in accordance with
these presents to any class of shares, on a show of hands every member who is present in
person or by proxy shall have one vote, the chairman of the meeting to determine which proxy
shall be entitled to vote where a member is represented by two proxies, and on a poll every
member who is present in person or by proxy shall have one vote for every share of which he
is the holder. A member who is bankrupt shall not, while his bankruptcy continues, be entitled
to exercise his rights as a member, or attend, vote or act at any meeting of the Company.

Article 89
At each Annual General Meeting, one-third of the Directors for the time being (or, if their
number is not a multiple of three, the number nearest to but not less than one-third) shall retire
from office by rotation, Provided that no Director holding office as Managing Director shall be
subject to retirement by rotation or be taken into account in determining the number of
Directors to retire. For the avoidance of doubt, each Director (other than a Director holding
office as Managing Director) shall retire at least once every three years.

Article 90
The Directors to retire by rotation shall include (so far as necessary to obtain the number
required) any Director who is due to retire at the meeting by reason of age or who wishes to
retire and not to offer himself for re-election. Any further Directors so to retire shall be those of
the other Directors subject to retirement by rotation who have been longest in office since their
last re-election or appointment and so that as between persons who became or were last re-
elected Directors on the same day, those to retire shall (unless they otherwise agree among
themselves) be determined by ballot. A retiring Director shall be eligible for re-election. A
Director shall be subject to such age limit as may be prescribed under the Act for purposes of
retirement or re-election.

95
Article 122
The Directors may from time to time set aside out of the profits of the Company and carry to
reserve such sums as they think proper which, at the discretion of the Directors, shall be
applicable for any purpose to which the profits of the Company may properly be applied and
pending such application may either be employed in the business of the Company or be
invested. The Directors may divide the reserve into such special funds as they think fit and
may consolidate into one fund any special funds or any parts of any special funds into which
the reserve may have been divided. The Directors may also, without placing the same to
reserve, carry forward any profits. In carrying sums to reserve and in applying the same, the
Directors shall comply with the provisions of the Statutes.

Article 124
If and so far as in the opinion of the Directors, the profits of the Company justify such
payments, the Directors may declare and pay the fixed dividends on any class of shares
carrying a fixed dividend expressed to be payable on fixed dates on the half-yearly or other
dates prescribed for the payment thereof and may also from time to time declare and pay
interim dividends on shares of any class of such amounts and on such dates and in respect
of such periods as they think fit.

Article 125
Unless and to the extent that the rights attached to any shares or the terms of issue thereof
otherwise provide, all dividends shall (as regards any shares not fully paid throughout the
period in respect of which the dividend is paid) be apportioned and paid pro rata according to
the amounts paid on the shares during any portion or portions of the period in respect of
which the dividend is paid. For the purposes of this Article, no amount paid on a share in
advance of calls shall be treated as paid on the share.

Article 126
No dividend shall be paid otherwise than out of profits available for distribution under the
provisions of the Statutes or, pursuant to Section 69 of the Act and in the form of stock
dividends, out of the share premium account. Any dividend unclaimed after six (6) years from
the date of declaration shall be made forfeit and revert to the Company.

Article 134
The Directors may, with the sanction of an Ordinary Resolution of the Company, capitalise any
sum standing to the credit of any of the Company’s reserve accounts as representing profits
available for distribution under the provisions of the Statutes or, pursuant to Sections 69 or 70
of the Act, the Company’s share premium account or capital redemption reserve, by
appropriating such sum to the persons registered as the holders of shares in the Register of
Members or (as the case may be) the Depository Register at the close of business on the date
of the resolution (or such other date as may be specified therein or determined as therein
provided) in proportion to their then holdings of shares and applying such sum on their behalf
in paying up in full unissued shares or (subject to any special rights previously conferred on
any shares or class of shares for the time being issued) unissued shares of any other class
not being redeemable shares, for allotment and distribution credited as fully paid up to and
amongst them as bonus shares in the proportion aforesaid. The Directors may do all acts and
things considered necessary or expedient to give effect to any such capitalisation, with full
power to the Directors to make such provisions as they think fit for any fractional entitlements
which would arise on the basis aforesaid (including provisions whereby fractional entitlements
are disregarded or the benefit thereof accrues to the Company rather than to the members
concerned). The Directors may authorise any person to enter on behalf of all the members
interested into an agreement with the Company providing for any such capitalisation and
matters incidental thereto and any agreement made under such authority shall be effective and
binding on all concerned.

96
Article 146
If the Company shall be wound up (whether the liquidation is voluntary, under supervision, or
by the court) the Liquidator may, with the authority of a Special Resolution, divide among the
members in specie or in kind the whole or any part of the assets of the Company and whether
or not the assets shall consist of property of one kind or shall consist of properties of different
kinds, and may for such purpose set such value as he deems fair upon any one or more class
or classes of property and may determine how such division shall be carried out as between
the members of different classes of members. The Liquidator may, with the like authority, vest
any part of the assets in trustees upon such trusts for the benefit of members as the Liquidator
with the like authority shall think fit, and the liquidation of the Company may be closed and the
Company dissolved, but so that no contributory shall be compelled to accept any shares or
other property in respect of which there is a liability.

Provisions relating to variation of rights of Shareholders


The provisions in the Articles of Association relating to the actions necessary to change the
rights of holders of the stock, are as follows:-

Article 9
(A) Whenever the share capital of the Company is divided into different classes of shares, the
variation or abrogation of the special rights attached to any class may, subject to the
provisions of the Act, be made either with the consent in writing of the holders of three-
quarters in nominal value of the issued shares of the class or with the sanction of a
Special Resolution passed at a separate General Meeting of the holders of the shares of
the class (but not otherwise) and may be so made either whilst the Company is a going
concern or during or in contemplation of a winding-up. To every such separate General
Meeting all the provisions of these presents relating to General Meetings of the Company
and to the proceedings thereat shall mutatis mutandis apply, except that the necessary
quorum shall be two or more persons holding at least one-third in nominal value of the
issued shares of the class present in person or by proxy or attorney and that any holder
of shares of the class present in person or by proxy or attorney may demand a poll and
that every such holder shall on a poll have one vote for every share of the class held by
him where the class is a class of equity shares within the meaning of Section 64(1) of the
Act or at least one vote for every share of the class where the class is a class of
preference shares within the meaning of Section 180(2) of the Act, Provided Always that
where the necessary majority for such a Special Resolution is not obtained at such
General Meeting, the consent in writing, if obtained from the holders of three-quarters in
nominal value of the issued shares of the class concerned within two months of such
General Meeting, shall be as valid and effectual as a Special Resolution carried at such
General Meeting.
(B) The provisions in Article 9(A) shall mutatis mutandis apply to any repayment of preference
capital (other than redeemable preference capital) and any variation or abrogation of the
rights attached to preference shares or any class thereof.
(C) The special rights attached to any class of shares having preferential rights shall not
unless otherwise expressly provided by the terms of issue thereof be deemed to be varied
by the creation or issue of further shares ranking as regards participation in the profits or
assets of the Company in some or all respects pari passu therewith but in no respect in
priority thereto.

97
Provisions relating to Annual General Meeting and Extraordinary General Meetings
The provisions in the Articles of Association relating to the manner in which annual general
meetings and extraordinary general meetings of shareholders are convoked, including the
conditions of admission, are as follows:-

Article 42
A reference to a member shall be a reference to a registered holder of shares in the Company,
or where such registered holder is CDP, the Depositors on behalf of whom CDP holds the
shares, Provided that:-

(A) a Depositor shall only be entitled to attend any General Meeting and to speak and vote
thereat if his name appears on the Depository Register maintained by CDP forty-eight (48)
hours before the General Meeting as a Depositor on whose behalf CDP holds shares in
the Company, the Company being entitled to deem each such Depositor, or each proxy of
a Depositor who is to represent the entire balance standing to the Securities Account of
the Depositor, to represent such number of shares as is actually credited to the Securities
Account of the Depositor as at such time, according to the records of CDP as supplied by
CDP to the Company, and where a Depositor has apportioned the balance standing to his
Securities Account between two proxies, to apportion the said number of shares between
the two proxies in the same proportion as previously specified by the Depositor in
appointing the proxies; and accordingly no instrument appointing a proxy of a Depositor
shall be rendered invalid merely by reason of any discrepancy between the proportion of
Depositor’s shareholding specified in the instrument of proxy, or where the balance
standing to a Depositor’s Securities Account has been apportioned between two proxies
the aggregate of the proportions of the Depositor’s shareholding they are specified to
represent, and the true balance standing to the Securities Account of a Depositor as at
the time of the General Meeting, if the instrument is dealt with in such manner as is
provided above;
(B) the payment by the Company to CDP of any dividend payable to a Depositor shall to the
extent of the payment discharge the Company from any further liability in respect of the
payment;
(C) the delivery by the Company to CDP of provisional allotments or share certificates in
respect of the aggregate entitlements of Depositors to new shares offered by way of rights
issue or other preferential offering or bonus issue shall to the extent of the delivery
discharge the Company from any further liability to each such Depositor in respect of his
individual entitlement; and
(D) the provisions in these presents relating to the transfers, transmissions or certification of
shares shall not apply to the transfer of book-entry securities (as defined in the Statutes).

Article 47
An Annual General Meeting shall be held once in every year, at such time (within a period of
not more than fifteen months after the holding of the last preceding Annual General Meeting)
and place as may be determined by the Directors. All other General Meetings shall be called
Extraordinary General Meetings.

Article 48
The Directors may whenever they think fit, and shall on requisition in accordance with the
Statutes, proceed with proper expedition to convene an Extraordinary General Meeting.

98
Article 49
Any Extraordinary General Meeting at which it is proposed to pass a Special Resolution or
(save as provided by the Statutes) a resolution of which special notice has been given to the
Company, shall be called by twenty-one days’ notice in writing at the least and an Annual
General Meeting or any other Extraordinary General Meeting, by fourteen days’ notice in
writing at the least. The period of notice shall in each case be exclusive of the day on which
it is served or deemed to be served and of the day on which the meeting is to be held and
shall be given in manner hereinafter mentioned to all members other than such as are not
under the provisions of these presents entitled to receive such notices from the Company,
Provided that a General Meeting notwithstanding that it has been called by a shorter notice
than that specified above shall be deemed to have been duly called if it is so agreed:-
(A) in the case of an Annual General Meeting by all the members entitled to attend and vote
thereat; and
(B) in the case of an Extraordinary General Meeting by a majority in number of the members
having a right to attend and vote thereat, being a majority together holding not less than
95 per cent. in nominal value of the shares giving that right;

Provided also that the accidental omission to give notice to or the non-receipt of notice by any
person entitled thereto shall not invalidate the proceedings at any General Meeting. At least
fourteen days’ notice of any General Meeting shall be given by advertisement in the daily press
and in writing to any stock exchange upon which the shares in the Company may be listed,
Provided Always that in the case of any Extraordinary General Meeting at which it is proposed
to pass a Special Resolution, at least twenty-one days’ notice in writing of such Extraordinary
General Meeting shall be given to any stock exchange upon which the Shares may be listed.

Article 50
(A) Every notice calling a General Meeting shall specify the place and the day and hour of the
meeting, and there shall appear with reasonable prominence in every such notice a
statement that a member entitled to attend and vote is entitled to appoint a proxy to attend
and vote instead of him and that a proxy need not be a member of the Company.
(B) In the case of an Annual General Meeting, the notice shall also specify the meeting as
such.
(C) In the case of any General Meeting at which business other than routine business
(“special business”) is to be transacted, the notice shall specify the general nature of such
business, and if any resolution is to be proposed as a Special Resolution, the notice shall
contain a statement to that effect.

Provisions relating to rights of non-resident or foreign Shareholders


The provisions in the Articles of Association relating to the rights to own Shares, including the
rights of non-resident or foreign shareholders to hold or exercise voting rights on their Shares,
are as follows:-

Article 5
(A) Subject to any direction to the contrary that may be given by the Company in General
Meeting and as permitted by the rules of the Designated Stock Exchange, all new shares
shall before issue be offered to such persons who as at the date (as determined by the
Directors) of the offer are entitled to receive notices from the Company of General
Meetings in proportion, as nearly as the circumstances admit, to the amount of the
existing shares to which they are entitled. The offer shall be made by notice specifying the
number of shares offered, and limiting a time within which the offer, if not accepted, will be
deemed to be declined, and, after the expiration of that time, or on the receipt of an
intimation from the person to whom the offer is made that he declines to accept the
shares offered, the Directors may dispose of those shares in such manner as they think
most beneficial to the Company. The Directors may likewise so dispose of any new shares
which (by reason of the ratio which the new shares bear to shares held by persons
entitled to an offer of new shares) cannot, in the opinion of the Directors, be conveniently
offered under this Article 5(A).
99
(B) The Company may, notwithstanding Article 5(A) above, authorise the Directors not to offer
new shares to members to whom by reason of foreign securities laws, such offers may not
be made without registration of the shares or a prospectus or other document, but to sell
the entitlements to the new shares on behalf of such members on such terms and
conditions as the Company may direct.

Article 35
(A) There shall be no restriction on the transfer of fully paid up shares (except where required
by law or by the rules, bye-laws or listing rules of any stock exchange on which the shares
in the Company may be listed) but the Directors may in their discretion decline to register
any transfer of shares upon which the Company has a lien, and in the case of shares not
fully paid up, may refuse to register a transfer to a transferee of whom they do not
approve, Provided Always that in the event of the Directors refusing to register a transfer
of shares, the Company shall within ten market days after the date on which the
application for a transfer of shares was made, serve a notice in writing to the applicant
stating the facts which are considered to justify the refusal as required by the Statutes.
(B) The Directors may decline to register any instrument of transfer unless:-
(i) such fee not exceeding S$2.00 as the Directors may from time to time require is paid
to the Company in respect thereof;
(ii) the instrument of transfer, duly stamped in accordance with any law for the time being
in force relating to stamp duty, is deposited at the Office or at such other place (if
any) as the Directors may appoint accompanied by the certificates of the shares to
which it relates, and such other evidence as the Directors may reasonably require to
show the right of the transferor to make the transfer and, if the instrument of transfer
is executed by some other person on his behalf, the authority of the person so to do;
and
(iii) the instrument of transfer is in respect of only one class of shares.

Article 43
Except as required by the Statutes or law, no person shall be recognised by the Company as
holding any share upon any trust, and the Company shall not be bound by or compelled in any
way to recognise (even when having notice thereof) any equitable, contingent, future or partial
interest in any share, or any interest in any fractional part of a share, or (except only as by
these presents or by the Statutes or law otherwise provided) any other right in respect of any
share, except an absolute right to the entirety thereof in the registered holder and nothing in
these presents contained relating to CDP or to Depositors or in any depository agreement
made by the Company with any common depository for shares shall in any circumstances be
deemed to limit, restrict or qualify the above.

Provisions relating to delay, deferment or prevention of a change in control our Company


The provision of our Articles of Association that would have an effect of delaying, deferring or
preventing a change in control of the company and that would operate only with respect to a
merger, acquisition or corporate restructuring involving our Company is as follows:-

100
Article 4(A)
Subject to these presents, no shares may be issued by the Directors without the prior approval
of the Company in General Meeting pursuant to Section 161 of the Act, but subject thereto
and the terms of such approval, and to Article 5, and to any special rights attached to any
shares for the time being issued, the Directors may allot (with or without conferring a right of
renunciation) or grant options over or otherwise dispose of the same to such persons on such
terms and conditions and for such consideration and at such time and whether or not subject
to the payment of any part of the amount thereof in cash or otherwise as the Directors may
think fit, and any shares may, subject to compliance with Sections 70 and 75 of the Act, be
issued with such preferential, deferred, qualified or special rights, privileges, conditions or
restrictions, whether as regards dividend, return of capital, participation in surplus, voting,
conversion or otherwise, as the Directors may think fit, and preference shares may be issued
which are or at the option of the Company are liable to be redeemed, the terms and manner
of redemption being determined by the Directors in accordance with the Act, Provided Always
that:-
(i) no shares shall be issued to transfer a controlling interest in the Company without the
specific prior approval of the Company in General Meeting; and
(ii) no shares shall be issued at a discount or options granted over unissued shares except in
accordance with the Act.

BANK BORROWINGS AND WORKING CAPITAL


22. Save as disclosed on page 41 of this Prospectus and in the Accountants’ Report, the
Company and its subsidiaries had as at 31 October 2000, no other borrowings or indebtedness
in the nature of borrowings including bank overdrafts and liabilities under acceptances (other
than normal trading bills) or acceptance credits, mortgages, charges, hire purchase
commitments, guarantees or other contingent liabilities.

23. In the opinion of the Directors, there are no minimum amounts which must be raised by the
Invitation in order to provide for the following items:
(a) the purchase price of any property purchased or to be purchased which is to be defrayed
in whole or in part out of the proceeds of the Invitation;
(b) estimated preliminary and issue expenses (including underwriting and placement
commission) for the Invitation payable by the Company;
(c) the repayment of any money borrowed by the Company in respect of any of the foregoing
matters; and
(d) working capital.

No amount is required to be provided in respect of the matters aforesaid otherwise than out of
the proceeds of the Invitation.

24. The Directors are of the opinion that, after taking into account the present banking facilities,
the Group has adequate working capital for its present requirements.

101
MATERIAL CONTRACTS
25. The following contracts not being contracts entered into in the ordinary course of business of
the Company and its subsidiaries (as the case may be) have been entered into by the
Company and its subsidiaries (as the case may be) within the two years preceding the date of
this Prospectus and are or may be material:-
(a) A lease agreement effective 1 August 1999 between Shanghai Jin Niu Property
Development Co Ltd as landlord and HES as tenant for the lease of No 77 Jin Niu
Building, E-Shan Road, Pudong New District, Shanghai having a built-in area of 1,498.58
sq m for a term of six (6) years commencing 1 August 1999 at a monthly rental of
RMB40,112 for the first two (2) years, subject to an upward or downward revision up to a
maximum of ten per cent (10%) of RMB40,112 for the next four (4) years. A maintenance
fee of RMB2.00 per sq m is payable per month;
(b) Tenancy agreement dated 5 April 1999 between Lim Bok Yong Investment Pte Ltd as
landlord and HSPL as tenant for the lease the premises known as 43 Kaki Bukit Industrial
Terrace Singapore 416099 having a built-in area of 5,212 sq ft for a term of two (2) years
commencing 15 April 1999 to 14 April 2001 at a rental of $5,000 per month;
(c) A 5-week option to purchase dated 14 March 2000 for the purchase of the whole of the
premises known as 40 Changi South Street 1, Singapore 486764 (the “Property”) by
Applied Industries (S) Pte Ltd (“Applied Industries”) to HSPL of an option exercise price of
$260,400 (inclusive of Goods and Services Tax);
(d) The HSPL Sale and Purchase Agreement dated 1 June 2000 between the Company and
the following persons (the “HSPL Shareholders”) to acquire the entire issued and paid-up
ordinary shares in HSPL, consideration of which was satisfied by the issue of 7,999,980
Shares in the capital of the Company (the “HSPL Acquisition”):-
Name No. of No. of
HSPL shares sold Hyflux Shares issued

Lum Ooi Lin Olivia 736,252 7,362,510


Deirdre Murugasu 45,001 450,000
Foo Hee Kiang 18,747 187,470
800,000 7,999,980

(e) The HEPL Sale and Purchase Agreement dated 1 June 2000 between the Company and
the HEPL Shareholders to acquire 544,800 ordinary shares of $1.00 each constituting
49.5% of the issued and paid-up ordinary shares in HEPL, consideration of which was
satisfied by the issue of 435,840 Shares in the capital of the Company (the “HEPL
Acquisition”):-
Name No. of No. of
HEPL shares sold Hyflux shares Issued

Wong Ming Keong 80,000 64,000


Chen Yue Feng 10,000 8,000
Ng Koon Hwi 100,000 80,000
Gan Leong Ming 97,000 77,600
Koh Lip Lin 88,000 70,400
Chin Siong Wee 70,000 56,000
Deirdre Murugasu 64,800 51,840
Tan Jin Bee 25,000 20,000
Ge Wen Yue 10,000 8,000
544,800 435,840

102
(f) Subscription agreement dated 3 June 2000 between Wong Ming Keong, Chen Yue Feng,
Ng Koon Hwi, Gan Leong Ming, Koh Lip Lin, Chin Siong Wee, Deirdre Murugasu, Tan Jin
Bee, Ge Wen Yue, Foo Hee Kiang, Lum Ooi Lin Olivia (the “Existing Shareholders”), DBS
Capital and Gimmill and the Company, for the subscription by each of the Strategic
Investors of 3,042,174 Shares in the capital of the Company at a consideration of
$0.7889096 per Share, totalling an aggregate of $4,800,000 (the “Subscription”);
(g) Shareholders’ agreement dated 21 June 2000 between the Existing Shareholders, the
Strategic Investors and the Company to give effect to their intentions and to regulate their
relationship inter se and in the conduct of the business and affairs of the Company
pursuant to the Subscription;
(h) A deed of assignment dated 22 June 2000 between Applied Industries as assignor and
HPSL as assignee for the assignment of the lease of the Property with JTC dated 26
November 1999 at a consideration of $2,800,000;
(i) A deed of assignment dated 22 June 2000 between HSPL as mortgagor and DBS Bank
as mortgagee for the mortgage of the Property;
(j) A Supplemental Agreement dated 31 August 2000 between the Company and HSPL
Shareholders confirming the effective date of the HSPL Acquisition as 31 March 2000 and
the consideration of the same as $799,998;
(k) A Supplemental Agreement dated 31 August 2000 between the Company and HEPL
Shareholders confirming the effective date of the HEPL Acquisition as 31 March 2000 and
the consideration of the same as $1,634,400;
(l) A sale and purchase agreement dated 7 September 2000 between the Company and
HSPL for the acquisition by the Company of 555,700 ordinary shares of $0.10 each
constituting 50.5% of the issued and paid-up capital of HEPL at a consideration of
$646,120.
(m) An agreement dated 8 January 2001 made between the Company and CDP pursuant to
which CDP agreed to act as central depository for the Company’s securities for trades in
the securities of the Company through the SGX-ST;
(n) The Management and Underwriting Agreement dated 8 January 2001 made between the
Company, the Vendors and DBS Bank referred to in paragraph 27 on page 104 below;
(o) The Placement Agreement dated 8 January 2001 made between the Company, the
Vendors and DBS Bank referred to in paragraph 27 on page 104 below.

LITIGATION
26. HEPL entered into a pre-sale agreement dated 12 October 1999 (the “Pre-Sale Agreement’)
with Shanghai Jinma Real Estate Co., Ltd (“Shanghai Jinma”) to purchase a residential
apartment at Block A, 9th Floor, No.2 Jinqiao Hotel Residence (the “Apartment”) in Shanghai
for a consideration of US$75,418 which has been paid in full by HEPL. A search was
conducted by us at Shanghai Real Estate Registry in August 2000 which stated that pursuant
to the bankruptcy of Shanghai Jinma, its assets, including the Apartment, have been frozen by
the Shanghai Pudong New district People’s Court on 27 December 1999. As such, HEPL may
take action to procure the legal title of the Apartment or to recover the consideration paid for
the Apartment. We are currently seeking legal advice and will decide on the appropriate course
of action once we have considered the feasibility of the options.

Save as disclosed above, neither the Company nor any of its subsidiaries is engaged in any
litigation or arbitration either as plaintiff or defendant in respect of any claims or amounts which
may have or have had during the previous 12 months a significant effect on the Group’s
financial position and the Directors have no knowledge or are aware of any proceeding,
litigation or claim of material importance which are pending or threatened against the Company
or any of its subsidiaries or of any facts likely to give rise to any such litigation, arbitration or
claim.

103
MANAGEMENT AND UNDERWRITING ARRANGEMENTS
27. (a) Pursuant to the management and underwriting agreement (“Management and Underwriting
Agreement”) dated 8 January 2001, the Company and the Vendors appointed DBS Bank
to manage the Invitation and to underwrite the Invitation Shares. DBS Bank will receive a
management fee from the Company and the Vendors in the proportion in which the
number of Invitation Shares offered by each of them pursuant to the Invitation bears to the
total number of Invitation Shares, for its services rendered in connection with the Invitation.
(b) Pursuant to the Management and Underwriting Agreement, the Underwriter agreed to
underwrite the Invitation Shares for a commission of 1.5% of the Issue Price for each
Invitation Share, payable by the Company and the Vendors in the proportion in which the
number of Invitation Shares offered by each of them pursuant to the Invitation bears to the
total number of Invitation Shares.
(c) Pursuant to the placement agreement (“Placement Agreement”) dated 8 January 2001, the
Placement Agent agreed to subscribe or procure subscriptions for the Placement Shares
for a placement commission of 1.5% of the Issue Price for each Placement Share, payable
by the Company and the Vendors in the proportion in which the number of Invitation
Shares offered by each of them pursuant to the Invitation bears to the total number of
Invitation Shares.
(d) Brokerage will be paid by the Company and the Vendors, in the proportion in which the
number of Invitation Shares offered by each of them pursuant to the Invitation bears to the
total number of Invitation Shares, to members of the Exchange, merchant banks and
members of the Association of Banks in Singapore in respect of accepted applications
made on Application Forms bearing their respective stamps, or to Participating Banks in
respect of successful applications made through Electronic Applications at the ATMs of the
relevant Participating Banks, at the rate of 1.0% of the Offer Price for each Offer Share.
(e) Save as aforesaid, no commission, discount or brokerage, has been paid or other special
terms granted within the two years preceding the date of this Prospectus or is payable to
any Director, promoter, expert, proposed Director or any other person for subscribing or
agreeing to subscribe or procuring or agreeing to procure subscriptions for any shares in
or debentures of the Company.
(f) The Management and Underwriting Agreement may be terminated by the Underwriter at
any time on or before the closing of the Application List on the occurrence of certain
events including, inter alia, changes in political, financial or economic conditions in
Singapore or abroad which result, inter alia, in the Singapore stock market being
materially and adversely affected.
(g) The Placement Agreement is conditional upon the Management and Underwriting
Agreement not having been terminated or rescinded pursuant to the provisions of the
Management and Underwriting Agreement.

MISCELLANEOUS
28. The nature of the business of the Company is stated on pages 49 to 52 of this Prospectus. At
the date of this Prospectus, all the corporations listed below are, by virtue of Section 6 of the
Companies Act (Chapter 50), deemed to be related to the Company:-

Subsidiaries of the Company


Hydrochem (S) Pte Ltd
Hydrochem Engineering (S) Pte Ltd
Hydrochem Engineering (Shanghai) Co., Ltd
Hyflux Engineering Pte Ltd

29. The time of opening of the Application List is set out on page 11 of this Prospectus.

104
30. The amount payable on application is $0.32 for each Offer Share and $0.32 for each
Placement Share. There has been no previous issue of Shares by the Company or offer for
sale of its Shares to the public within the two years preceding the date of this Prospectus.

31. Application moneys received by the Company and the Vendors in respect of successful
applications (including successful balloted applications which are subsequently rejected) will be
placed in a separate non-interest bearing account with DBS Bank (the “Receiving Bank”). In
the ordinary course of business, the Receiving Bank will deploy these moneys in the interbank
money market. Pursuant to an agreement contained in a letter dated 4 January 2001, the
Company, the Vendors and the Receiving Bank have agreed that the Company and the
Vendors will receive for its own account an aggregate of a 50% share of any net revenue in
excess of $50,000 earned by the Receiving Bank from the deployment of such monies in the
interbank money market to be shared between the Company and the Vendors in the proportion
borne by the number of Invitation Shares each has offered to the total number of Invitation
Shares offered pursuant to the Invitation. Any refund of all or part of the application monies to
unsuccessful or partially successful applicants will be made without any interest or any share
of such revenue or any other benefits.

32. No property has been purchased or acquired or proposed to be purchased or acquired by the
Company or its subsidiaries which is to be paid for wholly or partly out of the proceeds of the
Invitation or the purchase or acquisition of which has not been completed at the date of the
issue of this Prospectus other than property the contract for the purchase or acquisition
whereof was entered into in the ordinary course of business of the Company or its
subsidiaries, the contract not being made in contemplation of the Invitation nor the Invitation in
consequence of the contract.

33. The estimated amount of the expenses of this issue and of the application for listing, including
underwriting and placement commission, brokerage, management fee and all other incidental
expenses in relation to this Invitation is approximately $1.2 million, which will be borne by the
Company and the Vendors in the proportion borne by the number of Invitation Shares each
has offered to the total number of Invitation Shares offered pursuant to the Invitation. The
listing fee and other fees payable to the SGX-ST for the listing are payable by the Company.

34. No amount of cash or securities or benefit has been paid or given to any promoter within the
two years preceding the date of this Prospectus or is proposed or intended to be paid or given
to any promoter at any time.

35. Save as disclosed in this Prospectus, the Directors are not aware of any relevant material
information including trading factors or risks not mentioned elsewhere in the Prospectus which
is unlikely to be known or anticipated by the general public and which could materially affect
the profits of the Company and its subsidiaries.

36. Save as disclosed in this Prospectus, the financial condition and operations of the Group are
not likely to be affected by any of the following:-
(a) known trends or known demands, commitments, events or uncertainties that will result in
or are reasonably likely to result in the Group’s liquidity increasing or decreasing in any
material way;
(b) material commitments for capital expenditures;
(c) unusual or infrequent events or transactions or any significant economic changes that
materially affected the amount of reported income from operations; and
(d) known trends or uncertainties that have had or that the Group reasonably expects to have
a material favourable or unfavourable impact on revenues or operating income.

105
CONSENTS
37. The Auditors and Reporting Accountants have given and have not withdrawn their written
consent to the issue of this Prospectus with the inclusion herein of the Accountants’ Report
and the letter relating to the profit estimate for the year ended 31 December 2000, in the form
and context in which they appear in this Prospectus and references to their names in the form
and context in which they appear in this Prospectus and to act in such capacity in relation to
this Prospectus.

38. The Manager, Underwriter and Placement Agent(s), the Solicitors, the Principal Banker and the
Share Registrar have given and have not withdrawn their consent to the issue of this
Prospectus with the inclusion herein of their names in the form and context in which they
appear in this Prospectus and to act in those capacities in relation to this Prospectus.

DOCUMENTS AVAILABLE FOR INSPECTION


39. Copies of the following documents may be inspected at the registered office of the Company
at, 40 Changi South Street 1 Singapore 486764 during normal business hours for a period of
six months from the date of this Prospectus:-
(a) the Memorandum and Articles of Association of the Company;
(b) the Directors’ Report;
(c) the letter from the Auditors and Reporting Accountants in relation to the consolidated
proforma profit estimate for the financial year ended 31 December 2000;
(d) the Accountants’ Report (including statement of adjustments);
(e) the material contracts referred to on pages 102 to 103 of this Prospectus;
(f) the letters of consent referred to on page 106 of this Prospectus; and
(g) the audited accounts of the Company and its subsidiaries for the last two financial years
ended 31 December 1998 and 31 December 1999 and the ten months ended 31 October
2000.

STATEMENT BY DIRECTORS OF THE COMPANY AND THE VENDORS


40. This Prospectus has been seen and approved by our Directors and the Vendors and they
collectively and individually accept full responsibility for the accuracy of the information given in
this Prospectus and confirm, having made all reasonable enquiries, that to the best of their
knowledge and belief, there are no other facts the omission of which would make any
statements herein misleading, and that this Prospectus constitutes full and true disclosure of all
material facts about the Invitation and the Company and its subsidiaries. Our Directors also
confirm that the profit estimate for the financial year ended 31 December 2000 has been
stated after due and careful enquiry.

STATEMENT BY DBS BANK


41. DBS Bank acknowledges that, to the best of its knowledge and belief, based on information
furnished to it by the Group, this Prospectus constitutes a full and true disclosure of all the
material facts about the Invitation and the Company and its subsidiaries and it is not aware of
any other facts the omission of which would make any statements herein misleading. It is also
satisfied that the profit estimate of the Group for the financial year ended 31 December 2000
has been stated by the Directors after due and careful enquiry.

106
APPENDIX A

DIRECTORS’ REPORT

8 January 2001

The Shareholders
Hyflux Ltd
40 Changi South Street 1
Singapore 486764

Dear Sirs

This report has been prepared for inclusion in the Prospectus of Hyflux Ltd (the “Company”) to be
dated 8 January 2001 in connection with the Invitation in respect of 39,470,000 ordinary shares of
$0.05 each in the capital of the Company (the “Shares”) comprising 25,000,000 New Shares and
14,470,000 Vendor Shares.

On behalf of the Directors of the Company, I report that, having made due inquiry in relation to the
interval between 31 October 2000, the date to which the last audited accounts of the Company
were made up, and the date hereof:-
(a) the business of the Company and its subsidiaries has, in the opinion of the Directors, been
satisfactorily maintained;
(b) no circumstances have, in the opinion of the Directors, arisen since the last Annual General
Meeting of the Company which would adversely affect the trading or the value of the assets of
the Company or its subsidiaries;
(c) the current assets of the Company and its subsidiaries appear in the books at values which
are believed to be realisable in the ordinary course of business;
(d) save as disclosed on page 126 of this Prospectus, no contingent liabilities have arisen by
reason of any guarantees given by the Company or its subsidiaries; and
(e) save as disclosed on page 116 of this Prospectus, there have been no changes in the
published reserves or any unusual factors affecting the profit of the Company and its
subsidiaries since the last audited accounts.

Yours faithfully
for and on behalf of the
Board of Directors

Lum Ooi Lin Olivia


Managing Director
Hyflux Ltd

107
APPENDIX B

LETTER FROM THE AUDITORS AND REPORTING ACCOUNTANTS


IN RELATION TO THE CONSOLIDATED PROFORMA PROFIT ESTIMATE
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2000

8 January 2001

The Board of Directors


Hyflux Ltd
40 Changi South Street 1
Singapore 486764

Dear Sirs

This letter has been prepared for inclusion in the Prospectus of Hyflux Ltd (the “Company”) to be
dated 8 January 2001 in connection with the Invitation in respect of 39,470,000 ordinary shares of
$0.05 each in the capital of the Company (the “Shares”) at $0.32 per Share comprising 25,000,000
New Shares and 14,470,000 Vendor Shares, payable in full on application.

We have reviewed the profit estimate of the Proforma Group for the financial year ended 31
December 2000 set out on pages 37 to 38 of the Prospectus in accordance with the Singapore
Standard on Auditing applicable to the examination of prospective financial information. The
Directors are solely responsible for the profit estimate of the Proforma Group including the bases
and assumptions on which the estimate is based.

The profit estimate of the Proforma Group includes results of the audited financial statements for the
ten months ended 31 October 2000.

Based on our examination of the evidence supporting the assumptions, nothing has come to our
attention which cause us to believe that these assumptions do not provide a reasonable basis for
the profit estimate of the Proforma Group. Further, in our opinion, the profit estimate of the Proforma
Group, so far as the accounting policies and calculations are concerned, is properly prepared on the
bases and assumptions, is consistent with the accounting policies normally adopted by the Proforma
Group, and is presented in accordance with Statements of Accounting Standard in Singapore.

Yours faithfully

Arthur Andersen
Certified Public Accountants
Singapore

Max Loh Khum Whai


Partner-in-charge

108
APPENDIX C

ACCOUNTANTS’ REPORT

8 January 2001
The Board of Directors
Hyflux Ltd
40 Changi South Street 1
Singapore 486764

Dear Sirs

A. INTRODUCTION
This report has been prepared for inclusion in the Prospectus to be dated 8 January 2001 in
connection with the Invitation by Hyflux Ltd (the “Company”) in respect of 39,470,000 ordinary
shares of S$0.05 each, comprising 25,000,000 New Shares and 14,470,000 Vendor Shares
payable in full on application as follows:
1. 6,000,000 Offer Shares at S$0.32 for each Offer Share by way of public offer; and
2. 33,470,000 Placement Shares by way of placement, comprising:
(i) 32,430,000 Placement Shares at S$0.32 for each Placement Share; and
(ii) 1,040,000 Reserved Shares at S$0.32 for each Reserved Share reserved for the
Directors, management, employees and others who have contributed to the success of the
Group.

B. THE COMPANY
The Company was incorporated in Singapore on 31 March 2000 as a limited private company
under the name of Hyflux Pte Ltd. On 20 December 2000, the Company was converted into a
public limited company and changed its name to Hyflux Ltd.

The principal activity of the Company is that of investment holding.

The Company was incorporated with an authorised share capital of S$50,000,000, comprising
500,000,000 ordinary shares of S$0.10 each and an issued and paid-up share capital of S$2,
comprising 20 initial subscriber shares of S$0.10 each.

The following was carried out by the Company:

(i) On 31 March 2000, the Company acquired the entire issued and paid-up share capital of
Hydrochem (S) Pte Ltd for a consideration of $799,998 which was satisfied by the issue
of 7,999,980 ordinary shares of S$0.10 each at par in the Company;
(ii) On 31 March 2000, the Company acquired 544,800 ordinary shares of S$1 each in
Hydrochem Engineering (S) Pte Ltd constituting 49.5% of the entire issued and paid-up
ordinary shares of Hydrochem Engineering (S) Pte Ltd for a consideration of S$1,634,400,
which was satisfied by the issue of 435,840 ordinary shares of S$0.10 each at S$3.75 per
share in the Company, giving rise to a share premium of $1,590,816;
(iii) On 1 June 2000, the sum of S$1,590,155.80 was capitalised from the share premium
account of the Company for a bonus issue of 15,901,558 ordinary shares of S$0.10 each
credited as fully paid to the existing shareholders;
(iv) On 3 June 2000, two investors (the “Investors”) each subscribed for 3,042,174 ordinary
shares of S$0.10 each in the capital of the Company at a consideration of S$0.789 per
share, raising an amount of S$4,800,000 for the Company;

109
B. THE COMPANY (Continued)
(v) On 7 September 2000, the Company acquired the remaining 50.5% equity interest in
Hydrochem Engineering (S) Pte Ltd for a cash consideration of $646,120, representing
Hydrochem (S) Pte Ltd’s cost of investment in Hydrochem Engineering (S) Pte Ltd; and
(vi) On 8 January 2001, the two Investors each subscribed for 1 ordinary share of S$0.05
each in the capital of the Company at a consideration of S$1,304,012 per share, raising
an amount of S$2,608,024 for the Company, pursuant to a shareholders’ agreement dated
21 June 2000.

At an Extraordinary General Meeting held on 18 December 2000, the shareholders of the


Company approved, inter alia, the following:
(i) the sub-division of each of the ordinary shares of S$0.10 each in the authorised and
issued and paid-up share capital into 2 ordinary shares of S$0.05 each (the “Stock Split”);
(ii) the capitalisation of S$4,192,225 from the share premium account of the Company by way
of a bonus issue of 83,844,500 ordinary shares of S$0.05 each credited as fully paid to
the existing shareholders;
(iii) the conversion of the Company into a public limited company and the change of its name
to Hyflux Ltd;
(iv) the adoption of the new Articles of Association of the Company;
(v) the issue of 25,000,000 New Shares which is part of the subject of this Invitation and
which, when fully paid, allotted and issued, will rank pari passu in all respects with the
existing ordinary shares of the Company; and
(vi) that pursuant to Section 161 of the Companies Act, the Directors be authorised to issue
shares in the Company (whether by way of rights, bonus or otherwise) at any time and
upon such terms and conditions and for such purposes and to such persons as the
Directors may in their absolute discretion deem fit, provided that the aggregate number of
shares to be issued pursuant to this resolution shall not exceed 50% of the issued share
capital of the Company immediately prior to the proposed issue and provided that the
aggregate number of such shares to be issued other than on a pro-rata basis to the then
existing shareholders shall not exceed 20% of the issued share capital of the Company
immediately prior to the proposed issue, unless revoked or varied by the shareholders in
a general meeting, such authority shall continue in force until the conclusion of the Annual
General Meeting or the date by which the next Annual General Meeting is required by law
to be held, whichever is the earlier.

110
C. THE PROFORMA GROUP
The Company and its subsidiaries are collectively referred to as the “Proforma Group”. The
subsidiaries at the date of this report are as follows:

Issued and % equity


Place and date paid-up held by
Name of subsidiary of incorporation capital the Group Principal activities

Hydrochem (S) Pte Singapore S$800,000 100 Manufacturing, processing


Ltd 30 June 1989 and dealing in water treatment
equipment and turnkey engineering
installation of industrial equipment and
machines and other related activities

Hydrochem Engineering Singapore S$1,100,500 100 Consulting in the installation of


(S) Pte Ltd 9 March 1994 equipment for chemical processing,
applications of chemicals and chemical
preparations for commercial or industrial
use and wholesale of chemical and
fabricated products

Hyflux Engineering Singapore S$2 100 Operating of water and liquid


Pte Ltd 18 November 2000 treatment plants and sale of treated
water

Held by a subsidiary
Hydrochem Engineering People’s US$420,000 100 Development, manufacture of equipment
(Shanghai) Co., Ltd Republic of and parts primarily for membrane
China filtration technology, sale of
24 November 1994 manufactured equipment and ancillary
parts, provision of installation and
commissioning of relevant projects and
provision of technical services and
consultation

We were appointed as auditors of the Company from the date of its incorporation. We have
acted as auditors of Hydrochem (S) Pte Ltd and Hydrochem Engineering (S) Pte Ltd with
effect from the financial year ended 31 December 1999. The financial statements of
Hydrochem (S) Pte Ltd for the financial years ended 31 December 1995 to 1998 have been
audited by another firm of public accountants, Casey Lim & Company. The financial statements
of Hydrochem Engineering (S) Pte Ltd for the financial periods from the date of incorporation,
9 March 1994 to 30 June 1995 and that for 1 July 1995 to 31 December 1996, as well as the
financial years ended 31 December 1997 to 1998 have been audited by Casey Lim &
Company.

The financial statements of Hydrochem Engineering (Shanghai) Co., Ltd for the period from the
date of incorporation, 1 October 1994 to 31 December 1995 and the financial years ended 31
December 1996 to 1999 were prepared in accordance with applicable accounting regulations
in the People’s Republic of China (PRC) and were audited by Guang Hua Certified Public
Accountants, a firm of certified public accountants in the PRC, for PRC statutory reporting
purposes. We have reviewed these financial statements and made adjustments as appropriate,
for the purpose of inclusion in the Proforma Group financial statements.

The auditors’ reports on the financial statements of the Company and its subsidiaries
incorporated in Singapore for all the periods under review were not qualified.

111
D. BASIS OF PRESENTATION OF FINANCIAL STATEMENTS
The financial statements set out in this report have been prepared on the basis that the
Proforma Group structure had been in place throughout the periods covered by this report. It
has been prepared in accordance with the accounting policies of the Proforma Group set out
in Section K of this report and is based on the audited financial statements of the companies
in the Proforma Group for the financial years ended 31 December 1995 to 31 December 1999
and the financial period for the ten months ended 31 October 2000.

In arriving at the Proforma Group financial statements, we have made such adjustments as we
considered necessary in order to present the financial statements on a consistent and
comparable basis, including notional adjustments to reflect the investments and share capital of
the Company, as if the Proforma Group had existed from 1 January 1995.

The acquisition of Hydrochem (S) Pte Ltd and Hydrochem Engineering (S) Pte Ltd for a total
consideration of S$2.4 million was effected via the issue of 7,999,980 ordinary shares of
S$0.10 each at par and 435,840 ordinary shares of S$0.10 each at S$3.75 per share. The net
tangible assets acquired was S$1.6 million. This resulted in the creation of share premium and
goodwill on consolidation in the consolidated financial statements. In preparing the Proforma
Group financial statements, we have assumed that this restructuring took place as at 1
January 1995. The Proforma Group has been accounted for as if the restructuring was done
on a net asset basis. Accordingly, we have assumed that there is no goodwill arising on
consolidation from the acquisition of these subsidiaries on a proforma basis.

E. STATEMENTS OF PROFORMA GROUP RESULTS


The results of the Proforma Group after making adjustments as we considered appropriate are
set out below:

Ten months
ended
Year ended 31 December 31 October
Note 1995 1996 1997 1998 1999 2000
S$’000 S$’000 S$’000 S$’000 S$’000 S$’000

Turnover 1 1,437 3,073 3,870 6,391 6,929 15,775

(Loss) profit before taxation 2 (225) (258) 137 1,058 430 5,954
Taxation 3 (10) (14) (12) (377) (351) (1,596)
Net (loss) profit for the
year/period (235) (272) 125 681 79 4,358

112
F. NOTES TO THE STATEMENTS OF PROFORMA GROUP RESULTS
1. Turnover represents contract revenue recognised using the percentage-of-completion method,
measured by reference to the value of work performed to total estimated contract value.
Provision is made for any foreseeable losses as soon as they are known. Intra-group
transactions have been excluded from Proforma Group turnover.

The Proforma Group has significant transactions with related parties on terms agreed between
the parties as follows:

Ten months
ended
Year ended 31 December 31 October
1995 1996 1997 1998 1999 2000
S$’000 S$’000 S$’000 S$’000 S$’000 S$’000

Rental expenses paid to directors — — 18 108 108 90

2. (Loss) profit before taxation has been determined after charging (crediting) the following:

Ten months
ended
Year ended 31 December 31 October
1995 1996 1997 1998 1999 2000
S$’000 S$’000 S$’000 S$’000 S$’000 S$’000

Amortisation of preliminary expenses 6 — 20 19 18 9


Bad trade debts written off — — — — — 71
Bad non-trade debts written off — — — — 184 —
Depreciation of fixed assets 57 90 74 106 143 220
Directors’ fees 9 60 — 355 107 83
Directors’ remuneration 213 181 287 371 328 307
Foreign exchange (gain) loss, net (8) (8) (27) 9 9 (42)
Grants received — — — — (108) (129)
Loss on disposal of fixed assets — — 2 — — —
Interest income on bank deposits — — — (8) (34) (61)
Interest expense
— bank overdrafts 14 18 21 10 8 2
— hire purchase 5 4 3 — 1 2
— finance lease — — — — 2 2
— bills payable — — — 10 10 9
— loan — — — — — 5
Provision for doubtful trade debts — — — — 73 178
Research and development costs — — 131 191 387 539

113
F. NOTES TO THE STATEMENTS OF PROFORMA GROUP RESULTS (Continued)
3. Taxation comprises:

Ten months
ended
Year ended 31 December 31 October
1995 1996 1997 1998 1999 2000
S$’000 S$’000 S$’000 S$’000 S$’000 S$’000

Current tax
— current year 10 14 12 108 335 1,592
— underprovision in respect of
prior year — — — — — 4
Deferred tax
— current year — — — 269 (2) —
— underprovision in respect of
prior year — — — — 18 —
10 14 12 377 351 1,596

The taxation charge for the Proforma Group differs from the amount obtained by applying the
applicable income tax rate to the profit before taxation of the Proforma Group mainly due to
the utilisation of tax losses brought forward from prior year and no right of offset of taxable
profits of one subsidiary with tax losses of another.

G. STATEMENTS OF ADJUSTMENTS
The following adjustments have been made to the audited financial statements of the companies
in the Proforma Group for the respective financial years/period covered by this report:

Ten months
ended
Year ended 31 December 31 October
1995 1996 1997 1998 1999 2000
S$’000 S$’000 S$’000 S$’000 S$’000 S$’000

Turnover
Turnover from summation of
audited financial statements 1,437 3,205 3,990 6,664 9,078 20,276
Elimination of turnover within
Proforma Group — (132) (120) (232) (2,149) (4,501)
Adjustment for overstatement
of turnover — — — (41) — —
Adjusted turnover as stated in
the Statements of Proforma
Group Results 1,437 3,073 3,870 6,391 6,929 15,775

(Loss) profit before taxation


(Loss) profit before taxation from
summation of audited financial
statements (225) (258) 137 1,108 430 5,954
Overstatement of trade debtors — — — (194) — —
Restatement of stocks — — — 144 — —
Adjusted (loss) profit before
taxation as stated in the
Statements of Proforma
Group Results (225) (258) 137 1,058 430 5,954

114
G. STATEMENTS OF ADJUSTMENTS (Continued)
Ten months
ended
Year ended 31 December 31 October
1995 1996 1997 1998 1999 2000
S$’000 S$’000 S$’000 S$’000 S$’000 S$’000

Taxation
Taxation from summation of
audited financial statements 10 14 12 108 351 1,596
Understatement of deferred
tax liability — — — 269 — —
Adjusted taxation as stated in
the Statements of Proforma
Group Results 10 14 12 377 351 1,596

H. SUMMARISED PROFORMA GROUP BALANCE SHEETS


The summarised balance sheets of the Proforma Group as at 31 December 1995 to 1999 and
as at 31 October 2000 as set out below have been prepared based on the audited financial
statements after making adjustments as we considered appropriate and on the basis that the
Proforma Group had been in place since 1 January 1995.

As at
As at 31 December 31 October
1995 1996 1997 1998 1999 2000
S$’000 S$’000 S$’000 S$’000 S$’000 S$’000

Proforma shareholders’ equity 927 940 1,075 1,719 310 7,765

Represented by:
Fixed assets 182 234 362 332 795 4,726
Preliminary expenses — — 46 27 9 20
Current assets 1,372 1,788 2,140 4,239 4,467 10,444
Current liabilities (606) (1,082) (1,473) (2,595) (4,479) (6,978)
Net current assets (liabilities) 766 706 667 1,644 (12) 3,466
Less:
Non-current liabilities
Hire-purchase creditors
(non-current portion) 21 — — — 186 153
Finance lease creditors
(non-current portion) — — — 15 11 9
Deferred taxation — — — 269 285 285
927 940 1,075 1,719 310 7,765

115
I. MOVEMENTS IN PROFORMA SHAREHOLDERS’ EQUITY
The movements in the shareholders’ equity of the Proforma Group for each of the five years
ended 31 December 1995 to 1999 and the ten months ended 31 October 2000 are as follows:

Ten months
ended
Year ended 31 December 31 October
1995 1996 1997 1998 1999 2000
S$’000 S$’000 S$’000 S$’000 S$’000 S$’000

Balance brought forward — 927 940 1,075 1,719 310


Add (less):
Notional investment in subsidiaries
via the issue of shares by the
Company 1,162 285 10 — 60 —
Net (loss) profit attributable to
the Proforma Group (235) (272) 125 681 79 4,358
Dividends, net — — — (37) (894) (1,700)
Currency alignment — — — — (7) (3)
Issue of shares by the
Company for cash — — — — — 4,800
Purchase of 50.5% equity
interest in Hydrochem
Engineering (S) Pte Ltd
by Hydrochem (S) Pte
Ltd for cash — — — — (647) —
Balance carried forward 927 940 1,075 1,719 310 7,765

116
J. STATEMENTS OF NET ASSETS
The statements of net assets of the Proforma Group and of the Company as at 31 October
2000 are set out below with the notes thereon, set out in Section L.

Proforma Proforma
Note Group Company
S$’000 S$’000

Proforma shareholders’ equity 7,765 5,009

Represented by:
Fixed assets 1 4,726 150
Investment in subsidiaries 2 — 870
Preliminary expenses 3 20 20
Current assets
Stocks 4 452 —
Trade debtors 5 3,587 —
Work-in-progress 6 3,968 —
Other debtors, deposits and prepayments 7 980 161
Due from subsidiaries (non-trade) 8 — 3,307
Dividend receivable — 1,700
Short term notes 9 500 500
Fixed deposits 10 659 —
Cash and bank balances 298 97
10,444 5,765
Less:
Current liabilities
Trade creditors 905 —
Other creditors and accruals 11 1,349 —
Proposed dividend 1,700 1,700
Provision for taxation 1,948 —
Hire purchase creditors (current portion) 12 216 96
Finance lease creditors (current portion) 13 4 —
Term loan, secured (current portion) 14 295 —
Bank overdraft, secured 14 561 —
6,978 1,796

Net current assets 3,466 3,969


Less:
Non-current liabilities
Hire purchase creditors (non-current portion) 12 153 —
Finance lease creditors (non-current portion) 13 9 —
Deferred taxation 285 —
7,765 5,009

117
K. SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies which have been consistently applied in the preparation of
the financial statements of the Company and the Proforma Group are as follows:

Basis of accounting
The financial information, expressed in Singapore dollars, are prepared in accordance with the
historical cost convention and Statements of Accounting Standard in Singapore to reflect the
results and financial positions of the Company and the Proforma Group.

Grants
These relate to grants received from the National Science and Technology Board (“NSTB”) and
the Economic Development Board (“EDB”) for certain projects undertaken by the Company.
Such grants received are recognised as income through the profit and loss account and
matched against related costs incurred during the year which they are intended to compensate.

Income recognition
Income from contracts is recognised using the percentage-of-completion method, measured by
reference to the value of work performed to total estimated contract value. Provision is made
for any foreseeable losses as soon as they are known.

Basis of consolidation
The Proforma Group financial statements include the financial statements of the Company and
its subsidiaries made up to the end of the financial year. The results of subsidiaries acquired
or disposed of during the year are included in or excluded from the Proforma Group financial
statements as if the Proforma Group existed with effect from 1 January 1995. Significant
intercompany balances and transactions have been eliminated on consolidation.

When subsidiaries are acquired, the difference between the fair value of net assets of
subsidiaries acquired at the date of acquisition over the cost of acquisition represents goodwill
or reserve on consolidation. This is amortised on a straight-line basis over 5 years through the
profit and loss account.

In the preparation of the Proforma Group financial statements, the financial statements of
foreign subsidiaries are translated at the rates of exchange ruling at the balance sheet date
except for share capital and reserves which are translated at historical rates of exchange and
profit and loss items which are translated at average exchange rates for the year. Foreign
currency translation differences are taken to translation reserve.

Investment in subsidiaries
Investment in subsidiaries is stated in the financial statements of the Company at cost.
Provision is made where there is a decline in value that is other than temporary.

Preliminary expenses
Preliminary expenses are stated at cost less amounts amortised. These expenses are written
off to the statement of profit and loss over 3 years.

Work-in-progress
Work-in-progress is stated at cost plus attributable profit net of progress billings and provision
for foreseeable losses. Costs include cost of materials, direct labour and direct and indirect
overheads incurred in connection with the contracts.

118
K. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fixed assets and depreciation
Fixed assets are stated at cost less accumulated depreciation.

Fixed assets are depreciated using the straight-line method to write-off the cost over their
estimated useful lives. The estimated useful lives have been taken as follows -

Years

Plant and machinery 4 - 5


Motor vehicles 4 - 5
Computers 1 - 4
Office equipment 4 - 5
Leasehold property over the lease period
Furniture and fittings 4 - 10
Renovations 4 - 5

Fully depreciated assets are retained in the financial statements until they are no longer in use.

During the financial year ended 31 December 1996, a subsidiary, Hydrochem (S) Pte Ltd
changed the estimated useful life of computers for depreciation purposes from 5 years to 1
year. The Directors are of the opinion that the change is to more accurately reflect the
economic useful life of the computers for depreciation purposes. The effect of the change in
accounting estimate is to increase the Group’s loss before taxation for the financial year ended
31 December 1996 by approximately S$14,000.

Stocks
Stocks are stated at the lower of cost and net realisable value. Cost is determined on a first-
in, first-out basis. In the case of finished goods and work-in-progress, cost includes raw
materials, labour and an attributable portion of overhead costs. Provision is made for
deteriorated, damaged, obsolete and slow-moving stocks.

Hire purchase and finance lease


Where assets are financed by hire purchase contracts or finance leases that give rights
approximating to ownership, the assets are capitalised as if they had been purchased outright
at the values equivalent to the present value of the total rental payable during the periods of
the hire purchase or finance lease and the corresponding hire purchase commitments or
finance lease are included under liabilities. The excess of the hire purchase or finance lease
payments over the recorded hire purchase or finance lease obligations is treated as finance
charges which are allocated over each hire purchase and finance lease term to give a constant
rate of interest on the outstanding balance at the end of each period.

Taxation
Income tax expense is determined on the basis of tax effect accounting, using the liability
method and is applied to all significant timing differences. Deferred tax benefits are not
recognised unless there is reasonable expectation of their realisation.

119
K. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreign currency transactions and balances
The accounting records of the companies in the Proforma Group are maintained in their
respective reporting currencies.

Transactions in foreign currencies during the year are recorded in the respective reporting
currencies using exchange rates approximating those ruling at transaction dates. Foreign
currency monetary assets and liabilities at the balance sheet date are translated into the
respective reporting currencies at exchange rates approximating those ruling at that date. All
resultant exchange differences are dealt with through the profit and loss account.

Pension scheme
Hydrochem Engineering (Shanghai) Co., Ltd is required to provide certain staff pension
benefits to their employees under existing People’s Republic of China legislation. Pension
contributions are provided at 30% of total basic salary of contracted Chinese employees and
are contributed to a pension fund managed by government agencies, which are responsible for
paying pensions to the company’s Chinese retired employees. These benefits are accounted for
on an accrual basis and charged to the profit and loss account.

Value-added tax (“VAT”)


In accordance with the relevant People’s Republic of China tax laws, the subsidiary is subject
to Value-added Tax (“VAT”), which is charged on top of the selling price at a general rate of
17%. An input credit is available whereby VAT previously paid on purchases of semi-finished
products or raw materials etc. can be offset against the VAT on sales to determine the net VAT
payable.

Research and development costs


Expenditure on research and development is charged to the profit and loss account in the year
in which it is incurred except where a major project is undertaken and it is reasonably
anticipated that the development costs will be recovered through future commercial activity.
Such development costs are written off over the life of the project from the date of
commencement of commercial operation.

120
L. NOTES TO THE STATEMENT OF NET ASSETS
1. FIXED ASSETS

Furniture Plant
and Office Motor and Leasehold
Group fittings equipment Renovations Computers vehicles machinery property Total
S$’000 S$’000 S$’000 S$’000 S$’000 S$’000 S$’000 S$’000

Cost
As at 1.1.00 45 152 133 66 565 273 97 1,331
Additions 27 52 568 52 278 287 2,884 4,148
Currency alignment — 2 — — 3 2 — 7

As at 31.10.00 72 206 701 118 846 562 2,981 5,486

Accumulated
depreciation
As at 1.1.00 25 97 87 55 235 33 5 537
Charge for the period 4 24 51 7 68 62 4 220
Currency alignment — 1 — — 2 — — 3

As at 31.10.00 29 122 138 62 305 95 9 760

Net book value


As at 31.10.00 43 84 563 56 541 467 2,972 4,726

Motor
Company vehicle
S$’000

Cost
As at 1.1.00 —
Additions 150

As at 31.10.00 150

Accumulated depreciation
As at 1.1.00 —
Charge for the period —

As at 31.10.00 —

Net book value


As at 31.10.00 150

As at 31 October 2000, the Group and Company had fixed assets under hire purchase and
finance lease with a net book value of approximately $582,000 and $150,000 respectively.

As at 31 October 2000, the Group’s leasehold residential property in the People’s Republic of
China with a net book value of approximately S$87,000 was frozen by the Pudong New District
People’s Court arising from a dispute between the developers of the property with People’s
Republic of China authorities (please refer to page 103 on “Litigation” for details).

121
L. NOTES TO THE STATEMENT OF NET ASSETS (Continued)
2. INVESTMENT IN SUBSIDIARIES

Country of Equity interest Proforma cost


incorporation held by the of investment
and place Proforma by the
Name of Subsidiary of business Principal Activities Group Company
% S$’000

Hydrochem (S) Pte Ltd Singapore Manufacturing, processing 100 453


and dealing in water
treatment equipment and
turnkey engineering
installation of industrial
equipment and machines
and other related activities

Hydrochem Engineering Singapore Consulting in the installation 100 417


(S) Pte Ltd of equipment for chemical
processing, applications
of chemicals and chemical
preparations for commercial
or industrial use and
wholesale of chemical
and fabricated products

Held by a subsidiary
Hydrochem Engineering People’s Development, manufacture of 100 —
(Shanghai) Co., Ltd Republic of equipment and parts primarily
China for membrane filtration
technology, sale of
manufactured equipment
and ancillary parts, provision
of installation and
commissioning of relevant
projects and provision of
technical services and consultation
870

122
L. NOTES TO THE STATEMENT OF NET ASSETS (Continued)
3. PRELIMINARY EXPENSES

Group Company
S$’000 S$’000

Preliminary expenses incurred 86 20


Less accumulated amortisation (66) —
Balance at end of the period 20 20

Movements in accumulated amortisation during the financial period are as follows:


At beginning of the period 57 —
Amortisation for the period 9 —
At end of the period 66 —

4. STOCKS

Group Company
S$’000 S$’000

Raw materials 452 —

5. TRADE DEBTORS

Group Company
S$’000 S$’000

Trade debtors 3,765 —


Less provision for doubtful trade debts (178) —
3,587 —

Movements in provision for doubtful trade debts during the period are as follows:
At beginning of the period — —
Provision for the period 178 —
At end of the period 178 —

6. WORK-IN-PROGRESS

Group Company
S$’000 S$’000

Project cost and attributable profits 10,118 —


Less progress billings (6,150) —
3,968 —

123
L. NOTES TO THE STATEMENT OF NET ASSETS (Continued)
7. OTHER DEBTORS, DEPOSITS AND PREPAYMENTS

Group Company
S$’000 S$’000

Other debtors 252 —


Deposits 41 —
Prepayments 687 161
980 161

8. DUE FROM SUBSIDIARIES (NON-TRADE)


These balances are unsecured, interest-free and have no fixed terms of repayment.

9. SHORT TERM NOTES


These short term notes bear variable interest rates from 2.825% to 2.9% per annum with
maturities within one year.

10. BANKING FACILITIES


Banking facilities from a bank, consisting of letters of credit and letters of guarantee, are
secured against fixed deposits of approximately $61,000 placed with the bank and personal
guarantees from two Directors.

11. OTHER CREDITORS AND ACCRUALS


Group Company
S$’000 S$’000

Other creditors 414 —


Accrued operating expenses 602 —
Advance payments from customers 333 —
1,349 —

12. HIRE PURCHASE CREDITORS


Group Company
S$’000 S$’000

Minimum payable under hire purchase agreements:


— within one year 236 105
— between two to five years 172 —
408 105
Less finance charges allocated to future years (39) (9)
369 96
Classified as follows:
— current portion 216 96
— non-current portion 153 —
369 96

124
L. NOTES TO THE STATEMENT OF NET ASSETS (Continued)
13. FINANCE LEASE CREDITORS

Group Company
S$’000 S$’000

Minimum payable under finance lease agreements:


— within one year 5 —
— between two to five years 11 —
16 —
Less finance charges allocated to future years (3) —
13 —
Classified as follows:
— current portion 4 —
— non-current portion 9 —
13 —

14. TERM LOAN AND BANK OVERDRAFT (SECURED)


The term loan and bank overdraft of Hydrochem (S) Pte Ltd are secured by the following:-
(i) A legal mortgage on the leasehold property at 40 Changi South Street 1 with a net book
value as at 31 October 2000 of approximately S$2.9 million,
(ii) A joint and several personal guarantee from the Directors, and
(iii) Deed of Assignment of the lease agreement between the Company and Jurong Town
Corporation.

The term loan is repayable within one year and interest is payable at 1.25 % per annum above
the prevailing prime rate.

The term loan of Hydrochem Engineering (Shanghai) Co., Ltd is secured by letter of credit
granted by Hydrochem Engineering (S) Pte Ltd.

The term loan is repayable within one year and interest is payable at approximately 6% per
annum.

125
L. NOTES TO THE STATEMENT OF NET ASSETS (Continued)
15. COMMITMENTS AND CONTINGENCIES
(a) Lease commitments
As at 31 October 2000, the Group has aggregate minimum lease commitments in respect
of rental of land amounting to approximately S$2,275,000, payable as follows:
Group Company
S$’000 S$’000

Within one year 171 —


Between two to five years 628 —
Later than five years 1,476 —
2,275 —

(b) Contingent liabilities, secured


As at 31 October 2000, the Group had contingent liabilities secured against fixed deposits
and personal guarantees from the Directors.
Group
S$’000

Letter of credit 598


Letter of guarantee 457

1,055
16. SUBSEQUENT EVENTS
At an Extraordinary General Meeting held on 18 December 2000, the shareholders of the
Company approved, inter alia, the following:
(i) the sub-division of each of the ordinary shares of S$0.10 each in the authorised and
issued and paid-up share capital into 2 ordinary shares of S$0.05 each (the “Stock Split”);
(ii) the capitalisation of S$4,192,225 from the share premium account of the Company by way
of a bonus issue of 83,844,500 ordinary shares of S$0.05 each credited as fully paid to
the existing shareholders;
(iii) the conversion of the Company into a public limited company and the change of its name
to Hyflux Ltd;
(iv) the adoption of the new Articles of Association of the Company;
(v) the issue of 25,000,000 New Shares which is part of the subject of this Invitation and
which, when fully paid, allotted and issued, will rank pari passu in all respects with the
existing ordinary shares of the Company; and
(vi) that pursuant to Section 161 of the Companies Act, the Directors be authorised to issue
shares in the Company (whether by way of rights, bonus or otherwise) at any time and
upon such terms and conditions and for such purposes and to such persons as the
Directors may in their absolute discretion deem fit, provided that the aggregate number of
shares to be issued pursuant to this resolution shall not exceed 50% of the issued share
capital of the Company immediately prior to the proposed issue and provided that the
aggregate number of such shares to be issued other than on a pro-rata basis to the then
existing shareholders shall not exceed 20% of the issued share capital of the Company
immediately prior to the proposed issue, unless revoked or varied by the shareholders in
a general meeting, such authority shall continue in force until the conclusion of the Annual
General Meeting or the date by which the next Annual General Meeting is required by law
to be held, whichever is the earlier.
Subsequent to the financial period, the Company incorporated Hyflux Engineering Pte Ltd as a
wholly-owned subsidiary in Singapore with an issued and paid-up capital of S$2.

126
M. NET TANGIBLE ASSET BACKING OF THE PROFORMA GROUP
The net tangible asset backing of the Proforma Group for each ordinary share of S$0.05 each
is based on the statement of net assets of the Proforma Group as at 31 October 2000 and
after taking into consideration the issue of 2 ordinary shares at S$1,304,012 per share and the
issue of 25,000,000 New Shares at S$0.32 per share, which forms part of the subject of the
Invitation, and the proceeds and estimated expenses in connection therewith.

S$’000
Net tangible assets
Net tangible assets as at 31 October 2000 7,745
Proceeds from the issue of 2 ordinary shares of S$0.05 each at S$1,304,012 per share 2,608
Proceeds from the issue of 25,000,000 New Shares of S$0.05 each at S$0.32 per share,
which forms part of the subject of this Invitation 8,000
Less estimated expenses of the Invitation payable by the Company (1,200)
17,153

Number of
shares
’000
Issued share capital
Issued and paid-up share capital as at 31 October 2000 30,422

Sub-division of ordinary shares of S$0.10 each into 2 ordinary shares of S$0.05 each 60,844
Bonus issue of 83,844,500 ordinary shares of S$0.05 each 83,844
Issue of 25,000,000 New Shares of S$0.05 each in connection with the Invitation 25,000
Post-Invitation issued share capital 169,688

Net tangible asset backing per S$0.05 share 10.11 cents

N. DIVIDENDS
Dividends declared by the companies in the Proforma Group during the periods under review
were as follows:

Year/period ended Gross dividend per share Net dividend


(S$’000)

Ordinary dividend
Hyflux Pte Ltd
30 June 2000 $0.075 1,700

Hydrochem (S) Pte Ltd


31 December 1999 $1.00 596
30 June 2000* $2.85 1,700

Hydrochem Engineering (S) Pte Ltd


31 December 1999 $0.3635 298
31 December 1998 $0.0459 37

* Payable to Hyflux Pte Ltd

127
O. AUDITED FINANCIAL STATEMENTS
No audited financial statements have been prepared for the Company or its subsidiaries for
any period subsequent to 31 October 2000.

Yours faithfully,

Arthur Andersen
Certified Public Accountants
Singapore

Max Loh Khum Whai


Partner-in-charge

128
APPENDIX D

DESCRIPTION OF SINGAPORE COMPANY LAW RELATING TO SHARES

The following statements are brief summaries of the rights and privileges of shareholders conferred
by the laws of Singapore and the Articles of Association (the “Articles”) of the Company. These
statements summarise the material provisions of the Articles but are qualified in entirety by
reference to the Articles.

Ordinary Shares
All of the ordinary shares are in registered form. The Company may, subject to the provisions of the
Act and the rules of the SGX-ST purchase its own ordinary shares. However, it may not, except in
circumstances permitted by the Act, grant any financial assistance for the acquisition or proposed
acquisition of its own ordinary shares.

New Ordinary Shares


New ordinary shares may only be issued with the prior approval in a general meeting of the
shareholders of the Company. The aggregate number of shares to be issued pursuant to such
approval may not exceed 50% (or such other limit as may be prescribed by the SGX-ST) of its
issued share capital for the time being, of which the aggregate number of shares to be issued other
than on a pro-rata basis to its shareholders may not exceed 20% (or such other limit as may be
prescribed by the SGX-ST) of its issued share capital for the time being. The approval, if granted,
will lapse at the conclusion of the annual general meeting following the date on which the approval
was granted. Subject to the foregoing, the provisions of the Act and any special rights attached to
any class of shares currently issued, all new ordinary shares are under the control of the Board of
Directors who may allot and issue the same with such rights and restrictions as it may think fit.

Shareholders
Only persons who are registered in the register of shareholders of the Company and, in cases in
which the person so registered is CDP, the persons named as the depositors in the depository
register maintained by CDP for the ordinary shares, are recognised as shareholders of the
Company. The Company will not, except as required by law, recognise any equitable, contingent,
future or partial interest in any ordinary share or other rights for any ordinary share other than the
absolute right thereto of the registered holder of that ordinary share. The Company may close the
register of shareholders for any time or times if it provides the SGX-ST at least 10 clear market
days’ notice. However, the register may not be closed for more than 30 days in aggregate in any
calendar year. The Company typically closes the register to determine shareholders’ entitlement to
receive dividends and other distributions.

129
Transfer of Ordinary Shares
There is no restriction on the transfer of fully paid ordinary shares except where required by law or
the listing rules or the rules or bye-laws of any stock exchange on which the Company is listed. The
Board of Directors may decline to register any transfer of ordinary shares which are not fully paid
shares or ordinary shares on which the Company has a lien. Ordinary shares may be transferred by
a duly signed instrument of transfer in a form approved by any stock exchange on which the
Company is listed. The Board of Directors may also decline to register any instrument of transfer
unless, among other things, it has been duly stamped and is presented for registration together with
the share certificate and such other evidence of title as they may require. The Company will replace
lost or destroyed certificates for ordinary shares if it is properly notified and if the applicant pays a
fee which will not exceed S$2 and furnishes any evidence and indemnity that the Board of Directors
may require.

General Meetings of Shareholders


The Company is required to hold an annual general meeting every year. The Board of Directors may
convene an Extraordinary General Meeting whenever it thinks fit and must do so if shareholders
representing not less than 10% of the total voting rights of all shareholders request in writing that
such a meeting be held. In addition, two or more shareholders holding not less than 10% of the
issued share capital of the Company may call a meeting. Unless otherwise required by law or by the
Articles, voting at general meetings is by ordinary resolution, requiring an affirmative vote of a
simple majority of the votes cast at the meeting. An ordinary resolution suffices, for example, for the
appointment of directors. A special resolution, requiring the affirmative vote of at least 75% of the
votes cast at the meeting, is necessary for certain matters under Singapore law, including voluntary
winding up, amendments to the Memorandum of Association and the Articles, a change of the
corporate name and a reduction in the share capital, share premium account or capital redemption
reserve fund. The Company must give at least 14 days’ notice in writing. The notice must be giving
of notices and must set forth the place, the day and the hour of the meeting and, in the case of
special business, the general nature of that business.

Voting Rights
A shareholder is entitled to attend, speak and vote at any general meeting, in person or by proxy.
Proxies need not be a shareholder. A person who holds ordinary shares through the SGX-ST book-
entry settlement system will only be entitled to vote at a general meeting as a shareholder if his
name appears on the depository register maintained by CDP 48 hours before the general meeting.
Except as otherwise provided in the Articles, two or more shareholders must be present in person
or by proxy to constitute a quorum at any general meeting. Under the Articles, on a show of hands,
every shareholder present in person and by proxy shall have one vote (provided that in the case of
a shareholder who is represented by two proxies, only one of the two proxies as determined by that
shareholder or, failing such determination, by the Chairman of the meeting in his sole discretion
shall be entitled to vote on a show of hands), and on a poll, every shareholder present in person or
by proxy shall have one vote for each ordinary share which he holds or represents. A poll may be
demanded in certain circumstances, including by the chairman of the meeting or by any shareholder
present in person or by proxy and representing not less than 10% of the total voting rights of all
shareholders having the right to attend and vote at the meeting or by any two shareholders present
in person or by proxy and entitled to vote. In the case of a tie vote, whether on a show of hands or
a poll, the chairman of the meeting shall be entitled to a casting vote.

130
Dividends
The Company may, by ordinary resolution of its shareholders, declare dividends at a general
meeting, but it may not pay dividends in excess of the amount recommended by the Board of
Directors. The Company must pay all dividends out of its profits; however, the Company may
capitalise its share premium account and apply it to pay dividends, if such dividends are satisfied by
the issue of shares to shareholders of the Company. See “Bonus and Rights Issue”. The Board of
Directors may also declare an interim dividend without the approval of its shareholders. All dividends
are paid pro rata among the shareholders in proportion to the amount paid up on each
shareholder’s ordinary shares, unless the rights attaching to an issue of any ordinary share provides
otherwise. Unless otherwise directed, dividends are paid by cheque or warrant sent through the post
to each shareholder at his registered address. Notwithstanding the foregoing, the payment by the
Company to CDP of any dividend payable to a shareholder whose name is entered in the
depository register shall, to the extent of payment made to CDP, discharge the Company from any
liability to that shareholder in respect of that payment.

Bonus and Rights Issues


The Board of Directors may, with approval of the shareholders at a general meeting, capitalise any
reserves or profits (including profit or moneys carried and standing to any reserve or to the share
premium account) and distribute the same as bonus shares credited as paid-up to the shareholders
in proportion to their shareholdings. The Board of Directors may also issue rights to take up
additional ordinary shares to shareholders in proportion to their shareholdings. Such rights are
subject to any conditions attached to such issue and the regulations of any stock exchange on
which the Company is listed.

Takeovers
The Act and the Singapore Code on Takeovers and Mergers regulate the acquisition of ordinary
shares of public companies and contain certain provisions that may delay, deter or prevent a future
takeover or change in control of the Company. Any person (the “Offeror”) acquiring an interest, either
on his own or together with parties acting in concert with him, in 25% or more of the voting shares
in the Company must extend a mandatory takeover offer for the remaining voting shares in
accordance with the provisions of the Singapore Code on Takeovers and Mergers (the “Takeover
code”). “Parties acting in concert” include a company and its related and associated companies, a
company and its directors (including their relatives), a company and its pension funds, a person and
any investment company, unit trust or other fund whose investment such person manages on a
discretionary basis, and a financial advisor and its client in respect of shares held by the financial
advisor and shares in the client held by funds managed by the financial advisor on a discretionary
basis. An offer for consideration other than cash must be accompanied by a cash alternative at not
less than the highest price paid by the offeror or parties acting in concert with the offeror within the
preceding 12 months. A mandatory takeover offer is also required to be made if the Offeror holding,
either on his own or together with parties acting in concert with him, between 25% and 50% of the
voting shares acquires additional voting shares representing more than 3% of the voting shares in
any 12 month period. Approval of the Securities Industry Council (the “Council)” must be obtained
in advance for partial offers (which must not be mandatory takeover offers) for less than 100% of
the equity share capital of the Company not already owned by the Offeror and his concert parties.
In the case of a partial offer which could not result in the Offeror and parties acting in concert with
him holding shares carrying 25% or more of the voting rights of the Company, consent will normally
be granted. In the case of a partial offer which could result in the Offeror and his concert parties
holding shares carrying not less than 25% but not more than 50% of the voting rights of the
Company, consent will not be granted. In the case of a partial offer which could result in the Offeror
and his concert parties holding shares carrying more than 50% but less than 100% of the voting
rights of a company, consent will not normally be granted unless conditions as set out in the
Takeover Code are complied with. Any partial offer which could result in the Offeror and his concert
parties holding 50% or more of the voting rights of the Company must be conditional, not only on
the specified number or percentage of acceptances being received but also on approval by the
Company’s shareholders. The Offeror, parties acting in concert with him and their associates are not
allowed to vote on the partial offer. The Offeror and his concert parties may not deal in shares of

131
the Company during the offer period nor, in the case of a successful partial offer, may the Offeror
or his concert parties, except with the consent of the Council, purchase such shares during a period
of 12 months after the end of the offer period. The Council’s consent will normally be granted if such
purchases are proposed to be made more than 6 months after the close of the partial offer. The
Council will not normally give consent to partial offers for the Company within 12 months from the
date of the close of a previous partial offer (whether successful or not) unless the subsequent
partial offer is, as would normally be required, recommended by the board of the Company, and the
offer is proposed to be made by a person not acting in concert with the previous offeror.

Liquidation or Other Return of Capital


If the Company liquidates or in the event of any other return of capital, holders of ordinary shares
will be entitled to participate in any surplus assets in proportion to their shareholdings, subject to
any special rights attaching to any other class of shares.

Indemnity
As permitted by Singapore law, the Articles provide that, subject to the Act, the Board of Directors
and officers shall be entitled to be indemnified by the Company against any liability incurred in
defending any proceedings, whether civil or criminal, which relate to anything done or omitted to
have been done as an officer, Director or employee and in which judgement is given in their favour
or in which they are acquitted or in connection with any application under any statute for relief from
liability in respect thereof in which relief is granted by the court. The Company may not indemnify
Directors and officers against any liability which by law would otherwise attach to them in respect of
any negligence, default, breach of duty or breach of trust of which they may be guilty in relation to
the Company.

Limitations on Rights to Hold or Vote Shares


Except as described in “Voting Rights” and “Takeovers” above, there are no limitations imposed by
Singapore law or by the Articles on the rights of non-resident shareholders to hold or vote ordinary
shares.

Minority Rights
The rights of minority shareholders of Singapore-incorporated companies are protected under
Section 216 of the Act, which gives the Singapore courts a general power to make any order, upon
application by any shareholder of the Company, as they think fit to remedy any of the following
situations:-
(a) the affairs of the Company are being conducted or the powers of the Board of Directors are
being exercised in a manner oppressive to, or in disregard of the interests of, one or more of
the shareholders; or
(b) the Company takes an action, or threatens to take an action, or the shareholders pass a
resolution, or propose to pass a resolution, which unfairly discriminates against, or is otherwise
prejudicial to, one or more of the shareholders, including the applicant.
Singapore courts have wide discretion as to the reliefs they may grant and those reliefs are in no
way limited to those listed in the Act itself. Without prejudice to the foregoing, Singapore courts
may:-
(a) direct or prohibit any act or cancel or vary any transaction or resolution;
(b) regulate the conduct of the affairs of the Company in the future;
(c) authorise civil proceedings to be brought in the name of, or on behalf of, the Company by a
person or persons and on such terms as the court may direct;
(d) provide for the purchase of a minority shareholder’s shares by the other shareholders or by the
Company and, in the case of a purchase of shares by the Company, a corresponding reduction
of its share capital;
(e) provide that the Memorandum of Association or the Articles be amended; or
(f) provide that the Company be wound up.

132
APPENDIX E

DESCRIPTION OF SINGAPORE LAW AND REGULATIONS


RELATING TO TAXATION

The discussion below is not intended to constitute a complete analysis of all tax consequences
relating to ownership of our Ordinary Shares. Prospective purchasers of our Ordinary Shares
should consult their tax advisors concerning the tax consequences of their particular
situations. This description is based on laws, regulations and interpretations now in effect
and available as of the date of this Prospectus. The laws, regulations and interpretations,
however, may change at any time, and any change could be retroactive to the date of issuance of
our ordinary shares. These laws and regulations are also subject to various interpretations and the
relevant tax authorities or the courts could later disagree with the explanations or conclusions set
out below.

Singapore Taxation
The following discussion describes the material Singapore income tax, capital gains tax, stamp duty
and estate duty consequences of the purchase, ownership and disposal of our ordinary shares.

Income Tax

General
Singapore resident taxpayers, which include individuals who are residing in Singapore and
companies which are controlled or managed in Singapore, are subject to Singapore income tax on:-

(a) income accruing in or derived from Singapore; and

(b) foreign income received in Singapore.

A company will be regarded as being resident in Singapore if the control and management of its
business is exercised in Singapore (for example, if the company’s board of directors meets and
conducts the business of the company in Singapore). An individual will be regarded as being
resident in Singapore in a year of assessment if, in the preceding year, he was physically present
in Singapore or exercised employment in Singapore (other than as a director of a company) for 183
days or more, or if he resides in Singapore.

Non-Singapore resident corporate taxpayers, subject to certain exceptions, are subject to Singapore
income tax on:-
(a) income that is accrued in or derived from Singapore; and
(b) foreign income received in Singapore.

Non-Singapore resident individuals, subject to certain exceptions, are subject to Singapore income
tax only on income accruing in or derived from Singapore.

The corporate tax rate in Singapore is currently 26%. The rate shall be reduced to 25.5% with effect
from the year of assessment 2001 (financial year ended in 2000).

Subject to the provisions of any applicable tax treaty, non-Singapore resident taxpayers who derive
certain types of income from Singapore are subject to a withholding tax currently at 25.5% or
generally 15% in the case of interest, royalty and rental of movable equipment income.

133
Dividend Distributions
Under Singapore’s taxation system, the tax paid by the Company at the prevailing corporate tax rate
is in effect imputed to, and deemed to be paid on behalf of its shareholders. Shareholders receive
dividends net of such tax. Shareholders are taxed on the gross amount of dividends (that is, on the
amount of net dividends plus an amount equal to the amount of gross dividends multiplied by the
prevailing corporate tax rate). The tax paid by the Company effectively becomes available to its
shareholders as a tax credit to offset their Singapore income tax liability on the gross amount of
dividends paid by the Company.

Singapore does not impose withholding tax on dividends paid to Singapore citizen or non-Singapore
resident shareholders. As the tax paid by the Company at the prevailing corporate tax rate is
deemed to be paid by its shareholders, no further Singapore income tax liability is imposed on
dividends received by such non-resident shareholders. Conversely, such non-resident shareholders
who do not have deductible expenses which are accepted by the Inland Revenue Authority of
Singapore (“IRAS’’) as attributable to such dividend income will normally not receive any refund from
the IRAS. Singapore taxpayers are taxed on dividends received from the Company at the income
tax rates applicable to each taxpayer. Where their income tax liabilities on the dividends are lower
(or, as the case may be, higher) than the tax deducted at source from such dividends at the
prevailing corporate rate, such resident shareholders may receive a refund from (or, as the case
may be, have to pay further tax to) the IRAS.

Where the Company receives foreign income that has not been subject to full Singapore income tax
due to the availability of foreign tax credits, the Company may pay tax exempt dividends out of the
foreign income received in Singapore. The amount of tax exempt dividend is equal to (i) the foreign
tax credit allowed divided by the prevailing corporate tax rate less (ii) the foreign tax paid. The
Company will credit such amounts to a special account (known as the “Section 13E account”). Any
subsequent dividends paid by the Company out of this account to its shareholders (other than on
any shares of a preferential nature) will be tax exempt subject to certain conditions.

Gains on disposal of the ordinary shares


Singapore does not impose tax on capital gains. However, gains may be construed to be of an
income nature and subject to tax if:-
(a) they arise from activities which the IRAS regards as the carrying on of a trade in Singapore;
or
(b) they are short-term gains from the sale of real property and shares in unlisted companies with
substantial real property or real property related assets in Singapore.

Any profits from the disposal of ordinary shares are not taxable in Singapore unless the seller is
regarded as having derived gains of an income nature, in which case, the disposal profits would be
taxable.

Stamp Duties
No stamp duty is payable on the issue of new ordinary shares of the Company.

Stamp duty is payable on the instrument of transfer of ordinary shares of the Company at the rate
of S$2.00 for every S$1,000 market value of such ordinary shares. The purchaser is liable for stamp
duty, unless otherwise agreed. No stamp duty is payable if no instrument of transfer is executed or
if the instrument of transfer is executed outside Singapore. However, stamp duty may be payable if
the instrument of transfer which is executed outside Singapore is received in Singapore. The above
stamp duty is not applicable to scripless transfers of the ordinary shares through CDP system.

134
Further, stamp duty is payable at a rate of S$0.50 for every S$1,000 or any part thereof of the
transaction value on the contract note for the sale or purchase of ordinary shares in Singapore
unless certain conditions are met. Stamp duty on contract notes has been suspended for the sale
or purchase of any stocks or shares made between June 30, 1998 to June 29, 2000.

Estate Duties
Singapore estate duty is imposed on the value of most movable and immovable property situated in
Singapore owned by individuals who are not domiciled in Singapore, subject to specific exemption
limits. Singapore estate duty is imposed on the value of most immovable property situated in
Singapore and on most movable property, wherever it may be, owned by individuals who are
domiciled in Singapore, subject to specific exemption limits. The Company’s ordinary shares are
considered to be movable property situated in Singapore as the Company is a company
incorporated in Singapore and the share register is maintained in Singapore.

Accordingly, the Company’s ordinary shares held by an individual are subject to Singapore estate
duty upon such individual’s death, whether or not such individual is domiciled in Singapore.
Singapore estate duty is payable to the extent that the value of the ordinary shares aggregated with
any other assets subject to Singapore estate duty exceeds S$600,000. Unless other exemptions
apply to the other assets, for example, the separate exemption limit for residential properties, any
excess beyond S$600,000 will be taxed at 5% on the first S$12,000,000 of the individual’s
Singapore chargeable assets and thereafter at 10%. Individuals should consult their own tax
advisors regarding the Singapore estate duty consequences of their ownership of the Company’s
ordinary shares.

135
APPENDIX F

TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION

Applications are invited for the subscription of the Invitation Shares at the Issue Price, subject to the
following terms and conditions:-

1. Applications for the Offer Shares (other than Reserved Shares) may be made by way of the
Offer Shares Application Forms or by way of electronic applications through the Automated
Teller Machine (“ATMs”) belonging to the Participating Banks (“ATM Electronic Applications”) or
the Internet Banking (“IB”) websites of the relevant Participating Banks (“Internet Electronic
Applications”, which together with ATM Electronic Applications, shall be referred to as
“Electronic Applications”). Applications for Placement Shares may only be made by way of the
Placement Shares Application Forms, and applications for Reserved Shares may only be made
by way of the Reserved Shares Application Forms. Applicants may not use their CPF Funds
to apply for the Invitation Shares.

2. Only one application may be made for the benefit of one person for either the Offer
Shares (other than the Reserved Shares) or the Placement Shares in his own name. A
person submitting an application for the Offer Shares (other than Reserved Shares) by
way of a printed application form may not submit another application for Offer Shares
by way of Electronic Application and vice versa. A person submitting an application for
the Offer Shares by way of an ATM Electronic Application may not submit another
application for Offer Shares by way of an Internet Electronic Application and vice versa.
Such separate applications will be deemed to be multiple applications and shall be
rejected.

A person, other than an approved nominee company, who is submitting an application


in his own name should not submit any other applications, whether on a printed
application form or through an Electronic Application, for any other person. Such
separate applications will be deemed to be multiple applications and shall be rejected.

An applicant who has agreed with the Placement Agents to subscribe for Placement
Shares or who otherwise subscribes for Placement Shares shall not make or procure
any separate application for Offer Shares either by way of an Offer Shares Application
Form or through an Electronic Application. Such separate applications will be deemed
to be multiple applications and shall be rejected.

Conversely, an applicant who has made an application for Offer Shares (other than for
Reserved Shares) either by way of the Offer Shares Application Form or through an
Electronic Application shall not make any separate application for Placement Shares.
Such separate applications will be deemed to be multiple applications and shall be
rejected.

Joint or multiple applications will be rejected. Persons submitting or procuring


submission of multiple share applications (whether for Offer Shares, Placement Shares
or both Offer Shares and Placement Shares) may be deemed to have committed an
offence under the Penal Code (Chapter 224) of Singapore and the Securities Industry
Act (Chapter 289) of Singapore, and such applications may be referred to the relevant
authorities for investigation. Applications appearing to be or suspected of being multiple
applications will be liable to be rejected at the discretion of the Company.

136
An applicant making an application for the Reserved Shares using the Reserved Shares
Application Form may submit one separate application for Offer Shares (other than
Reserved Shares) in his own name either by way of an Offer Shares Application Form
or through an Electronic Application or submit one separate application for Placement
Shares by way of a Placement Share Application Form, provided he adheres to the
terms and conditions of this Prospectus. Such separate applications will not be treated
as multiple applications.

3. Applications will not be accepted from any person under the age of 21, undischarged
bankrupts, sole proprietorships, partnerships, chops or non-corporate bodies, joint Securities
Account holders of CDP and applicants whose addresses (furnished in their printed Application
Forms or, in the case of Electronic Applications, contained in the records of the relevant
Participating Banks, as the case may be) bear post office box numbers.

4. The existence of a trust will not be recognised. Any application by any person must therefore
be made in his/her/their own name(s) and without qualification or, where the application is
made by way of a printed Application Form by a nominee, in the name(s) of approved nominee
company or companies after complying with paragraph 5 below.

5. Nominee applications may be made by approved nominee companies only. Approved


nominee companies are defined as banks, merchant banks, finance companies, insurance
companies, licensed securities dealers in Singapore and nominee companies controlled by
them. Applications made by persons acting as nominees other than approved nominee
companies will be rejected.

6. For non-nominee applications, each applicant must maintain a Securities Account with
CDP in his own name at the time of application. An applicant without an existing Securities
Account with CDP in his own name at the time of application will have his application rejected
(in the case of an application by way of an Application Form) or will not be able to complete
his Electronic Application (in the case of an Electronic Application). An applicant with an
existing Securities Account with CDP who fails to provide his Securities Account number or
who provides an incorrect Securities Account number in section B of the Application Form or
in his Electronic Application, as the case may be, is liable to have his application rejected.
Subject to paragraph 7 below, an application may be rejected if the applicant’s particulars such
as his name, NRIC or passport number, nationality and permanent residence status provided
in his Application Form or, in the case of an Electronic Application, contained in the records of
the relevant Participating Bank at the time of his Electronic Application, as the case may be,
differ from those particulars in his Securities Account as maintained with CDP. If the applicant
possesses more than one individual direct Securities Account with CDP, his application will be
rejected.

7. If the address of an applicant stated on the Application Form or, in the case of an
Electronic Application, contained in the records of the relevant Participating Bank, as
the case may be, is different from the address registered with CDP, the applicant must
inform CDP of his updated address promptly, failing which the notification letter on
successful allotment and other correspondence from CDP will be sent to his address
last registered with CDP.

8. The Company reserves the right to reject or accept, in whole or in part, or to scale down or
ballot, any application without assigning any reason therefore, and no enquiry and/or
correspondence on the decision of the Company will be entertained. This right applies to
applications made by way of printed Application Forms and by way of Electronic Applications.
In deciding the basis of allotment which shall be at the discretion of the Company, due
consideration will be given to the desirability of allotting the Invitation Shares to a reasonable
number of applicants with a view to establishing an adequate market for the Shares.

137
9. The Company reserves the right to reject any application which does not conform strictly to the
instructions set out in the Application Forms and this Prospectus or which does not comply
with the instructions for Electronic Applications or with the terms and conditions of this
Prospectus or, in the case of applications by way of printed Application Form, which is illegible,
incomplete, incorrectly completed or which is accompanied by an improperly drawn up or
improper form of remittance. The Company further reserves the right to treat as valid any
applications not completed or submitted or effected in all respects in accordance with the
terms and conditions of this Prospectus, the instructions set out in the Application Forms and
this Prospectus or the instructions for Electronic Applications and also to present for payment
or other processes all remittances at any time after receipt and to have full access to all
information relating to, or deriving from, such remittances or the processing thereof.

10. Share certificates will be registered in the name of CDP and will be forwarded only to CDP. It
is expected that CDP will send to each successful applicant at his own risk, within 15 Market
Days after the close of the Application List, a statement showing that his Securities Account
has been credited with the number of Invitation Shares allotted to him. This will be the only
acknowledgement of application moneys received and is not an acknowledgement by the
Company. Each applicant irrevocably authorises CDP to complete and sign on his behalf as
transferee or renouncee any instrument of transfer and/or other documents required for the
issue or transfer of the Invitation Shares allotted to the applicant. This authorisation applies to
applications made both by way of printed Application Forms and by way of Electronic
Applications.

11. By completing and delivering an Application Form and, in the case of an ATM Electronic
Application, by pressing the “Enter” or “OK” or “Confirm” or “Yes” or any other relevant key on
the ATM or, in the case of an Internet Electronic Application, by clicking “Submit” or “Continue”
or “Yes” or “Confirm” or any other relevant button on the IB website screen in accordance with
the provisions herein, each applicant:–
(a) irrevocably offers to subscribe for the number of Invitation Shares specified in his
application (or such smaller number for which the application is accepted) at the Issue
Price for each Invitation Share and agrees that he will accept such Shares as may be
allotted to him, in each case on the terms of, and subject to the conditions set out in, this
Prospectus and the Memorandum and Articles of Association of the Company; and
(b) warrants the truth and accuracy of the information in his application.

12. Applications must be made in lots of 1,000 Invitation Shares or higher integral multiples of
1,000 Invitation Shares. Applications for any other number of Invitation Shares will be rejected.

13. No Shares will be allotted on the basis of this Prospectus later than six months after the date
of this Prospectus.

14. In the event of an under-subscription for the Offer Shares as at the close of the Application
List, that number of Offer Shares under-subscribed shall be made available to satisfy
applications for the Placement Shares to the extent there is an over-subscription for the
Placement Shares as at the close of the Application List. Any of the Reserved Shares not
taken up will be made available to satisfy applications for the Offer Shares to the extent that
there is an over-subscription for the Offer Shares as at the close of the Application List. In the
event of an under-subscription for the Placement Shares as at the close of the Application List,
that number of Placement Shares under-subscribed shall be made available to satisfy
applications for the Offer Shares to the extent that there is an over-subscription for the Offer
Shares as at the close of the Application List.

15. In the event of an over-subscription for the Offer Shares as at the close of the Application List
and/or the number of Placement Shares are fully subscribed or over-subscribed as at the close
of the Application List, the successful applications for the Offer Shares shall be determined by
ballot, or otherwise as determined by the Directors and approved by SGX-ST.

138
16. Acceptance of applications will be conditional upon the Company being satisfied that:–
(a) permission has been granted by SGX-ST to deal in, and for quotation for, all the existing
Shares and the New Shares on a “when issued” basis on SGX Sesdaq; and
(b) the Management and Underwriting Agreement and Placement Agreement referred to on
page 104 of this Prospectus have become unconditional and have not been terminated.

17. Additional terms and conditions for applications by way of printed Application Forms are set out
on pages 139 to 142 of this Prospectus.

18. Additional terms and conditions for Electronic Applications are set out on pages 143 to 147 of
this Prospectus.

19. Each applicant irrevocably authorises CDP to disclose the outcome of his application, including
the number of Invitation Shares allotted to the applicant pursuant to his application, to
authorised operators.

20. Any reference to the “applicant” in this section shall include a person applying for the Offer
Shares by way of an Electronic Application or by way of an Offer Shares Application Form, a
person applying for the Placement Shares through the Placement Agent and a person applying
for the Reserved Shares by way of a Reserved Shares Application Form.

21. The Issue Price for each New Share is $0.32.

22. No application will be held in reserve.

ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING PRINTED APPLICATION


FORMS
Applications by way of printed Application Forms shall be made on, and subject to, the terms and
conditions of this Prospectus, including but not limited to the terms and conditions appearing below
and those set out under the section on “Terms and Conditions and Procedures for Application” found
on pages 136 to 139 of this Prospectus, as well as the Memorandum and Articles of Association of
the Company.

1. Applications for the Offer Shares (other than for the Reserved Shares) must be made using the
WHITE Application Forms and official envelopes “A” and “B”, and applications for the
Placement Shares must be made using the BLUE Application Forms, and applications for the
Reserved Shares must be made using the PINK Application Forms, accompanying and
forming part of this Prospectus. Care must be taken to follow the instructions set out in the
respective Application Forms and this Prospectus for the completion of the respective
Application Forms. Applications which do not conform strictly to these instructions or to the
terms and conditions of this Prospectus or which are illegible, incomplete, incorrectly
completed or which are accompanied by improperly drawn up or improper form of remittances
may be rejected.

2. The Application Forms must be completed in English. Please type or write clearly in ink using
BLOCK LETTERS. All spaces in an Application Form, except those under the heading “FOR
OFFICIAL USE ONLY”, must be completed and the words “NOT APPLICABLE” or “N.A.” should
be written in any space that is not applicable.

139
3. Individuals, corporations and approved nominee companies must give their names in full.
Applications must be made, in the case of individuals, in their full names as appearing in their
identity cards (if applicants have such identification documents) or passports and, in the case
of corporations, in their full names as registered with a competent authority. Applicants, other
than individuals, completing the Application Form under the hand of an official, must state the
name and capacity in which that official signs. A corporation completing an Application Form is
required to affix its Common Seal (if any) in accordance with its Memorandum and Articles of
Association or the equivalent constitutive documents of the corporation. If an application by a
corporate applicant is successful, a copy of its Memorandum and Articles of Association or its
equivalent constitutive documents must be lodged with the Company’s Share Registrar. The
Company reserves the right to require any applicant to produce documentary proof of
identification for verification purposes.

4. (a) All applicants must complete Sections A and B and sign page 1 of the Application Form.
(b) All applicants are required to delete either paragraph 7(a) or 7(b) on page 1 of the
Application Form. Where paragraph 7(a) is deleted, the applicant must also complete
Section C of the Application Form with particulars of the beneficial owner(s).
(c) Applicants who fail to make the required declaration in Paragraph 7(a) or 7(b) (as the case
may be) on page 1 of the Application Form are liable to have their applications rejected.

5. Applications for the Invitation Shares must be accompanied by payment in cash in the form set
out below only. Each application must be accompanied by a cash remittance in Singapore
currency for the full amount payable, in respect of the number of Invitation Shares applied for,
in the form of a Banker’s Draft, Cashier’s Order or POSB Cashier’s Order drawn on a bank in
Singapore and made out in favour of “HYFLUX SHARE ISSUE ACCOUNT” crossed “A/C
PAYEE ONLY”, or in the form of a DBS Autobank Cashier’s Order Equivalent, and with the
name and address of the applicant written clearly on the reverse side. Applications not
accompanied by any payment or accompanied by any other form of payment will not be
accepted. Remittances bearing “Not Transferable” or “Non Transferable” crossings will be
rejected. No acknowledgement of receipt will be issued by the Company or the Manager or the
Placement Agent for applications and application moneys received.

6. Individual applicants will be required to declare whether they are citizens or permanent
residents of Singapore. Corporate applicants, whether incorporated or unincorporated and
wherever incorporated or constituted, will be required to declare whether they are corporations
in which citizens or permanent residents of Singapore or any body corporate constituted under
any statute of Singapore have an interest in the aggregate of more than 50% of the issued
share capital of or interests in such corporations. Approved nominee companies are required
to declare whether the beneficial owner of the Invitation Shares is a citizen or permanent
resident of Singapore or a corporation, whether incorporated or unincorporated and wherever
incorporated or constituted, in which citizens or permanent residents of Singapore or any body
corporate incorporated or constituted under any statute of Singapore have an interest in the
aggregate of more than 50% of the issued share capital of or interests in such corporation.

7. Unsuccessful applications and those not successfully balloted or accepted are expected to be
returned to the applicants by ordinary post, at the risk of the applicants, within three Market
Days after the close of the Application List, without interest or any share of revenue or other
benefit arising therefrom. Where an application is rejected or accepted in part only, the full
amount or the balance of the application moneys, as the case may be, will be refunded to the
applicant by ordinary post at his own risk (without interest or any share of revenue or other
benefit arising therefrom) within 14 days after the close of the Application List provided that the
remittance accompanying such application which has been presented for payment or other
processes has been honoured and the application moneys received in the designated share
issue account. Unsuccessful applicants using DBS Autobank Cashier’s Order Equivalent will
have the full amount of their application moneys (without interest or any share of revenue or
other benefit arising therefrom) automatically credited to their accounts maintained with DBS
Bank.

140
8. Capitalised terms used in the Application Forms and defined in this Prospectus shall bear the
meanings assigned to them in this Prospectus.

9. In consideration of the Company having distributed the Application Form to the applicant and
agreeing to close the Application List at 12.00 noon on 15 January 2001 or such later time or
date as the Directors may, in their absolute discretion, decide and by completing and delivering
the Application Form, each applicant agrees that:–
(a) his application is irrevocable;
(b) his remittance will be honoured on first presentation and that any moneys returnable may
be held pending clearance of his payment and he will not be entitled to any interest or any
share of revenue or other benefit arising therefrom;
(c) in respect of the Invitation Shares for which his application has been received and not
rejected, acceptance of his application shall be constituted by written notification by or on
behalf of the Company and not otherwise, notwithstanding any remittance being presented
for payment by or on behalf of the Company;
(d) he will not be entitled to exercise any remedy of rescission for misrepresentation at any
time after acceptance of his application;
(e) all applications, acceptances and contracts resulting therefrom under the Invitation shall be
governed by and construed in accordance with the laws of Singapore and that he
irrevocably submits to the non-exclusive jurisdiction of the Singapore courts; and
(f) in making his application, reliance is placed solely on the information contained in this
Prospectus and that none of the Company, the Manager, the Underwriter, the Placement
Agent or any other person involved in the Invitation shall have any liability for any
information not so contained.

10. Applications for Offer Shares (other than Reserved Shares)


(a) Applications for Offer Shares (other than Reserved Shares) must be made using the
WHITE Application Forms and WHITE official envelopes “A” and “B”.
(b) The applicant must:–
(i) enclose the WHITE Offer Shares Application Form, duly completed and executed,
together with the correct remittance in accordance with the terms and conditions of
this Prospectus in the WHITE official envelope “A” which is provided;
(ii) in the appropriate spaces on the WHITE official envelope “A”:–
(1) write his name and address;
(2) state the number of Offer Shares (other than Reserved Shares) applied for;
(3) tick the relevant box to indicate the form of payment; and
(4) affix adequate Singapore postage;
(iii) SEAL THE OFFICIAL WHITE ENVELOPE “A”;
(iv) write, in the appropriate box provided, on the larger official WHITE envelope “B”
addressed to DBS BANK, 6 SHENTON WAY #28-00, DBS BUILDING TOWER ONE,
SINGAPORE 068809, the number of Offer Shares (other than Reserved Shares) for
which the application is made; and

141
(v) insert WHITE official envelope “A” into WHITE official envelope “B”, seal WHITE
official envelope “B”, affix adequate Singapore postage on “B” (if despatching by
ordinary post) and thereafter DELIVER BY HAND OR DESPATCH BY ORDINARY
POST at his own risk to DBS BANK, 6 SHENTON WAY #28-00, DBS BUILDING
TOWER ONE, SINGAPORE 068809, so as to arrive by 12.00 noon on 15 January
2001 or such other time or date as the Directors and the Vendors may, in their
absolute discretion, decide. Local Urgent Mail or Registered Post must NOT be used.
Applications that are illegible, incomplete or incorrectly completed or accompanied by an
improperly drawn up or improper form of remittance are liable to be rejected.
(c) ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement of
receipt will be issued for any application or remittance received.

11. Applications for Placement Shares


(a) Applications for Placement Shares must be made using the BLUE Application Forms.
(b) The completed BLUE Placement Shares Application Form and the applicant’s remittance
in accordance with the terms and conditions of this Prospectus for the full amount payable
in respect of the number of Placement Shares applied for must be delivered by hand or
despatched by ordinary post enclosed and sealed in any envelope to be provided by the
applicant. The applicant must affix adequate Singapore postage (if despatching by ordinary
post) and thereafter the sealed envelope must be delivered by hand or despatched by
ordinary post at the applicant’s own risk to DBS Bank, 6 Shenton Way #28-00, DBS
Building Tower One, Singapore 068809, for the attention of Capital Markets, to arrive by
12.00 noon on 15 January 2001 or such other time or date as the Directors and the
Vendors may, in their absolute discretion, decide. Local Urgent Mail or Registered Post
must NOT be used.
(c) ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement of
receipt will be issued for any application or remittance received.
(d) Alternatively, the applicant may remit his application moneys by electronic transfer to the
account of DBS Bank, Shenton Way Branch, Current Account No. 001-045686-5, in
favour of “HYFLUX SHARE ISSUE ACCOUNT” for the number of Placement Shares
applied for by 12.00 noon on 15 January 2001. Applicants who remit their application
moneys via electronic transfer should send a copy of the telegraphic transfer advice slip to
DBS Bank, 6 Shenton Way #28-00, DBS Building Tower One, Singapore 068809, for
the attention of Capital Markets, to arrive by 12.00 noon on 15 January 2001 or such
other time or date as the Directors and the Vendors may, in their absolute
discretion, decide.

12. Applications for Reserved Shares


(a) Applications for Reserved Shares must be made using the PINK Application Forms.
(b) The completed PINK Reserved Shares Application Form and the applicant’s remittance in
accordance with the terms and conditions of this Prospectus for the full amount payable in
respect of the number of Reserved Shares applied for must be enclosed and sealed in an
envelope to be provided by the applicant. The applicant must affix adequate Singapore
postage (if despatching by ordinary post) and thereafter the sealed envelope must be
delivered by hand or despatched by ordinary post at the applicant’s own risk to DBS
Bank, 6 Shenton Way #28-00, DBS Building Tower One, Singapore 068809, so as to
arrive by 12.00 noon on 15 January 2001 or such other time or date as the Directors and
the Vendors may, in their absolute discretion, decide. Local Urgent Mail or Registered Post
must NOT be used.
(c) ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement or
receipt will be issued for any application or remittance received.

142
ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS
The procedures for Electronic Applications are set out on the ATM screens (in the case of ATM
Electronic Applications) and the IB website screens (in the case of Internet Electronic Applications)
of the relevant Participating Banks (the “Steps”). Currently, DBS Bank, OUB and UOB are the only
Participating Banks through which Internet Electronic Applications may be made. For illustrative
purposes, the procedures for Electronic Applications through ATMs and the IB website of DBS Bank
are set out in the “Steps for ATM Electronic Applications through ATMs of DBS Bank (including its
POSBank Services division)” and the “Steps for Internet Electronic Application through the IB
website of DBS Bank” (the “DBS Steps”) appearing on pages 148 and 149 of this Prospectus
respectively. Please read the terms of this Prospectus, the Steps and the terms and conditions for
Electronic Applications set out below carefully before making an Electronic Application. An ATM card
issued by one Participating Bank cannot be used to apply for Offer Shares at an ATM belonging to
other Participating Banks.

Any reference to the “Applicant” in these Terms and Conditions for Electronic Applications and the
Steps shall mean the applicant who applies for the Offer Shares (other than the Reserved Shares)
through an ATM of a Participating Banks or the IB website of a relevant Participating Bank.

For an ATM Electronic Application, an Applicant must have an existing bank account with, and be
an ATM cardholder of, one of the Participating Banks before he can make an ATM Electronic
Application at the ATMs of that Participating Bank. For an Internet Electronic Application, the
Applicant must have an existing bank account with and a User Identification (“User ID”) and a
Personal Identification Number/Password (“PIN”) given by the relevant Participating Banks. The DBS
Steps set out the actions that the Applicant must take at ATMs or the IB website of DBS Bank to
complete an Electronic Application. The actions that the Applicant must take at the ATMs or the IB
websites of the other Participating Banks are set out on the ATM screens or the IB websites of the
relevant Participating Banks. Upon the completion of his ATM Electronic Application transaction, the
Applicant will receive an ATM transaction slip (“Transaction Record”), confirming the details of his
ATM Electronic Application. The Transaction Record is for the Applicant’s retention and should not be
submitted with any printed Application Form. Upon completion of his Internet Electronic Application
through the IB website of DBS Bank, there will be an on-screen confirmation (“Confirmation
Screen”) of the application which can be printed out by the Applicant for his record. The printed
record of the Confirmation Screen is for the Applicant’s retention and should not be submitted with
any printed Application Form.

An Applicant must ensure that he enters his own Securities Account Number when using the
ATM card issued to him in his own name. Using his own Securities Account Number with an
ATM card not issued to him in his own name will render his ATM Electronic Application liable
to be rejected. An Applicant, including one who has a joint bank account with a Participating
Bank, must use an ATM card issued to him in his own name and must enter his own
Securities Account number. An Applicant who fails to use his own ATM card or who does not key
in his own Securities Account Number will have his application rejected.

An Applicant must ensure, when making an Internet Electronic Application, that the mailing address
of his account selected for the application is in Singapore and the application is being made in
Singapore. Otherwise, his application is liable to be rejected. In this connection, the Applicant will be
asked to declare that he is in Singapore at the time when he makes his application.

An Electronic Application shall be made in accordance with, and subject to, the terms and
conditions of this Prospectus including but not limited to the terms and conditions appearing below
as well as those set out under the section on “Terms and Conditions and Procedures for
Application” found on pages 136 to 139 of this Prospectus, as well as the Memorandum and Articles
of Association of the Company.

1. In connection with his Electronic Application for the Offer Shares, the Applicant is required to
confirm statements to the following effect in the course of activating the Electronic Application:–

143
(a) that he has received a copy of this Prospectus and has read, understood and
agreed to all the terms and conditions of application for the Offer Shares and this
Prospectus prior to effecting the Electronic Application and agrees to be bound by
the same;
(b) that he consents to the disclosure of his name, NRIC or passport number, address,
nationality and permanent resident status, CDP Securities Account number, CPF
Investment Account number (if applicable) and share application amount (the
“Relevant Particulars”) from his account with that Participating Bank to the Share
Registrar, SCCS, CDP, CPF, the Company and the Manager (the “Relevant Parties”);
and
(c) that that application is his only application for the Offer Shares (other than
Reserved Shares) and it is made in his name and at his own risk.

His application will not be successfully completed and cannot be recorded as a completed
transaction unless he presses the “Enter” or “OK” or “Confirm” or “Yes” or any other relevant
key in the ATM or clicks “Confirm” or “OK” or “Submit” or “Continue” or “Yes” or any other
relevant button on the IB website screen. By doing so, the Applicant shall be treated as
signifying his confirmation of each of the above statements. In respect of statement 1(b) above,
his confirmation shall signify, and shall be treated as, his written permission given in
accordance with the relevant laws of Singapore, including Section 47(4) of the Banking Act
(Chapter 19) of Singapore, to the disclosure by that Participating Bank of the Relevant
Particulars of his account(s) with that Participating Bank to the Relevant Parties.

2. An Applicant may make an ATM Electronic Application at an ATM of any Participating Bank or
an Internet Electronic Application at the IB website of any relevant Participating Bank for the
Offer Shares (other than Reserved Shares) in the form of cash only by authorising such
Participating Bank to deduct the full amount payable from his account with such Participating
Bank.

3. The Applicant irrevocably agrees and undertakes to subscribe for and to accept the number of
Offer Shares (other than Reserved Shares) applied for as stated on the Transaction Record or
on the Confirmation Screen or any lesser number of Offer Shares (other than Reserved
Shares) that may be allotted to him in respect of his Electronic Application. In the event that
the Company decides to allot any lesser number of such Offer Shares or not to allot any Offer
Shares to the Applicant, the Applicant agrees to accept such decision as final. If the
Applicant’s Electronic Application is successful, his confirmation (by his action of pressing the
“Enter” or “OK” or “Confirm” or “Yes” or any other relevant key on the ATM or clicking “Confirm”
or “OK” or “Submit” or “Continue” or “Yes” or any other relevant button on the IB website
screen) of the number of Offer Shares (other than Reserved Shares) applied for shall signify
and shall be treated as his acceptance of the number of Offer Shares (other than Reserved
Shares) that may be allotted to him and his agreement to be bound by the Memorandum and
Articles of Association of the Company.

4. The Applicant irrevocably requests and authorises the Company to:–


(a) register the Offer Shares allotted to the Applicant in the name of CDP for deposit into his
Securities Account;
(b) send the relevant Share certificate(s) to CDP;
(c) return or refund (without interest or any share of revenue or other benefit arising
therefrom) the application moneys in Singapore currency should his Electronic Application
not be accepted, by automatically crediting the Applicant’s bank account with his
Participating Bank with the relevant amount within three Market Days after the close of the
Application List; and

144
(d) return or refund (without interest or any share of revenue or other benefit arising
therefrom) the balance of the application moneys in Singapore currency should his
Electronic Application be accepted in part only, by automatically crediting the Applicant’s
bank account with his Participating Bank with the relevant amount within 14 days after the
close of the Application List.

5. BY MAKING AN ELECTRONIC APPLICATION, THE APPLICANT CONFIRMS THAT HE IS


NOT APPLYING FOR THE OFFER SHARES AS NOMINEE OF ANY OTHER PERSON AND
THAT ANY ELECTRONIC APPLICATION THAT HE MAKES IS THE ONLY APPLICATION
MADE BY HIM AS BENEFICIAL OWNER.

THE APPLICANT SHALL MAKE ONLY ONE ELECTRONIC APPLICATION AND SHALL
NOT MAKE ANY OTHER APPLICATION FOR THE INVITATION SHARES (OTHER THAN
FOR THE RESERVED SHARES), WHETHER AT THE ATMs OF ANY PARTICIPATING BANK
OR THE IB WEBSITES OF THE RELEVANT PARTICIPATING BANKS OR ON THE
PRESCRIBED PRINTED APPLICATION FORMS. WHERE A PERSON HAS MADE AN
APPLICATION FOR INVITATION SHARES (OTHER THAN RESERVED SHARES) ON AN
APPLICATION FORM, HE SHALL NOT MAKE AN ELECTRONIC APPLICATION FOR
OFFER SHARES AND VICE VERSA.

6. The Applicant irrevocably agrees and acknowledges that his Electronic Application is subject to
risks of electrical, electronic, technical and computer-related faults and breakdowns, fires, acts
of God and other events beyond the control of the Participating Banks, the Company and the
Manager and if, in any such event, the Participating Banks and/or the Company and/or the
Manager do not record or receive the Applicant’s Electronic Application, or data relating to the
Applicant’s Electronic Application or the tape or any other devices containing such data is lost,
corrupted, destroyed or not otherwise accessible, whether wholly or partially for whatever
reason, the Applicant shall be deemed not to have made an Electronic Application and the
Applicant shall have no claim whatsoever against the Participating Banks, the Company or the
Manager for the Offer Shares applied for or for any compensation, loss or damage.

7. Electronic Applications shall close at 12.00 noon on 15 January 2001 or such other time as
the Directors and Vendors may in their absolute discretion, decide. Subject to the paragraph
above, an Internet Electronic Application is deemed to be received only upon its completion,
that is, when there is an on-screen confirmation of the application.

8. All particulars of the Applicant in the records of his Participating Bank at the time he makes
his Electronic Application shall be deemed to be true and correct and the relevant Participating
Bank and the Relevant Parties shall be entitled to rely on the accuracy thereof. If there has
been any change in the particulars of the Applicant after the time of the making of his
Electronic Application, the Applicant shall promptly notify his Participating Bank.

9. The Applicant must have sufficient funds in his bank account(s) with his Participating Bank at
the time he makes his Electronic Application, failing which his Electronic Application will not be
completed or accepted. Any Electronic Application which does not strictly conform to the
instructions set out in this Prospectus or on the screens of the ATM or the IB website through
which that Electronic Application was made will be rejected.

10. No application will be kept in reserve. Where an Electronic Application is not accepted, it is
expected that the full amount of the application moneys will be refunded in Singapore currency
(without interest or any share of revenue or other benefit arising therefrom) to the Applicant by
being automatically credited to the Applicant’s bank account with the relevant Participating
Bank within three Market Days after the close of the Application List. Trading on a “when
issued” basis, if applicable, is expected to commence after such refund has been made.
Where an Electronic Application is rejected or accepted in part only, the full amount or the
balance of the application moneys will be refunded in Singapore currency (without interest or
any share of revenue or other benefit arising therefrom) to the Applicant by being automatically
credited to the Applicant’s bank account with his Participating Bank within 14 days after the
close of the Application List.

145
The responsibility for timely refund of application moneys arising from unsuccessful or partially
successful Electronic Application lies solely with the respective Participating Banks. Therefore,
Applicants are strongly advised to consult their respective Participating Banks regarding the
status of their Electronic Applications and/or refund of application moneys to them arising from
their unsuccessful or partially successful Electronic Applications, to determine the exact
number of Shares, if any, which have been allotted to them. Neither the SGX-ST, CDP, SCCS,
the Participating Banks, the Company nor the Manager assumes any responsibility for any loss
which may be incurred as a result of Applicants having to cover any net sell positions or from
buy-in procedures activated by the SGX-ST.

If the Applicant’s Electronic Application is made through the ATMs of UOB Group and is
unsuccessful, it is expected that a computer-generated notice will be sent to the Applicant by
the relevant Participating Bank (at the address of the Applicant as stated in the records of the
relevant Participating Bank at the date of his ATM Electronic Application) by ordinary post at
the Applicant’s own risk within three Market Days after the close of the Application List. If the
Applicant’s ATM Electronic Application is made through the ATMs of OCBC Group, KTB,
OUB or DBS Bank (including its POSBank Services division) and is unsuccessful, no
notification will be sent by the relevant Participating Bank.

If the Applicant’s Internet Electronic Application made through the IB website of UOB,
OUB or DBS Bank is unsuccessful, no notification will be sent by such Participating
Bank.

Applicants who make Electronic Applications through the ATMs of the following banks may
check the provisional results of their ATM Electronic Applications as follows:–

Available at ATM/ Service expected


Bank Telephone Internet Operating Hours from

DBS Bank 1800-222 2222 Internet Banking or 24 hours a day 7.00 p.m. on the
327 4767 Internet Kiosk balloting day
www.dbs.com*

KTB 222 8228 ATM ATM-24 hours a day ATM - Evening of


the balloting day

Phone Banking Phone Banking -


Mon-Fri 0800-2200 8.00 a.m. on the day
Sat 0800-1500 after the balloting day

OCBC 1800-363 3333 ATM ATM-24 hours a day Evening of the


Phone Banking - balloting day
24 hours a day

OUB 1800-224 2000 OUB Personal Phone Banking/ Evening of the


Internet Banking Internet Banking balloting day
www.oub2000.com. sg* 24 hours a day
OUB Mobile Buzz OUB Mobile Buzz**
24 hours a day

UOB 1800-533 5533 ATM(Other Phone Banking***/ 6.00 p.m. on the


1800-222 2121 Transactions – “IPO ATM 24 hours balloting day
Enquiry”)
www.uobcyberbank.
com.sg***

* Applicants who make Internet Electronic Applications through the IB websites of OUB or DBS Bank may also
check the results of their application through the same channels listed in the table above in relation to ATM
Electronic Applications made at ATMs of DBS Bank or OUB.
** Applicants who make Electronic Applications through the ATMs or IB website of OUB and who have activated
their OUB Mobile Buzz service will be notified of the results of their Electronic Application via their mobile
phones.
*** Applicants who make Electronic Applications through the ATMs of UOB Group or the IB website of UOB may
check the results of their application through UOB CyberBank, UOB Group ATMs or UOB Phone Banking
Services.

146
11. In consideration of the Company making available the Electronic Application facility, through the
ATMs and IB websites (if any) of the Participating Banks and agreeing to close the Application
List at 12:00 noon on 15 January 2001 or such later time or date as the Directors and
Vendors may in their absolute discretion decide, and by making and completing an Electronic
Application, the Applicant agrees that:–
(a) his Electronic Application is irrevocable; and
(b) his Electronic Application, the acceptance of his Electronic Application by the Company
and the contract resulting therefrom under the Invitation shall be governed by and
construed in accordance with the laws of Singapore and he irrevocably submits to the
non-exclusive jurisdiction of the Singapore courts.
(c) none of the Company, the Manager or the Participating Banks shall be liable for any
delays, failures or inaccuracies in the recording, storage or in the transmission or delivery
of data relating to his Electronic Application to the Company or CDP due to a breakdown
or failure of transmission, delivery or communication facilities or any risks referred to in
paragraph 6 on page 145 of this Prospectus or to any cause beyond their respective
controls;
(d) he will not be entitled to exercise any remedy of rescission for misrepresentation at any
time after acceptance of his application;
(e) in respect of the Offer Shares for which his Electronic Application has been successfully
completed and not rejected, acceptance of the Applicant’s Electronic Application shall be
constituted by written notification by or on behalf of the Company and not otherwise,
notwithstanding any payment received by or on behalf of the Company; and
(f) in making his application, reliance is placed solely on the information contained in this
Prospectus and that none of the Company, the Manager, the Underwriter, the Placement
Agent or any other person involved in the Invitation shall have any liability for any
information not so contained.

12. The Applicant should ensure that his personal particulars as recorded by both CDP and the
relevant Participating Banks are correct and identical. Otherwise his Electronic Application may
be rejected. The Applicant should promptly inform CDP of any change in his address, failing
which the notification letter on successful allotment will be sent to his address last registered
with CDP.

13. The existence of a trust will not be recognised. Any Electronic Application by a person must be
made in his/their own name(s) and without qualification. The Company will reject any
application by any person acting as nominee.

147
INSTRUCTIONS FOR ELECTRONIC APPLICATIONS THROUGH ATMS OF DBS BANK
(INCLUDING ITS POSBANK SERVICES DIVISION) AND IB WEBSITE OF DBS BANK
Instructions for an Applicant using Electronic Application will appear on the ATM screens and the IB
website screens of the relevant Participating Banks.

Steps for ATM Electronic Application through ATMs of DBS Bank (including its POSBank
Services division)
For illustrative purposes, the steps for making an ATM Electronic Application through a DBS Bank
or POSBank ATM and through the IB website of DBS Bank are shown below. Certain words
appearing on the screen are in abbreviated form (“A/c”, “amt”, “appln”, “ &”, “I/C” and “No.” refer to
“Account”, “amount”, “application”, “and”, “NRIC” and “Number” respectively). Instructions for ATM
Electronic Applications on the ATM screens of Participating Banks (other than DBS Bank(including
its POSBank Services division)) may differ slightly from those represented below.

Step 1: Insert your personal DBS or POSBank ATM Card.

2: Enter your Personal Identification Number

3: Select “CASHCARD & MORE SERVICES”

4: Select “ESA-IPO SHARE/BOND/RIGHTS”

5: Select “ELECTRONIC SECURITY APPLN (IPO-SHARE/BOND)” to “HYFLUX”

6: Press the “ENTER” key to acknowledge:-


— You have read, understood & agreed to all terms of the appln & the
Prospectus/Document
— You consent to disclose your name, I/C No., address, nationality, CDP
Securities A/c No., CPF Investment A/c No. & security appln amount from your
bank account(s) to share registrars, SCCS, CDP, CPF, issuer/vendor(s)
— For FIXED price security appln, this is your only appln and it is made in your
own name and at your own risk
— For TENDER security appln, this is your only appln at the selected tender price
and it is made in your own name and at your own risk
— You are not a US Person as referred to in the Prospectus/Document where
applicable
7: Select your nationality

8: Select the DBS Bank account (Autosave/Current/Savings/Savings Plus) or the POSBank


account (Current/Savings) from which to debit your application moneys

9: Enter the number of shares/securities you wish to apply for using cash

10: Enter your own 12-digit CDP Securities Account number or press “Enter” to confirm if
your CDP Securities Account number is correct. (If your CDP Securities Account number
has already been stored in the DBS Bank’s or POSBank’s records)

11: Check the details of your securities application, your CDP Securities Account number on
the screen and press the “ENTER” key to confirm application

12: Remove the Transaction Record for your reference and retention only

148
Steps for Internet Electronic Application through the IB website of DBS Bank
For illustrative purposes, the steps for making an Internet Electronic Application through the DBS
Bank IB website is shown below. Certain words appearing on the screen are in abbreviated form
(“A/c”, “amt”, ‘appln”, “&”, “I/C” and “No.” refer to “Account”, “amount”, “application”, “and”, “NRIC” and
“Number” respectively),

Step 1: Click on to DBS bank website (www.dbs.com)

2: Login to Internet banking

3: Enter your User ID and PIN

4: Select “Electronic Security Application”

5: Click “Yes” to proceed and to warrant that you have observed and complied with all
applicable laws and regulations

6: Click on “Hyflux”

7: Click “Confirm” to acknowledge:


(a) You have read, understood & agreed to all terms of application and
Prospectus/Document
(b) You consent to disclose your name, I/C No., address, nationality, CDP Securities A/c
No., CPF Investment A/c No. & security application amount from your DBS/POSBank
account(s) to share registrars, SCCS, CDP, CPF Board and issuer(s)
(c) This application is made in your own name and at your own risk
(d) For FIXED price securities application, this is your only application. For TENDER
securities application, this is your only application at the selected tender price
(e) You are not a US Person as referred to in the Prospectus/Document, where
applicable.

8: Fill in details for share application and click “Submit”

9: Check the details of your securities application, your IC/passport No. and no. of shares
on the screen and click “OK” to confirm your application

10: Print Confirmation Screen (optional) for your reference & retention only

149
This page has been intentionally left blank.
This page has been intentionally left blank.
This page has been intentionally left blank.
Financial
highlights
For financial (’S$ mil)

year ended 20.140 Industry


December 31 20

18
Financial
Financial Performance
Performance prospects
15.775
16 Rising demand for water treatment systems

14
• Shortage of fresh water supply
- less than 1% of world’s fresh water is readily accessible for human use
12 • Growing market for conservation and recycling of water
- Projected growth of 10% to 15% per annum over the next three years,
10 and by 20% to 25% per annum in the longer term in Singapore
8.720

Increasing water consumption
8
6.929 - Water consumption in PRC estimated to grow at 5% per annum
6.391 - Brisk pace of PRC‘s industrial development further compounds the
5.954
Profit before tax
6
Incorporatedshortage
in theofRepublic
potable water
of Singapore on 31 March 2000
3.870 Growth in membrane industry
4
Turnover
• Demand for membrane materials in the US is projected to grow by 7.8% per
2 annum from US$1.2 billion in 1999 to US$1.8 billion in 2004
1.058
0.137 0.430

0
1997 1998 1999 10 mths ended 2000(Estimate)

Our 31 Oct ‘00

Our
competitive
strengths business
Provide integrated services
• Designing • Engineering
strategies
• Installation • Commissioning
• Maintenance Provide fully integrated services
• Continue to provide a wide range of water treatment services
Ability to meet the diverse needs of various industries by utilising
membrane filtration • Plan to provide emergency recovery units to provide uninterrupted
water treatment while servicing or upgrading customers’ water
• Serve industries such as electronics, pharmaceutical and treatment systems
biotechnology
• Not reliant on a single industry or customer Lower direct costs
Experienced management team • Aim to manufacture in-house up to 30% to 50% of the
materials used in our systems
• Led by founder and Managing Director, Ms Olivia Lum, for the past
10 years Incorporate information technology into systems
• Assisted by a dedicated management team • Enhance operational capabilities of our systems
Ability to meet international standards
Strengthen and cultivate relationships with
• Produce water which meets USP standards engineering consultants and companies
• Manufacture equipment which meets ASME standards • Keep abreast of new projects
Customised systems
Tender for projects of larger value
• Provide solutions to suit the various needs of customers
• Customise membrane filtration plants for diverse applications Increase research & development and
required by different industries improve quality standards
Established relationship with customers and suppliers • Develop proprietary membranes
• Approximately 70% of our business is obtained through referrals and • Improve existing membranes
recommendations by our existing customers, engineering consultants • Find new uses and applications
and companies
• Drive quality system to ISO standards
• Supply agreement with E-Cell Corporation of Canada for a patented
electrochemical liquid purification apparatus widely used in industries
requiring ultra-pure water

SNP SPrint Pte Ltd 612004


“A SPECIALIST IN INTEGRATED TREATMENT
SYSTEMS FOR ADVANCED WATER TREATMENT AND
MEMBRANE FILTRATION”

(Incorporated in the Republic of Singapore on 31 March 2000)


Core business
A one-stop shop service for the design, fabrication, installation,
commissioning and maintenance of water treatment systems,
specialising in advanced membrane filtration technologies that
have found diverse applications across industries and markets.

Our headquarters in Singapore Our Shanghai Office

PROSPECTUS DATED 8 JANUARY 2001


Application has been made to the Singapore Exchange Securities Trading Limited (the “SGX-
ST”) for permission to deal in, and for quotation of, all of our ordinary shares of $0.05 each
(the “Shares”) comprising existing issued and fully paid-up shares and the new Shares (the
“New Shares”) which are the subject of this Invitation (as defined herein). Such permission
will be granted when the Company has been admitted to the Official List of the SGX Sesdaq.
Acceptance of applications will be conditional upon permission being granted to deal in, and
for quotation of, all the issued Shares and the New Shares. Moneys paid in respect of any
application accepted will be returned, without interest or any share of revenue or other benefit
arising therefrom and at the applicant’s own risk, if the said permission is not granted.
The SGX-ST assumes no responsibility for the correctness of any of the statements made,
opinions expressed or reports contained in this Prospectus. Admission to the Official List of
the SGX Sesdaq is not to be taken as an indication of the merits of the Invitation, the Company,
its subsidiaries, the Shares or the New Shares.
A copy of this Prospectus, together with copies of the Application Forms, has been lodged
We build specialised systems for:
with and registered by the Registrar of Companies and Businesses in Singapore who takes
no responsibility for its contents.
• Water Purification of raw water for public consumption and industrial applications
• Wastewater Treatment for industries
• Water Recycling of wastewater for reuse
Invitation in respect of 39,470,000 Ordinary Shares of $0.05 each comprising • Advanced Membrane Filtration to recover or purify products, such as antibiotics, Vitamin C, dyes
25,000,000 New Shares and 14,470,000 Vendor Shares as follows:- and urea in manufacturing process
(1) 6,000,000 Offer Shares at $0.32 for each Offer Share by way of public • High-purity piping systems and equipment hook-up to convey pure products, such as compressed
offer, and air, specialty gases, ultra-pure water and chemicals to manufacturing plants
(2) 33,470,000 Placement Shares by way of placement, comprising:-

(i) 32,430,000 Placement Shares at $0.32 for each Placement Share; and

(ii) 1,040,000 Reserved Shares at $0.32 for each Reserved Share reserved
for our Directors, management, employees and others who have
contributed to the success of our Group,

payable in full on application.

Manager, Underwriter and Placement Agent


Water Treatment System Membrane Filtration Plant for water recycling
in an electronic factory
EDI System in a Recycling of brine solution
semiconductor facility in a sugar factory
HYFLUX LTD 40 Changi South Street 1 Singapore 486764