& PRESIDENT’S GROUP CEO MESSAGE OF DIRECTORS BOARD taking...

GROUP CEO& PRESIDENT’S

MESSAGE

SENIORMANAGEMENT

CORPORATEMILESTONES

OPERATIONSREVIEW

BOARDOF DIRECTORS

FINANCIALHIGHLIGHTS

FLIGHTtaking

annual report.03

HYFLUX LTD

annual report.03

HYFLUX LTD

CONTENTS

GROUP CEO & PRESIDENT’S MESSAGE .02

BOARD OF DIRECTORS .08

SENIOR MANAGEMENT .10

CORPORATE MILESTONES .16

FINANCIAL HIGHLIGHTS .18

OPERATIONS REVIEW .21

TAKING OFF ON ADVANCED TECHNOLOGY .26

RAISING SHAREHOLDER VALUE .32

CONQUERING NEW HEIGHTS .38

CONFIDENCE TO SOAR .44

CORPORATE STRUCTURE .48


MESSAGE

SENIORMANAGEMENT

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FINANCIALHIGHLIGHTS“I always like to think ahead of others.

I don’t like to play catch up.”

OLIVIA LUM FOUNDER, GROUP CEO & PRESIDENT

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HYFLUX LTD

OLIVIA LUMGroup CEO & President

page

02.03

“The challenge for us is to grow our company into the leading watertreatment company in the world.”

OLIVIA LUMTHE STRAITS TIMES, SINGAPORE PRESS HOLDINGS, 26 MARCH 2004OLIVIA RECEIVED THE ENTERPRISE AWARD FOR HYFLUX AT THE SINGAPORE BUSINESS AWARDS 2003.


MESSAGE

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This time last year, we promised to create value for your

investment in us and to achieve another year of profitable

growth. We are pleased to have done that and more.

The strength of our broadened portfolio, combined with

excellent execution, made for a sterling finish with a

S$19.5 million post-tax profit for the fiscal year ended

31 December 2003 (2002: S$12.3 million).

Hyflux today commands a market capitalisation of around

S$460 million. Having grown our market capitalisation

six fold, we were ranked as one of the best performing

companies on the Singapore Exchange Sesdaq board and

was upgraded to the Mainboard listing in April 2003.

Our success last year was largely due to the fact that

we remained focused on the course we had charted for

ourselves to stay ahead. These achievements represent

the collective efforts of our staff to excel at every

level and the support received from our shareholders

who today exceeds 5,000, our customers, suppliers and

business partners.

2003 – A YEAR OF MANY MILESTONES

2003 was truly a year of many milestones for Hyflux.

Two municipal projects were completed in Singapore: The

S$27.0 million Chestnut Avenue raw water treatment plant

which is the largest potable water plant in Asia using

membranes and the S$27.8 million third NEWater plant at

Seletar using our own in-house developed ultrafiltration

membrane system. Undoubtedly, the highlight of the year

was the award of Singapore’s first seawater desalination

plant to us, with a project value of some S$200 million,

followed by the conclusion of a financing deal with top

international banks for this landmark project. These

projects have provided Hyflux with the credentials

and confidence to venture forth more aggressively

internationally, targeting potential projects of similar stature.

In addition to growing our industrial applications, 2003

also saw our entry into the consumer product market.

Hence, the theme of this year’s report...Taking Flight.


MESSAGE

taking FLIGHT

annual report.03

HYFLUX LTD

“Our know-how and technology has noboundaries. We are not just confined towater even though we are just a watertreatment company.”

OLIVIA LUMSMART INVESTOR, VOLUME XII, 2004

WATER FOR 20 YEARS

In early 2002, PUB invited tenders for Singapore’s

first-ever seawater desalination project. Through a rigorous

and demanding bidding process, Singspring Pte Ltd,

a wholly-owned subsidiary of the Hyflux Group, was

eventually selected to build, own and operate the

desalination plant in Tuas that will supply water to PUB

for 20 years under a Water Purchase Agreement signed

in April 2003. A cornerstone in Singapore’s future water

self sustainability, this project-financed deal will enhance

our track record and image in the Asia Pacific region and

provide the springboard for us to clinch further projects.

REACHING INTO THE REGION AND BEYOND

Underpinning the support and confidence garnered

for this project, Singspring concluded the financing

agreement with four leading regional and international

banks, led by DBS bank, in December 2003. The deal

also clinched the Euromoney Asia Pacific Water Deal of

the Year 2003.

Such strong support and recognition will stand us in good

stead as we take flight and extend our reach into the region

and beyond. Construction of the desalination plant

commenced in January 2004. When completed in the 4th

quarter of 2005, the desalination plant will have

a designed capacity of over 136,000 cubic metres of

potable water a day, one of the largest such facilities

in the world.

CHINA – A KEY MARKET

Our growth in China was robust. We won an extra

S$20 million worth of orders from Sinolac (Singapore) Pte

Ltd, raising the value of a contract previously awarded to

Hyflux to S$46.9 million. The increased contract value

involves the supply of an organic acid plant, including the

membrane filtration system, with design capacity double

that of the original design. This represents our biggest

industrial project to date and will position us strongly to

make further inroads in China.

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DRAGON-FLY

2003 also saw the commercial launch of our new

consumer product, the Dragon-fly, simply called the

“Air-2-Water” machine. This is yet another example of our

ability to leverage on Hyflux’s proprietary ultrafiltration

membrane and purification technology to develop

innovative products to benefit consumers. Following the

launch, we have received some 20,000 units of firm orders

in Singapore, Indonesia, Malaysia, the Middle East and

the United States, with firm enquiries pouring in from India,

Sri Lanka, the Caribbean, Korea, Taiwan and Thailand.

CLEAR STRATEGY FOR R&D

Over the past ten years or so, the context in which we are

operating and the resources and expertise that we

possess have changed dramatically. However, one thing

which remains clear to us and continues to be the bulwark

of our growth strategy is our investment in R&D and the

need to stay technologically ahead.

UNDOUBTEDLY, THE HIGHLIGHT OF THE YEAR WAS THE AWARD OF SINGAPORE’S FIRST SEAWATER DESALINATION PLANT TO US, WITH A PROJECT VALUE OF SOME

S$200 MILLION, FOLLOWED BY THE CONCLUSION OF A FINANCING DEAL WITH TOP INTERNATIONAL BANKS FOR THIS LANDMARK PROJECT.

For years, Hyflux has dedicated itself to investing in

research and development. Our core business lies

in the development and application of membrane

technology. We firmly believe that the only way to maintain

a competitive edge in business is through improving

membrane technology and its innovative use in new

markets. We will always leverage on our core capabilities

and membrane technology to make pure water readily

available and affordable to every individual – whether it is

NEWater, or from seawater, or even from the air.

Clearly, with the flexibility that comes from the continuous

development of our proprietary membranes, the market

potential is enormous. To further facilitate advancements

in the applications of membrane technology, Hyflux signed

a Memorandum of Understanding with the Nanyang

Technological University’s Environmental Engineering

Research Centre (EERC) in October 2003 for collaboration

in water treatment research. We welcome similar

collaborations with other research bodies and

tertiary institutes.


MESSAGE

annual report.03

HYFLUX LTD

OUTLOOK

Just like the previous year, we are also entering the

new year with a healthy order book, valued at some

S$62 million. This time, growth drivers will come from the

China market and the consumer business segment.

THE CHINA MARKET

With rapid industrialisation and increasing focus on the

availability of water resources to sustain economic

development, China continues to present high growth

opportunities, especially in the pharmaceutical and

biotechnology segments.

We therefore intend to continue with our on-going

efforts to build on our reputation and standing in China,

and to extend our business portfolio there. We are

penetrating new segments such as the chemical and

petrochemical industries. Hyflux Filtech was incorporated

in November 2003, as a joint venture with a team of

Chinese entrepreneurs to develop and market membrane-

based niche applications for the process industries in

China. Our Chinese partners also bring with them in-depth

knowledge of the distribution channels in a market,

estimated to have a value of over US$500 million.

The synergistic alliance will thus give us immediate access

to this vast market as reflected by the deals already

secured and will complement our existing strong presence

in the electronics, the pharmaceutical and the

biotechnology sectors. Elsewhere, we are exploring

business opportunities in countries like the Philippines,

Indonesia, Vietnam and Thailand.

CONSUMER PRODUCTS POISED TO TAKE OFF

The Group also expects sales of consumer products to

take off in 2004. We have made some inroads in this area

and will now strengthen our business development

fundamentals to expand this line of business in the region.

The Dragon-fly, sold mainly through a network of

distributors, represents an additional and recurring revenue

stream for us. We will continue to develop new membrane-

based home products to fuel our foray into the consumer

and lifestyle markets.

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06.07

“The sky is the limit. With the directions we have set and with newblood in our management team, we are confident that Hyflux willcontinue to be a nimble, highly focused and leading enterprise.We move into 2004 on a charted course, with excitement andconfidence that we have in place the right strategy, the rightpeople and the right leadership to take us to greater heights.”

OLIVIA LUM


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FLYING FORWARD

We intend to fly high and fast. Our key strength lies in the

development and commercialisation of membrane

technology. This will continue to be our forte. The

technology has a wide range of applications – from

treatment of water and wastewater to the reclamation of

water (NEWater) and desalination, process liquid

purification, as well as the production of potable water

from ambient air. We will continue to leverage on this core

capability and the tremendous energy and passion within

Hyflux to provide customised solutions to our customers

and those who wish to be our clients.

ON WINGS OF FLIGHT

Taking flight – the sky is the limit. With the directions we

have set and with new blood in our management team,

we are confident that Hyflux will continue to be a nimble,

highly focused and leading enterprise. We move into 2004

on a charted course, with excitement and confidence that

we have in place the right strategy, the right people and

the right leadership to take us to greater heights.

JUST LIKE THE PREVIOUS YEAR, WE ARE ALSO ENTERING THE NEW YEAR WITH A HEALTHY ORDER BOOK, VALUED AT SOME S$62 MILLION.

PERSONAL THANKS

I would like to welcome our new Director, Mr S. Iswaran

to the Board. With his vast experience in the private and

public sectors, I am confident he will be an invaluable

member of the Board.

I would also like to thank Dr Deirdre Murugasu and

Mr Foo Hee Kiang for their contributions to the Board for

the past three years. For corporate governance reasons,

Dr Murugasu and Mr Foo will be stepping down from the

Board in February 2004. They will both join the executive

committee of the board.

Finally, and with great pride and gratitude, I would like

to thank all our shareholders, customers, business

partners, suppliers and employees for believing in us and

for their continuing support. Hyflux will strive towards even

better performance in 2004, exploring fresh ideas, breaking

new grounds and flying high to create wealth for those

who believe in us.

OLIVIA LUMGroup CEO & President


MESSAGE

annual report.03

HYFLUX LTD

1. OLIVIA LUM OOI LIN

Olivia Lum is Group CEO and

President of the Hyflux Group.

She started corporate life as a

chemist with Glaxo Pharmaceuticals

Pte Ltd and left in 1989 to start up

Hydrochem (S) Pte Ltd, the precursor

to Hyflux Ltd.

Managing the Group for more than

ten years now, Olivia Lum is the

driving force behind the Group’s

growth and business expansion,

responsible for policy and strategies

formulation and corporate direction.

A Nominated Member of Parliament

since July 2002, Olivia Lum holds

several positions in the public service.

She is a board member of SPRING

Singapore and the National University

of Singapore Council. She is also an

advisor to the Singapore Institute

of International Affairs. In 2003,

1. 2.

she was awarded the International

Management Action Award (IMAA)

and the Business Times “Most

Creative Entrepreneur Award”.

Ms Lum holds an Honours degree in

Science from the National University

of Singapore.

2. GAY CHEE CHEONG

Mr Gay was appointed Non-

executive Director of the Group

on 3 August 2001.

Currently Deputy Chairman/CEO

of 2G Capital Pte Ltd, he was JIT

Group’s Group Executive Director

and MD to the various JIT companies

in Singapore and overseas during the

four years he was there.

Mr Gay holds directorships in a

number of l isted companies in

Singapore.

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08.09


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He holds an Honours degree in

Electronic Engineering from Royal

Military College of Shrivenham, UK

and in Economics from University of

London. He also has a MBA from the

National University of Singapore.

3. LEE JOO HAI

Mr Lee was appointed Independent

Director on 19 December 2000.

A CPA with memberships to

ICPAS and Institute of Chartered

Accountants in England and

Wales, he is a partner in a public

accounting firm in Singapore. He has

more than 20 years of experience in

accounting, auditing, taxation and

company secretarial work.

Mr Lee holds directorships in a

number of other listed companies

in Singapore.

4. TEO KIANG KOK

Mr Teo was appointed Independent

Director on 19 December 2000.

A lawyer with more than 20 years

experience in legal practice, he is a

senior partner of Shook Lin & Bok, a

firm of advocates and solicitors. He

is currently the finance partner and

Head of Corporate Finance and

China practice groups in Shook Lin

& Bok. His main areas of practice are

corporate finance, international

finance and securities. He has

advised listed companies extensively

on corporate law and compliance

requirements.

He holds a Bachelor of Law (Honours)

degree from the University of Hull

and is a Barrister-at-Law from

Lincoln’s Inn.

5. S. ISWARAN

Mr S. Iswaran was appointed

Non-executive Director of the Group

on 2 June 2003.

Managing Director at Temasek

Holdings Pte Ltd and MP for West

Coast GRC, Mr Iswaran holds

directorships in a number of

companies such as SembCorp

Industries, Sunningdale Precision

Industries and SciGen. He has also

held various appointments at the

Ministry of Trade and Industry,

National Trades Union Congress and

Singapore Technologies.

3. 4. 5.


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annual report.03

HYFLUX LTD

1. DEIRDRE MURUGASU (DEE DEE NG)

Dr Dee Dee Ng is Chief Operating

Officer (COO) and Executive Vice

President for the Hyflux Group.

She worked for nine years with the

Ministry of Health before joining

Hyflux in 1996. Her last appointment

the re was as a spec ia l i s t i n

Family Medicine.

Her previous appointment in

Hydrochem (S) Pte Ltd (wholly-

owned subsidiary of Hyflux Ltd) was

Head of Business Development,

responsible for the development,

application and marketing of new

products and services.

Her current appointment as the

Group COO entails overseeing the

Group’s day-to-day operations, sales

and marketing.

Dr Dee Dee Ng holds a Masters of

Medicine (Family Medicine) from the


SINGAPORE

OFFICE

1. 2.

2. FOO HEE KIANG

Mr Foo is Executive Vice President

for Special Projects.

He worked as a Sales Manager for

Multico System Engineers Pte Ltd, a

construction equipment and building

materials company, for eight years

before joining Hyflux in 1998.

Mr Foo is in charge of the Group’s

special projects, which require

intensive management expertise and

structured planning. With more than

15 years of marketing and sales

experience behind him, he also

supports the marketing and sales of

the Group’s products and services.

Mr Foo holds a Bachelor of

Engineering degree from the National

University of Singapore.

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3. LIM KIM SENG

Mr Lim is Executive Vice President

of Finance and Company Secretary

for the Hyflux Group.

He heads the Group’s financial

management, legal and corporate

secretarial and investor relations

functions.

Mr Lim has over 25 years of

experience in industry and banking.

Prior to joining the Group in 2000,

he held senior positions in finance,

corporate secretarial functions

and human resources with major

American MNCs and a leading

local bank.

Mr Lim graduated with a degree in

accountancy from the University of

Singapore and holds a MBA from the


He is a non-practising member of

the Institute of Certified Public

Accountants.

4. GRACE GOH

Ms Goh is Senior Vice President of

Finance and Chief Financial Officer

for the Hyflux Group.

She is responsible for the financial

management of the Group covering

accounting, treasury, tax and

financial control and reporting.

She also handles investor relations

and assists in corporate secretarial

functions.

Ms Goh has more than 15 years of

experience in external and internal

audit, financial management and

control, and human resource

administration with both MNCs

and SMEs.

She holds a Degree in Accountancy

from the University of Singapore and

a MBA from the University of Wales

and Manchester Business School

(UK). Ms Goh is also a Certified

Internal Auditor and non-practising

member of the Institute of Certified

Public Accountants of Singapore.

3. 4. 5.


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5. CHRISTOPHER MURUGASU

Mr Murugasu is Senior Vice President

for Corporate Services. He is

responsible for the Group’s human

resource, procurement and general

administration functions.

Prior to joining Hyflux in August 2001,

Mr Murugasu accumulated over 15

years of experience in the public

sector as well as with a foreign bank.

He holds an Honours degree in

Computing Science from the Imperial

College and a Masters degree from

the London School of Economics.

annual report.03

HYFLUX LTD

6. FREDDY SOON

Mr Soon is Senior Vice President for

Business & Corporate Development.

H e i s r e s p o n s i b l e f o r n e w

business development, corporate

communications, branding and

customer relations. Mr Soon has over

30 years of experience in productivity

and competitiveness policy and

strategy formulation, industrial

design, quality assurance and

standardisation, business excellence

management, and international

relations.

Prior to joining Hyflux, he was Deputy

Chief Executive of the Standards,

Productivity and Innovation Board

(SPRING Singapore), responsible for

corporate planning and development

and major national initiatives including

Benchmarking, Best Practices and

the Singapore Quality Award.

6. 7.

He holds an Honours Degree in

Science from the University of

Western Australia and a Certificate

of the Advanced Management

Programme from INSEAD.

7. HURN DAVID CHARLES

Mr Hurn is Senior Vice President for

Structured Projects.

Prior to joining Hyflux, he worked for

more than ten years in the power

industry, initially in the construction

of power stations and later in the

development and financing of

independent power projects.

Mr Hurn leads development for

the Group’s subsidiary, Hyflux

Engineering, which invests in the

growing market of privately financed

water projects and other process

industries that uti l ise Hyflux’s

membrane technologies.

He holds a Masters degree from

Cambridge University, UK.

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8. EDMUND WONG

Mr Wong is Senior Vice President,

responsible for the Group’s water and

wastewater treatment business

for both industrial and municipal

markets.

Having joined Hyflux in August 2003,

he brings with him over 25 years of

experience in various sales/marketing

and management capacities for

companies in the pulp & paper,

petrochemical, minerals, power, steel

and municipal markets in North

America and Asia.

He graduated with a Masters of

Sc ience degree i n Chemica l

Engineering from Stanford University

in California, USA.

9. TERENCE MATTHEWS

Mr Matthews is Senior Vice President

of Sales and Marketing, providing

global sales and technical support to

clients and representatives for water,

water reclamation and wastewater

treatment applications.

He has more than 20 years of

experience in the industry and

is a long time member of the

Water Environment Association of

Ontario, Canadian Pulp and Paper

Association, American Water Works

A s s o c i a t i o n a n d t h e Wa t e r

Environment Association.

He is a graduate in Chemical

E n g i n e e r i n g f ro m M c M a s t e r

University in Ontario, Canada.

10. ROSE TONG LAY KUEN

Ms Tong is Senior Vice President

and Head of Hyflux’s Consumer

Products Division.

She is responsible for spearheading

the Group’s global growth in the

Consumer Products arena and

securing new revenue streams from

this segment.

Ms Tong has over 20 years of

experience in Consumer Banking.

Prior to joining the Group in February

2004, she held senior management

positions in Branding, Product

Management, Marketing and Sales

& Service in major foreign and

local banks.

Ms Tong graduated with a degree in

Science, majoring in Computer

Science and Economics from the

National University of Singapore and

is a member of the Chartered Institute

of Marketing.

8. 9. 10.


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annual report.03

HYFLUX LTD

1. GE WEN YUE

Mr Ge is Vice President for Business

Development and the General

Manager of Hydrochem Engineering

(Shanghai) Co. Ltd. He joined

Hydrochem in 1994.

Being a pioneer in the China

operations, he is also responsible

for overseeing the research,

development and sales of membrane

technology in China.

Mr Ge holds a Bachelor of Chemistry

degree from Shanghai Science and

Technology University.

CHINA

OFFICE

2. GU JIA LONG

Mr Gu is Vice President for Finance

and Administration and the Vice

General Manager of Hydrochem

Engineering (Shanghai) Co. Ltd.

He joined the Group in 1990 and is

responsible for the daily operations,

financial jurisdiction and general

administration of Hydrochem.

Mr Gu has more than 36 years of

experience in a wide range of

industries. Having headed chemical

factories and institutions and

development companies, he has also

covered portfolios in finance and

human resource.

1. 2.

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3. 4.

3. DAVID WEI CHEN

Mr Chen is Executive Director for

Hyflux Filtech (Singapore) Pte Ltd. He

is responsible for the overall business

direction, corporate strategy, human

resource and financial functions of

Hyflux Filtech.

Mr Chen has more than 15 years of

regional experience in strategic

planning, business development and

management. Prior to joining the

Group in November 2003, Mr Chen

was an executive in the liquid filtration

industry, and later served as CEO

and Managing Director of two

Chinese companies.

He holds a B.S degree in Mechanical

Engineering from Shanghai’s Jiao

Tong University.

4. GARY GUOXING LI

Mr Li is General Manager of Hyflux

Filtech (Singapore) Pte Ltd. He is

responsible for the overall sales and

marketing and the daily operations

of Hyflux Filtech.

Before joining Hyflux in November

2003, Mr Li accumulated more

than ten years of sales and marketing

experience in China’s liquid filtration

industry. He is also experienced in

developing related applications for

the chemical and petrochemical

sectors.

Mr Li holds a degree in Mechanical

Engineering from Shanghai Chemical

College and a MBA degree from Inter

American University.


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annual report.03

HYFLUX LTD

JANUARY 2003

Awarded contract by PUB for

Singapore’s first 30MGD 20-yr

BOO Seawater Desalination

Plant in Tuas

Invested in revolutionary

Air-2-Water technology –

Aquosus water generator

FEBRUARY 2003

Awarded “Singapore’s Best

Small Company 2003” by

Asiamoney

APRIL 2003

Upgraded to SGX Mainboard

Listing

MAY 2003

Recorded 155 percent surge

in net profit for the year’s first

quarter, despite weak market

sentiments

JUNE 2003

Hyflux Engineering secured an

additional order of S$20 million

from Sinolac’s manufacturing

facility in China

Hyflux Group increased

its stake in the seawater

desalination project with

acquisition of outstanding

shares in Singspring Pte Ltd

from Ondeo Degremont

page

16.17

january.december

2003


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Recieved ISO 9001:2000

Certif ication for “Design,

Fabrication, Installation &

Commissioning of Fluid

Treatment Systems”

AUGUST 2003

Recorded 133 percent surge in

net profit and 99 percent

increase in sales for the first half

of the year

OCTOBER 2003

Signed a Memorandum of

Unde rs tand ing w i th the

Nanyang Techno log i ca l

University (NTU) for research

co l l abora t ion i n wa te r

treatment using membrane

technology

NOVEMBER 2003

Recorded 133 percent surge in

net profit for the year’s third

quarter

Incorporated Hyflux Filtech

as a joint venture to extend its

arm into niche applications for

the process industries in China

DECEMBER 2003

Singspring Pte Ltd secured the

financing deal for the seawater

desalination project with four

regional and international banks

Official launch of “Dragon-fly”,

the first commercial model

of Aquosus


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annual report.03

HYFLUX LTD

(S$’000) 1999 2000 2001 2002 2003

Revenue 6,929 20,759 27,235 45,267 81,172

Profit Before Tax and Minority Interests 430 8,631 9,447 11,803 19,941

Minority Interests – – 5 402 246

Profit Attributable to Shareholders 79 6,370 7,355 12,261 19,510

Shareholders’ Equity 310 9,131 31,366 53,915 85,479

Total Assets 5,271 17,921 43,247 72,414 116,158

Net Tangible Assets 301 9.775 27,610 50,409 76,362

Net Tangible Assets per share (cents) 0.21 6.76 15.50 21.34 24.44

Earnings per share (cents) 0.05 4.40 3.38 5.33 7.68

Dividend per share (cents) – 0.60 0.50 1.50 0.70

Return on Revenue (%) 1.1% 30.7% 27.0% 27.1% 24.0%

Return on Equity (%) 25.5% 69.8% 23.4% 22.7% 22.8%

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

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○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○

“Having grown our market capitalisation six fold, we were ranked as one ofthe best performing companies on the Singapore Exchange Sesdaq boardand was upgraded to the Mainboard listing in April 2003.”

OLIVIA LUM

page

18.19


MESSAGE

SENIORMANAGEMENT

CORPORATEMILESTONES

OPERATIONSREVIEW

BOARDOF DIRECTORS

FINANCIALHIGHLIGHTS

GROUP REVENUE BY COUNTRY REVENUE GROWTH BY COUNTRY

0

50

100

150

200

250

0

5

10

15

20

25

30

35

40

45

50

S$’000 %

FY1999

201% 31%

66%

79%

FY2000 FY2001 FY2002 FY2003

0

5

10

15

20

25

30

35

40

45

50

0

20

40

60

80

100

120

S$’000 %

FY2001 FY2002 FY2003

60%

113%

103%

62%

SINGAPORE PRC OTHERS REVENUE GROWTH %

GROUP REVENUE BY SECTOR (FY2002) GROUP REVENUE BY SECTOR (FY2003)

3%CONSUMER

48%MUNICIPAL

52%INDUSTRIAL

FINANCIALHIGHLIGHTS

54%MUNICIPAL

42%INDUSTRIAL

SINGAPORE PRC OTHERS PRC GROWTHSINGAPORE GROWTH

annual report.03

HYFLUX LTD

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

430

8,6319,447

11,803

19,941

FY1999 FY2000 FY2001 FY2002 FY2003

S$’000

PROFIT BEFORE TAX (PBT)

0

2000

4000

6000

8000

10000

12000

14000

16000

18000

20000

79

6,3707,355

12,261

19,510

FY1999 FY2000 FY2001 FY2002 FY2003

S$’000

PROFIT AFTER TAX (PAT)

0

10000

20000

30000

40000

50000

60000

70000

80000

90000

FY1999 FY2000 FY2001 FY2002 FY2003

310

9,131

31,366

53,915

85,479

S$’000

SHAREHOLDERS’ EQUITY NTA/SHARE

0

5

10

15

20

25

30

FY1999 FY2000 FY2001 FY2002 FY2003

0.21

6.76

15.50

21.34

24.44

S$ CENTS

page

20.21

FINANCIAL HIGHLIGHTS (CONT’D)


MESSAGE

SENIORMANAGEMENT

CORPORATEMILESTONES

OPERATIONSREVIEW

BOARDOF DIRECTORS

FINANCIALHIGHLIGHTS

MANPOWER

OVERVIEW

Employee headcount grew by about 30 percent from 352 at year-end 2002 to 495 at end of this year. About one-half

of this increase was for Singspring’s seawater desalination plant project. The rest of the increase was mainly in R&D,

engineering and sales personnel. A breakdown in the employee workforce is as follows:-

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○○ ○ ○ ○ ○ ○ ○

2003 2002

Singapore 280 169

Shanghai 132 105

Hangzhou and Ningbo 83 78


MESSAGE

SENIORMANAGEMENT

CORPORATEMILESTONES

OPERATIONSREVIEW

BOARDOF DIRECTORS

FINANCIALHIGHLIGHTS

annual report.03

HYFLUX LTD

PERFORMANCE

OVERVIEW

(a) Key Financial Data

page

22.23

S$ MILLION 2003 2002 INCREASE

Revenue 81.2 45.3 79%

Earnings before interest, tax, depreciation & amortisation (EBITDA) 22.3 14.4 55%

Earnings before interest & tax (EBIT) 20.2 12.1 67%

Profit after tax after MI 19.5 12.3 59%

Earnings per share (EPS) (cents) 7.7 5.3 45%

Net asset value (NAV) per share (cents) 27.4 22.8 20%

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○○ ○ ○ ○ ○ ○ ○

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○○ ○ ○ ○ ○ ○ ○


MESSAGE

SENIORMANAGEMENT

CORPORATEMILESTONES

OPERATIONSREVIEW

BOARDOF DIRECTORS

FINANCIALHIGHLIGHTS

(b) Revenue

In FY2003, revenue for the Group increased by 79 percent

to S$81.2 million on the back of strong demand from its

two main markets in China and Singapore.

Revenue in Singapore doubled to S$48.4 million, from a

year ago, largely due to completion of the two municipal

projects for Singapore’s Public Utilities Board – the

Chestnut Avenue raw water treatment project and the

Seletar NEWater project.

Sales in China surged by 62 percent or S$12.3 million

to S$32.1 million, mostly from the pharmaceutical and

biotechnology sectors.

During the year, the Group also announced its entry into

the consumer market. Its new consumer product,

“Dragon-fly”, which uses patented technology, was

launched in the fourth quarter of the year and contributed

3 percent of total sales.

(c) Profit after Tax

Group profit after tax of S$19.5 million was higher by

59 percent or S$7.2 million compared to that in FY2002.

Growth in profits was driven by contributions from China,

which contributed to 62 percent of the Group’s profit from

operations. This was due to higher margins achieved from

the pharmaceutical and biotechnology sectors.

In tandem with the higher sales, raw and consumable

materials increased by 98 percent to S$36.7 million in

FY2003, yielding a gross margin of 55 percent compared

to 59 percent in FY2002. The lower gross margin was

largely due to higher municipal sales in Singapore.

Operating costs and expenses were also higher, largely

due to civil work and subcontractor costs of S$8.7 million

for the two municipal projects in Singapore and the start-

up and operating costs of the new consumer business.

Overall, net profit margin was marginally lower by

3 percent to 24 percent this year largely due to lower

margins from municipal projects.

REVENUE BY COUNTRY (FY2003) PROFIT FROM OPERATIONS BY COUNTRY (FY2003)

OPERATIONSREVIEW

60%SINGAPORE

40%CHINA

38%SINGAPORE

62%CHINA

annual report.03

HYFLUX LTD

(d) Earnings Per Share (EPS)

Earnings per share rose 44 percent to 7.68 cents

compared to 5.33 cents in FY2002. This was despite the

enlargement of share capital with a new share issue and

a bonus issue in 2003. The higher EPS was the result of

higher profit after tax for FY2003.

(e) Balance Sheet Review

The Group’s equity base strengthened by 59 percent

or S$31.6 million to S$85.5 million as of 31 December

2003. The strengthening was mainly due to the net profit

for the year of S$19.5 million, the private placement of

11.8 million shares and due to 2 million of option shares

exercised pursuant to the Hyflux Employee Share Option

Scheme less dividend payment.

Current assets increased by 45 percent or S$24.2 million

to S$78.1 million largely due to the stronger cash position

of S$31.9 million and higher trade receivables as a result

of increased sales. Higher trade payables and accruals

accounted for the bulk of the increase in current liabilities

of S$15.5 million. This led to the lower current ratio of 2.9

compared to 4.8 in FY2002.

In the area of capital expenditure, construction-in-progress

for the seawater desalination plant amounted to S$10.1

million. The other significant area of investment in 2003

was in research and development expenditure which rose

by S$5.6 million.

Compared to FY2002, net asset value per share increased

by 20 percent to 27.4 cents per share whilst debt equity

ratio improved from 0.14 to 0.08.

page

24.25

EPS/DPS (CENTS)

0

1

2

3

4

5

6

7

8

FY1999 FY2000 FY2001 FY2002 FY2003

0.60

0.50

1.50

0.70

00.05

4.40

3.38

5.33

7.68

EPS DPS


MESSAGE

SENIORMANAGEMENT

CORPORATEMILESTONES

OPERATIONSREVIEW

BOARDOF DIRECTORS

FINANCIALHIGHLIGHTS

(f) Cash Flows and Liquidity

In FY2003, net cash generated from operating activities

amounted to S$26.5 million compared to S$3.4 million in

FY2002. The substantial improvement of S$23.1 million

in cash from operating activities was largely the result of

higher operating profit and improvement in working capital.

For invest ing act iv i t ies, higher cash outf low of

S$16.7 million was due to the Group’s investment in

the seawater desalination project, acquisition of new

technologies and research and development projects.

Cash flow generated from financing activities such as

shares issuance amounted to S$11.0 million, which

was partially offset by repayment of the term loans.

As at 31 December 2003, the Group’s cash position stood

at S$31.9 million, which is S$14.8 million higher than that

of FY2002.

In addition to the current positive cash and cash

equivalents position, the Group has established short-term

and medium-term financing facilities with various financial

institutions to fund the Group’s working capital

requirements and capital expenditure programme.

(g) Shareholders’ Returns

Return on Equity, Dividends and Earnings Per Share

Despite the larger share capital as a result of a new share

issue and a bonus issue, return on equity was maintained

at 23 percent in FY2003.

The Group will continue its policy of ploughing most of its

cash resources back into fuelling business growth.

It has therefore proposed a final cash dividend of 0.7 cents

per ordinary share compared to a total dividend payout of

1.5 cents in 2002.

OPERATIONSREVIEW

annual report.03

HYFLUX LTD

taking off on advanced

TECHNOLOGY“This is literally a Ground Breaking Ceremony (and) for us at Hyflux,it is also figuratively a ground breaking – breaking new grounds aswe progress to be one of the world’s leaders in water technologyand business.”

OLIVIA LUMAT THE GROUND BREAKING CEREMONY OF SINGAPORE’S FIRST SEAWATER DESALINATION PLANT AT TUAS

page

26.27


MESSAGE

SENIORMANAGEMENT

CORPORATEMILESTONES

OPERATIONSREVIEW

BOARDOF DIRECTORS

FINANCIALHIGHLIGHTS

Our message is clear:

Membranes are the future...

Membranes for every product

annual report.03

HYFLUX LTD

SELETAR NEWATER PLANT

page

28.29

“2003 was truly a year of many milestones for Hyflux. Two municipalprojects were completed in Singapore: The S$27.0 million ChestnutAvenue raw water treatment system which is the largest potable waterplant in Asia using membranes and the S$27.8 million third NEWaterplant at Seletar using our own in-house developed ultra-filtrationmembrane system.”

OLIVIA LUM

TAKING OFF ON ADVANCEDTECHNOLOGY

RAISING SHAREHOLDERVALUE

CONQUERING NEWHEIGHTS

CONFIDENCETO SOAR


With a clear vision to become a leader in water

treatment and membrane technology, Hyflux goes beyond

the conventional description of a water-treatment

company. It develops and manufactures its own

proprietary membranes.

Membranes are inspired by, none other than nature. Similar

to a human body, the internal organs and skin work like

high tech membranes to provide the necessary purification

and processing.

Hyflux believes that the only way forward to maintain its

competitive edge in water treatment is through the use of

advanced membrane technology. Hence, the growth

strategy is to harness the development and application of

membrane technology as its core strength, making it a

true integrated solutions provider for a spectrum of liquid

treatment systems.

Hyflux advanced membranes have wide-ranging

applications across different separation fields – not only

applicable to water and wastewater treatment and

desalination, but are also used in fluid treatment

for industrial processes or in new products for the

consumer market.

With its proprietary technology, Hylfux is able to incorporate

and customise its in-house membranes for the more

demanding filtration processes, to fulfil unique and

stringent criteria for different projects, unlike off-the-shelf

membranes. The Seletar NEWater plant, for example, uses

Hyflux’s Kristal300™ ultra-filtration membranes with

capacity to produce 24,000 cubic metres of NEWater daily.

Minister for the Environment, Mr Lim Swee Say, in a speech

at an International Symposium on Water Resource

Management in December 2003, mentioned the five

annual report.03

HYFLUX LTD

applications. In October 2003, Hyflux signed a Memorandum

of Understanding with Nanyang Technological University’s

Environmental Engineering Research Centre to collaborate

in water treatment research. The agreement allows Hyflux

to tap the Centre’s expertise and advanced equipment

and facilities.

SPREADING WINGS

Another reason for Hyflux’s competitive edge is its ability

to respond faster than bigger competitors. It does not

merely produce standardised membranes. Hyflux is able

to improvise and customise the membrane structures for

its clients. Another strength is its dedicated laboratories

and fully equipped test plant facilities which allow

specialists to conduct evaluation trials before embarking

on the actual manufacturing process.

In 2003, sales of membrane systems to China’s

pharmaceutical and biotechnology sectors surged.

Hyflux’s membranes are now enjoying greater acceptance

in the processing of fluids such as those found in the

agri-food, pharmaceutical, biotech, chemical and

petrochemical industries.

page

30.31

DRAGON-FLY

PUREFLO

challenges in management of water resources. One of

them is the use of advanced technology for water

treatment. With conventional water treatment technology,

it is not economical to treat rainwater for drinking. With

new membrane technology, not just rainwater, but even

sea and wastewater can be cost-effectively treated.

Advanced technology in water treatment and purification

can only enhance Singapore’s available water resources.

INNOVATION CREATES LIFT

Membrane technology is not new, but Hyflux’s innovative

applications and research have pushed back the

boundaries of what was previously possible. Research,

development and production of membranes are carried

out by Hyflux in Singapore, as well as in China through

its 55-percent-owned subsidiary, Hangzhou Zheda

Hualu Membrane Engineering. The subsidiary, not only

strengthens the group’s presence in China but also

provides access to a larger pool of R&D talent.

To tap external expertise, Hyflux also partners universities

and research institutes for R&D work in membrane

“Our core business is in thedevelopment and applicationof membrane technology andwe are trying to mimic whatnature has provided for us.”

OLIVIA LUMSMART INVESTOR, VOLUME XII, 2004




CONFIDENCETO SOAR


In June 2003, Hyflux Engineering (a wholly-owned

subsidiary of Hyflux) was also awarded an additional

order of S$20 million from China’s Sinolac Manufacturing

Facility, raising the value of a previous contract to

S$46.9 million through a doubling of the design capacity

of its membrane system.

DEVELOPING THE CONSUMER MARKET – DRAGON-FLY

Named Dragon-fly, the first commercial model of

Aquosus was rolled out in December 2003. Aquosus

was an investment made by the Group in January 2003

in a US-incorporated entity, which holds the 20-year

patent for the Air-2-Water technology, which we call

Aquovate Technology.

Hyflux has adroitly transformed part of itself to enter the

consumer market and secure a new income stream,

through successful miniaturisation of its large-scale

membrane-based systems.

OUR GROWTH IN CHINA WAS ROBUST. WE WON AN EXTRA S$20 MILLION WORTH OF ORDERS FROM SINOLAC (SINGAPORE) PTE LTD,RAISING THE

VALUE OF A CONTRACT PREVIOUSLY AWARDED TO HYFLUX TO

S$46.9 MILLION.

PureFlo is another example of Hyflux tapping on this niche:

A new water filter that brings ultra-filtration membrane

technology into the home. Affixed to taps, PureFlo allows

consumers to enjoy purified water of unrivalled standards.

This state-of-the-art water filter, which leverages on Hyflux

proprietary ultra-fine membrane systems, uses double-

skinned purification membranes that even filter out

viruses, unlike commonly available filtration systems.

With new lifestyle habits and greater awareness of the

health benefits of using pure water, demand for this

high-quality water filter is expected to flow in 2004.

annual report.03

HYFLUX LTD

raising shareholder

VALUE

Mainboard-listed Hyflux Ltd is forecasting an annual growth rateof 30 percent over the next five years, as China, one of its mainmarkets, continues its rapid economic ascent.

TODAY, MEDIACORP PRESS, 27 FEBRUARY 2004

page

32.33




CONFIDENCETO SOAR

Exploring fresh ideas, breaking new grounds and

flying high to create wealth for those who believe in us

annual report.03

HYFLUX LTDpage

34.35

1. GUEST OF HONOUR, MR LIM SWEE SAY, MINISTER FOR THE ENVIRONMENT

OFFICIATING THE GROUND BREAKING CEREMONY OF THE SINGSPRING SEAWATER

DESALINATION PLANT

2. OLIVIA PRESENTING A TOKEN OF APPRECIATION TO CHAIRMAN OF PUB,MR TAN GEE PAW AT THE GROUND BREAKING CEREMONY OF THE SEAWATER

DESALINATION PLANT

3. SIGNING CEREMONY OF THE SEAWATER DESALINATION PROJECT FINANCING DEAL

1.

2. 3.




CONFIDENCETO SOAR

In 2003, the Hyflux Group achieved record growth and

laid down significant markers for the future.

On 12 December 2003 Singspring Pte Ltd (a wholly-owned

subsidiary of Hyflux) inked the financing agreement for

the project to develop, design, procure, construct, test and

commission Singapore’s first seawater desalination plant.

The transaction was lead arranged by DBS Bank Ltd, also

the facility agent, the security trustee and the account

bank. This landmark project financing deal attracted

interest from three global banks. ING Bank N.V., KBC Bank

N.V. and Standard Chartered Bank.

The S$165 million issue comprises a senior debt facility

of up to S$158.5 million to fund 80 percent of the project

costs, and a contingency facility of up to S$6.5 million to

pay for 70 percent of any cost overrun. The balance of

the total project costs or cost overrun will come from

Hyflux’s equity in Singspring.

Repayment of the loan facility will be over a period of up

to 18 years from the date of commercial operation of the

plant. For the first ten years, the interest rate has been

fixed under an interest rate swap facility with DBS Bank.

For the remainder of the period, the interest rate will be

floating at the swap offer rate plus a fixed margin.

Such strong support from four leading regional and

international banks clearly testifies to the standing of Hyflux

the off-taker and the sponsor of the project and the project

itself. The fact that the loan was oversubscribed by more

than 30 percent is testimony to the lending community’s

faith in the Hyflux Group.

A historic ground breaking ceremony was held on

16 January 2004 to mark the start of construction for

Singapore’s first-ever seawater desalination plant.

Scheduled for completion by end 2005, Asia’s largest

tropical seawater desalination plant at Tuas is capable

of supplying over 136,000 cubic metres of desalinated

water a day to meet some ten percent of Singapore’s

water needs.


annual report.03

HYFLUX LTD

Currently, water in Singapore is supplied through three

taps: water catchment areas, importation of water and

alternative sources like NEWater. Completion of the

desalination plant in 2005 will truly turn on the nation’s

fourth tap – a momentous occasion for both Singapore

and Hyflux.

The desalination project also confirms Hyflux’s arrival as

a key player in the water industry. With Hyflux acquiring

in July 2003 the 30 percent stake in Singspring previously

held by Ondeo Degremont, Singspring is now wholly

owned by Hyflux.

Reverse osmosis membranes will form the core technology

for the desalination plant. Hyflux’s membranes also ensure

a higher recovery rate of seawater, in addition to higher

energy savings and also being environmentally friendly.

Hyflux provided the necessary engineering, procurement

and construction (EPC) management, as well as

operational experience and financial expertise for the

project. This signals Hyflux’s ability to undertake similar

large-scale municipal projects, whether at home or abroad,

and heralds its entry into the big league.

Projects which were successfully completed in 2003

included – the commissioning of the Seletar NEWater plant

in January 2004, Hyflux’s second venture into the municipal

market. The plant, operating on proprietary Kristal300™

Ultrafiltration membranes, reverse-osmosis membranes

and ultra-violet technologies, now meets around 15

percent of the country’s total water needs. The raw water

treatment works at Chestnut Avenue marked Hyflux’s third

municipal project in Singapore. Commissioned in January

2004, the project to outfit PUB’s plant with an advanced

membrane filtration system with a capacity of 273 million

cubic metres per day. The Chestnut Avenue facility is

currently the second largest raw water membrane

treatment plant in the world.

page

36.37

“Many successful companies have gone into all kinds of differentfields but we have chosen to focus on membrane technology andwater-related businesses. So the challenge is how we can capturethe market because it is definitely growing.”

OLIVIA LUMTHE BUSINESS TIMES SUPPLEMENT, SINGAPORE PRESS HOLDINGS, 26 MARCH 2004.




CONFIDENCETO SOAR


ENGAGING MARKETS IN CHINA

With biotechnology an up-and-rising industry in China,

Hyflux’s membrane systems, capable of separating

alternative liquid streams such as organic acids, will

be in demand. Hyflux has thus devoted significant

resources to its regional office in Shanghai, as well as its

operations in Hebei and Hangzhou.

The competitiveness of Hyflux’s systems in China was

confirmed by an increased contract from Sinolac, raising

the value of a project previously awarded from S$20 million

to some S$46 million. Currently, the Group’s largest

industrial project, the Sinolac deal points towards China

as a growing market.

In November 2003, a fresh initiative to target new market

segments in China was also announced. Hyflux Filtech

was incorporated as a joint venture between Hyflux and a

team of Chinese entrepreneurs to develop and market

membrane-based niche applications in China. By

December, the 71-percent-owned subsidiary had already

secured orders to the tune of S$8.4 million, a bright start

for a youthful enterprise.

Hyflux today commands a market capitalisation of around $450 million.

annual report.03

HYFLUX LTD

conquering new

HEIGHTS

“Nobody knows the chemistry of water better than Hyflux and we havethe membrane technology that can be miniaturised for home use. I seegreat potential in the home consumer market.”

OLIVIA LUMTHE STRAITS TIMES, SINGAPORE PRESS HOLDINGS, 27 FEBRUARY 2004

page

38.39




CONFIDENCETO SOAR

Innovations for better living

annual report.03

HYFLUX LTD

“We want to help people improve their lives through creating abetter environment for them. One of the worst things is to livein a dirty environment and to have to drink dirty water.”

OLIVIA LUMTHE BUSINESS TIMES SUPPLEMENT, SINGAPORE PRESS HOLDINGS, 26 MARCH 2004

page

40.41




CONFIDENCETO SOAR

Industrial isation and economic development are

increasingly dependent on usable water.

Hyflux offers a number of competitive advantages as the

preferred water treatment company. These include:

• Singapore-manufactured membranes that

have the highest quality standards

• Turnkey experience and in-house system

integration capabilities

• Experience in a wide range of industrial applications

• Ability to transform pilot plant experience

into commercial projects


Aquosus marks Hyflux’s first foray into the consumer

market. By July 2003, Hyflux had received orders for some

20,000 units, slated for delivery in 2004.

The first commercial model of Aquosus, called

“Dragon-fly”, allows consumers to enjoy fresh and

pure water at an affordable price, since the water is

generated on its own, converted from ambient

atmospheric water vapour. The high-performance water

generator will help meet the growing demand for high

quality drinking water, especially in countries where piping

quality is poor.

“Aquovated water” is kept fresh while in storage through

a constant recirculation process, making it even safer than

bottled water which may run the risk of bacterial build up.

The patented aquovate technology is another example

how Hyflux revolutionises the drinking water industry.

annual report.03

HYFLUX LTD

Hyflux Aquosus, another wholly-owned subsidiary will

manufacture and market “Dragon-fly” in Asia, targeting

an audience who consumes over 25.6 billion litres of water

per year, or 23 percent of total global bottled water

consumption. Three of the largest Asian markets, China,

Indonesia and Thailand, have also joined the top ten

markets for bottled water.

Just as a dragonfly springs from a larval stage, Hyflux’s

“Dragon-fly” transforms air into a different form – water.

“Dragon-fly” will bear the proud “Made-in-Singapore”

brand name and enjoy the image of a lifestyle product.

CLEAR VIEW FROM HERE

Following the rapid expansion into new markets, Hyflux

has concurrently developed its production and

manufacturing facilities. Peripheral components are

manufactured in China, but the heart of the system, the

proprietary “Hyflux Filtration Cartridge”, is developed and

installed in Singapore.

The consumer market segment contributed S$3 million

to Group sales in 2003. In 2004, Hyflux’s latest home

product anticipates to create greater impact. PureFlo, the

latest consumer offering to come from the Group, allows

homes to enjoy tap water purified through ultra-filtration

(UF) membrane technology – the purest form of filtering

water using tap pressure.

Each UF membrane filter, found in PureFlo has micro-pores

so fine at 0.015 micron that it screens out particles such

as sand (100 micron), hair and pollen (10 micron), bacteria

(1 micron) and even viruses (0.1 micron)

PureFlo’s compact design allows for easy installation as it

comes with two adaptors that are compatible with four

major tap sizes. The filter is also equipped with toggle

switches offering a choice of “Tap Water” or “Purified

Water” which extends the shelf life of the membrane.

Users can also easily view the condition of the filters and

replace the cartridge on time.

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Just as a dragonfly springs from a larval stage, Hyflux’s “Dragon-fly”transforms air into a different form – water. “Dragon-fly” will bear theproud “Made-in-Singapore” brand name and enjoy the image of alifestyle product.




CONFIDENCETO SOAR

THE CONSUMER MARKET SEGMENT CONTRIBUTED S$3 MILLION TO GROUP SALES IN 2003.


The advanced home filter also helps to remove chlorine

for up to 1,500 litres of water, based on an average chlorine

concentration of 0.2 parts per million (ppm) or less for

standard water. This ensures four to five months of pure

water for a household of four.

PureFlo will be introduced in Malaysia by March, Thailand

by April and China by September 2004. For some homes

in Singapore, water is already “Hyflux-pure”.

TOMORROW’S REALITY, TODAY

Hyflux’s new products are reminiscent of its growing

international stature. Proprietary membrane technology

will position the Group at the forefront of global fluid

treatment, whether for homes, industries or municipalities.

Our know-how and innovations are for better living.

They know no boundaries.

annual report.03

HYFLUX LTDpage

44.45

“At Hyflux, we always stress R&D, human capital and innovativeideas. With all these, we want to focus on our already-successfultechnologies and we want to be ahead of everybody else.This will be the main thrust to put us on the world map.”

OLIVIA LUMTHE BUSINESS TIMES SUPPLEMENT, SINGAPORE PRESS HOLDINGS, 26 MARCH 2004




CONFIDENCETO SOARconfidence to

SOAR

The Hyflux dream is a future made

boundless by pure water

annual report.03

HYFLUX LTD

As one of Asia’s largest water and fluid treatment

companies, Hyflux has successfully partnered more than

200 clients from Asia Pacific and Africa. Despite the

presence of bigger players, the Group is often singled out

as the preferred partner. This, according to clients, is

because of Hyflux’s professionalism, technology, passion

and a no-nonsense approach to get the job done, speedily

and efficiently.

ENTERPRISE OF THE YEAR

The Singapore Business Awards, jointly organised by

The Business Times and DHL Worldwide Express, a global

logistics company, honoured Hyflux with the Enterprise

of the Year Award for 2003 in recognition of its outstanding

record of innovation, entrepreneurial culture, financial

performance and growth. The award, one of Singapore’s

most prestigious, is conferred by a panel drawn from the

business, government, academic and media fields.

EUROMONEY WATER DEAL OF THE YEAR, ASIA PACIFIC

Singapore’s first seawater desalination project clinched

Euromoney’s Water Deal of the Year Award 2003, Asia

Pacific. It will be Singapore’s largest ever financed water

project, with the longest ever tenure of 18 years. This award

has set a new benchmark for the Group in regional water

projects; in terms of scope, as well as complexity of

execution, and extends our reach into the region and beyond.

EUROMONEY BEST SMALL COMPANY LIST

The only local company to make Euromoney’s Best Small

Company list, Hyflux was recognised by the magazine for

its glowing financial and management performance in

2003. The criteria used to select top performers from 699

firms were market strength, profitability, growth potential

and quality of management and earnings.

ISO 9001:2000

In June 2003, Hyflux was awarded the ISO 9001:2000

certification for the “Design, Fabrication, and Installation

& Commissioning of Fluid Treatment Systems.”

THE ASCENT SO FAR

Hyflux is firmly on the way to becoming a world-leading

water treatment company. By focusing on its proprietary

membrane know-how and core business capabilities,

Hyflux is poised to take off internationally. Hyflux has a

page

46.47

While Hyflux’s initial ascent has been about passion, drive, and focus,a new height will only be reached through experimentation, creativityand unrelenting speed.




CONFIDENCETO SOAR

CONFIDENCETO SOAR

solid platform and reputation to undertake more projects

in the region. There is dazzling promise given Hyflux’s

membrane technology, leadership and ability to compete.

Charting its flight path, the Hyflux Group has identified

the following to go forward:

THE STRENGTH OF OUR BROADENED PORTFOLIO, COMBINED WITH EXCELLENT EXECUTION, MADE FOR A STERLING FINISH WITH A

S$19.5 MILLION POST-TAX PROFIT FOR THE FISCAL YEAR ENDED 31 DECEMBER 2003.

• Harness proprietary technology by acquiring

technology in the fluid and water treatment

business, either through direct investment or

joint development

• Build recurring income streams and focus on

core business groups, secure large value

projects and develop new applications

• Invest in synergistic businesses and potential

tie-ups in large growing markets such as

China and other parts of Asia

• Further strengthen the existing strong

management team

NOW FOR FREE FLIGHT

The work done in strengthening the Group’s fundamentals

has resulted its sterling performance and recognition. While

Hyflux’s initial ascent has been about passion, drive, and

focus, a new height will only be reached through

experimentation, creativity and unrelenting speed.

China will be a high growth market, not only in the

pharmaceutical and biotechnology segments, but also in

the chemical and petrochemical segments. The country’s

evolution into the largest manufacturing hub in the

world, coupled with a population exceeding one billion,

translates into exciting demand for a range of membrane

treatment systems.

Surging demand for clean water in China is merely

symptomatic of a world-wide thirst. According to the

United Nations, around five billion people will find it difficult

or impossible to meet their needs for fresh water in 2025.

Hyflux has a mission to provide part of the answer.

annual report.03

HYFLUX LTD

CORPORATE

STRUCTURE

HYFLUX LTD

SINGSPRING

PTE LTD

(100%)

HYFLUX

INTERNATIONAL

LTD

(100%)

HYFLUX

AQUOSUS

(SINGAPORE)

PTE LTD

(75%)

HYDROCHEM

ENGINEERING

(S) PTE LTD

(100%)

HANGZHOUZHEDA HUALU

MEMBRANETECH. CO. LTD.

(55%)

HYFLUX

FILTECH

(SINGAPORE)

PTE LTD

(71%)

HYFLUX

AQUOSUS

(SHANGHAI)

CO. LTD.

(100%)

HYDROCHEM

ENGINEERING

(SHANGHAI)

CO. LTD.

(100%)

NINGBO HUALUMEMBRANE

TECHNOLOGYCO. LTD.

(75%)

HYFLUX

FILTECH

(SHANGHAI)

CO. LTD.

(100%)

HYFLUX

ENGINEERING

PTE LTD

(100%)

page

48

HYDROCHEM

(S) PTE LTD

(100%)




CONFIDENCETO SOARdesigned & produced by

RAINDANCE

CORPORATE

INFORMATION

COMPANY SECRETARY

Mr Lim Kim Seng

AUDIT COMMITEE

Mr Lee Joo Hai (Chairman)

Mr Teo Kiang Kok

Mr Gay Chee Cheong

Ms Olivia Lum Ooi Lin

NOMINATING COMMITTEE

Mr Teo Kiang Kok (Chairman)

Mr Lee Joo Hai

Mr Gay Chee Cheong


REMUNERATION COMMITTEE

Mr Teo Kiang Kok (Chairman)

Mr Lee Joo Hai

Mr Gay Chee Cheong


EXECUTIVE COMMITTEE

Ms Olivia Lum (Chairman)

Dr Deirdre Murugasu

Mr Foo Hee Kiang

Mr Lim Kim Seng

Mr David Hurn

Ms Grace Goh

Ms Rose Tong

REGISTERED OFFICE

40 Changi South Street 1

Singapore 486764

Tel: (65) 6214 0777

Fax: (65) 6214 1211

SHARE REGISTRAR ANDSHARE TRANSFER OFFICE

Lim Associates (Pte) Ltd

10 Collyer Quay

#19-08 Ocean Building

Singapore 049315

AUDITORS

Ernst & Young

Certified Public Accountants

10 Collyer Quay

#21-01 Ocean Building

Singapore 049315

Partner-In-Charge

Max Loh Khum Whai

(since 2002)

BANKERS

DBS Bank Ltd

6 Shenton Way

DBS Building Tower One

Singapore 068809

Oversea-Chinese Banking

Corporation Limited

65 Chulia Street

OCBC Centre

Singapore 049513

annual report.03

HYFLUX LTD

HYFLUX LTD40 Changi South Street 1 Singapore 486764 t. [65] 6214 0777 f. [65] 6214 1211 www.hyflux.com

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