THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

Transcription

1 CIRCULAR DATED 11 APRIL 2011 THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION If you are in doubt about its contents or the action you should take, you should consult your bank manager, stockbroker, solicitor, accountant or other professional adviser immediately. If you have sold all your ordinary shares in the capital of Hyfl ux Ltd, you should immediately hand this Circular and the enclosed Proxy Form to the purchaser or to the bank, stockbroker or agent through whom you effected the sale for onward transmission to the purchaser. The Singapore Exchange Securities Trading Limited assumes no responsibility for the correctness of any of the statements made, reports contained or opinions expressed. Approval in-principle granted by the SGX-ST to the Company for the dealing in, listing of and quotation for the new Shares to be issued pursuant to the proposed 2011 Scheme (as defi ned in this Circular is not taken to as an indication of the merits of the 2011 Scheme, the Scheme Shares, the Company and/or its subsidiaries (as defi ned in this Circular). HYFLUX LTD (Incorporated in the Republic of Singapore) (Company Registration Number Z) CIRCULAR TO SHAREHOLDERS in relation to (1) THE PROPOSED IMPLEMENTATION OF HYFLUX EMPLOYEES' SHARE OPTION SCHEME 2011 (2) THE PROPOSED PARTICIPATION OF MS OLIVIA LUM OOI LIN, A CONTROLLING SHAREHOLDER, IN THE PROPOSED HYFLUX EMPLOYEES' SHARE OPTION SCHEME 2011 (3) THE PROPOSED GRANT OF OPTIONS TO MS OLIVIA LUM OOI LIN WHO IS A CONTROLLING SHAREHOLDER IMPORTANT DATES AND TIMES Last date and time for lodgment of Proxy Form : 25 April 2011 at 2.30pm. Date and time of Extraordinary General Meeting : 27 April 2011 at 2.30pm (or immediately after the conclusion or adjournment of the AGM to be held on the same date at 2.00pm). Place of Extraordinary General Meeting : 202 Kallang Bahru, Hyfl ux Building, Singapore

2 DEFINITIONS For the purpose of this Circular, the following defi nitions have, where appropriate, been used: Scheme The Hyfl ux Employees Share Option Scheme 2011, as the same may be amended from time to time pursuant to the terms and conditions set out herein Act Aggregate Subscription Cost Associate Auditors Board CDP Committee Controlling Shareholder The Companies Act (Chapter 50) of Singapore, as amended or modifi ed from time to time The total amount payable for Scheme Shares which may be acquired on the exercise of an Option shall bear the meaning assigned to it by the Listing Manual of the Singapore Exchange Securities Trading Limited The auditors of the Company for the time being The board of Directors of the Company The Central Depository (Pte) Limited The committee comprising the Committee of Directors of the Company appointed by the Board to administer the 2011 Scheme A person who: (a) (b) holds directly or indirectly 15% or more of the voting shares in the Company. The Singapore Exchange may determine that a person who satisfi es this paragraph is not a Controlling Shareholder; or in fact exercises control over a company. Date of Grant Director EGM Employee Executive Director Existing Option The date on which an Option is granted to an Employee pursuant to Rule 5 A Director of the Company for the time being Extraordinary General Meeting, notice of which is given on page 23 of this Circular An employee (including an employee holding a nonmanagerial position) of the Group including any Executive Director, and Non-Executive Director, selected by the Committee to participate in this Scheme in accordance with Rule 5(a) A Director who performs an executive function The right to subscribe for Shares granted or to be granted pursuant to the Existing Scheme 2

3 Existing Scheme The Hyflux Employees Share Option Scheme approved by the shareholders of the Company on 27 September 2001 FRS 102 shall bear the meaning assigned to it in Clause 3.4 Group GST Hyfl ux or the Company Hyfl ux and its Subsidiaries Goods and Services Tax Hyfl ux Ltd, a company incorporated in the Republic of Singapore Latest Practicable Date 14 March 2011 Listing Manual Market Day Market Price Non-Executive Director Offer Option Option Period Participant Performance Criteria The Listing Manual of the SGX-ST, as the same may be amended, varied or supplemented from time to time A day on which the Singapore Exchange is open for trading in securities The average of the last dealt prices per Share determined by reference to the daily offi cial list published by the SGX-ST for a period of fi ve (5) consecutive Market Days immediately prior to the relevant Date of Grant provided always that in the case of a Market Day on which the Shares of the Company are not traded on the SGX-ST, the last dealt price for Shares on such Market Day shall be deemed to be the last dealt price of the Shares on the immediately preceding Market Day on which the Shares were traded A Director of the Company who does not perform an executive function The Company s offer to a Selected Employee of an Option to subscribe for Shares under this Scheme The right to subscribe for Shares granted or to be granted pursuant to the 2011 Scheme Subject as provided in Rule 7, Rule 9, Rule 12 and any other additional conditions as may be introduced by the Committee from time to time, a period commencing the date as provided in Rule 7(a) and expiring at the end of ten (10) years after such Date of Grant The holder of an Option The performance criteria from time to time approved by the Chairman of the Board of Directors for the determination of the eligibility of Employees to participate in the 2011 Scheme P&L shall bear the meaning assigned to it in Clause 3.4 3

4 Rules Selected Employee Scheme Shares Shares Shareholders Singapore Exchange or SGX-ST Subscription Price Subsidiaries Rules of the 2011 Scheme and any reference to a particular Rule shall be construed accordingly An Employee eligible under Rule 5 below and who has been selected by the Committee for the purposes of making an Offer Shares to be issued under the 2011 Scheme Fully-paid ordinary shares in the capital of the Company The registered holders of the Shares and in the case of Depositors, Depositors who have Shares entered against their names in the Depository Register Singapore Exchange Securities Trading Limited The price at which a Participant shall subscribe for each Share upon the exercise of an Option as determined in accordance with Rule 9 The subsidiaries of a company (as defi ned in Section 5 of the Act) and Subsidiary shall be construed accordingly Vesting Period shall bear the meaning assigned to it in Clause 3.4 $ and cents Singapore dollars and cents respectively % Per centum or percentage The terms Depositor and Depository Register shall have the meanings ascribed to them respectively by Section 130A of the Act. 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. Any reference in this Circular to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word defi ned under the Act or any statutory modifi cation thereof and used in this Circular shall have the meaning assigned to it under the said Act. Any reference to a time of a day in the Circular is a reference to Singapore time. 4

5 CONTENTS LETTER TO SHAREHOLDERS OF HYFLUX LTD 1. INTRODUCTION 6 2. PROPOSED IMPLEMENTATION OF HYFLUX EMPLOYEES SHARE OPTION SCHEME FINANCIAL EFFECTS OF THE OPTION SCHEME PROPOSED GRANT OF OPTIONS TO MS OLIVIA LUM OOI LIN DIRECTORS AND SUBSTANTIAL SHAREHOLDERS INTERESTS IN SHARES EXTRAORDINARY GENERAL MEETING ACTION TO BE TAKEN BY SHAREHOLDERS DIRECTORS RECOMMENDATION DIRECTORS RESPONSIBILITY STATEMENT DOCUMENTS FOR INSPECTION 21 NOTICE OF EXTRAORDINARY GENERAL MEETING 22 EXTRAORDINARY GENERAL MEETING PROXY FORM 5

6 HYFLUX LTD (Incorporated in the Republic of Singapore) (Company Registration Number Z) Directors Olivia Lum Ooi Lin (Group President & CEO) Teo Kiang Kok (Non-Executive Independent Director) Lee Joo Hai (Non-Executive Independent Director) Gay Chee Cheong (Non-Executive Independent Director) Christopher Murugasu (Non-Executive Independent Director) Rajsekar Kuppuswami Mitta (Non-Executive Independent Director) Tan Teck Meng (Non-Executive Independent Director) 11 April 2011 Registered Office Hyfl ux Building 202 Kallang Bahru Singapore To: The Shareholders of Hyfl ux Ltd Dear Shareholder THE PROPOSED IMPLEMENTATION OF HYFLUX EMPLOYEES' SHARE OPTION SCHEME INTRODUCTION 1.1 The purpose of this Circular is to provide Shareholders with the relevant information pertaining to and to seek Shareholders approval for (a) (b) (c) the proposed implementation of an employees' share option scheme to be known as the Hyfl ux Employees' Share Option Scheme 2011; the proposed participation of Ms Olivia Lum Ooi Lin, a Controlling Shareholder, in the proposed 2011 Scheme; and and the proposed grant of Options to Ms Olivia Lum Ooi Lin, a Controlling Shareholder, at the EGM to be held on 27 April The SGX-ST has granted in-principle approval for the listing and quotation of the new Shares to be issued pursuant to the proposed 2011 Scheme. Approval in-principle granted by the SGX-ST to the Company for the dealing in, listing of and quotation for the new Shares to be issued pursuant to the proposed 2011 Scheme is not taken to as an indication of the merits of the 2011 Scheme, the Scheme Shares, the Company and/or its subsidiaries (as defi ned in this Circular). The SGX-ST assumes no responsibility for the correctness of any of the statements made, reports contained or opinions expressed. 6

7 2. PROPOSED IMPLEMENTATION OF HYFLUX EMPLOYEES SHARE OPTION SCHEME Existing Employee s Share Option Scheme The Existing Scheme was implemented at an extraordinary general meeting of the Company held on 27 September The duration of the Existing Scheme is 10 years commencing on the date of implementation, that is, 10 years commencing from 27 September The Existing Scheme is accordingly due to expire on 26 September The Company does not intend to extend the duration of the Existing Scheme. The Company proposes to implement the 2011 Scheme to replace the Existing Scheme. Details of the 2011 Scheme are set out in paragraph 2.4 below. It is proposed that the 2011 Scheme commence on 27 September 2011 and the Existing Scheme will terminate on its expiration date, 26 September The implementation of the 2011 Scheme and replacement of the Existing Scheme shall not affect the rights of holders of the Existing Options under the Existing Scheme. 2.2 Existing Options As at the Latest Practicable Date, (a) (b) (c) options granted under the Existing Scheme were for 86,021,369 Shares, representing approximately 10% of the issued share capital of the Company as at the Latest Practicable Date and such options were granted to 733 participants (1) ; there have been 29,595,500 Shares issued and allotted under the Existing Scheme, representing approximately 3.4% of the issued share capital of the Company as at the Latest Practicable Date; outstanding and unexercised Existing Options granted to participants under the Existing Scheme to subscribe for up to an aggregate of 37,691,369 Shares, representing approximately 4.4% of the issued share capital of the Company as at the Latest Practicable Date; and (d) the highest number of participants in the Existing Scheme, for any grant was 82. The limitation on the size of the Existing Scheme was that the total number of Shares issued pursuant to the Existing Option granted under the Existing Scheme shall not exceed 15% of the issued share capital of the Company on the date preceding the date of grant of an Existing Option. The total number of Shares which may be issued pursuant to the Existing Options granted under the Existing Scheme was only approximately 10% of the issued share capital of the Company as at the Latest Practicable Date and is within the such limitation on the size of the Existing Scheme. 7

8 Details of the outstanding Existing Options (2) as at the Latest Practicable Date are as follows: Date of Grant Exercise Period 15 Oct Oct 2001 to 14 Oct Jan Jan 2002 to 10 Jan Mar Mar 2002 to 27 Mar Jul Jul 2002 to 7 Jul Jan Jan 2003 to 6 Jan Apr Apr 2003 to 6 Apr Oct Oct 2003 to 15 Oct Dec Dec 2003 to 7 Dec Dec Dec 2003 to 28 Dec May May 2004 to 13 May Feb Feb 2005 to 6 Feb May May 2005 to 8 May Jun Jun 2005 to 31 May Jun Jun 2005 to 7 Jun Mar Mar 2006 to 27 Mar Mar Mar 2006 to 27 Mar Oct Oct 2006 to 17 Oct Dec Dec 2006 to 6 Dec Apr Apr 2007 to 04 Apr May May 2007 to 22 May Sep Sep 2007 to 24 Sep May May 2008 to 25 May Oct Oct 2008 to 30 Oct Jan Jan 2009 to 8 Jan May May 2009 to 14 May Oct Oct 2009 to 21 Oct Feb Feb 2010 to 25 Feb Feb Feb 2010 to 25 Feb Nov Nov 2010 to 15 Nov Mar Mar 2011 to 3 Mar Mar March 2011 to 3 Mar 2021 Subscription Price 8 Number of Shares comprised in the Existing Options Number of Participants $ , $ $ $ ,125 1 $ $ ,625 2 $ ,625 5 $ ,000 1 $ ,000 5 $ ,000 1 $ ,439, $ ,750,000 1 $ ,000 1 $ ,500 1 $ ,000 3 $ ,000 6 $ ,470,000 3 $ ,878, $ ,000 2 $ ,000 1 $ ,646, $ ,790, $ ,404, $ ,000 1 $ ,000 4 $ ,000 4 $ ,250,000 6 $ ,665,000 8 $ ,355, S$ ,000 6 S$ ,130, Note: (1) The number of participants was calculated by aggregating the number of participants in the table above. Certain participants who were granted Existing Options on more than one occasion were treated as a separate participant for each occasion of grant for purposes of calculation. (2) All the above options and prices have been adjusted for prior bonus issues.

9 2.3 Rationale The proposed 2011 Scheme is intended to replace the Existing Scheme which is due to expire on 26 September The 2011 Scheme, when implemented, will continue to provide the opportunity presented with the Existing Scheme for Employees of the Group who have contributed significantly to the growth and performance of the Group and who satisfy the eligibility criteria as set out in Rule 5 to participate in the equity of the Company. The Company recognises that the services of such Employees are important to the success and continued well-being of the Group. Implementation of the 2011 Scheme will enable the Company to continue to give recognition to the contributions made by such Employees after the expiration of the Existing Scheme. At the same time, it will give such Employees an opportunity to have a direct interest in the Company in the form of Options being granted to the Company to subscribe for new Shares in its capital, such Options having a fair value at the time of grant (please refer to Potential cost of issuing the Option(s) on page 17 of this Circular for more details on the cost to the Company in granting Options). Additionally, the 2011 Scheme will also help to achieve the following objectives:- (i) (ii) to offer an ownership opportunity to the Employees to encourage them to take greater responsibility for the performance of the Group and to maintain a high level of performance and contribution by aligning their interests with that of the Company; and to make total employee remuneration sufficiently competitive to recruit and retain Employees whose contributions are important to the long-term growth and profitability of the Group. 2.4 Summary of Rules A summary of the rules of the 2011 Scheme is as follows: (a) Eligibility Subject to the absolute discretion of the Committee, confirmed Employees (including confirmed part-time Employee) who have attained the age of 21 years on or before the Date of Grant, are not undischarged bankrupts and who meet the Performance Criteria, if applicable, shall be eligible to participate in the 2011 Scheme. Persons who are Controlling Shareholders or their Associate shall, if each such person meets the eligibility criteria in Rule 5(a), be eligible to participate in the 2011 Scheme Provided That:- (i) (ii) (iii) their participation in the Scheme is specifically approved by independent Shareholders in a separate resolution for each such person; the aggregate number of Scheme Shares available to Controlling Shareholders and their Associates shall not exceed 25% of the total number of Scheme Shares available under the 2011 Scheme; and the number of Scheme Shares available to any one Controlling Shareholder or his Associates shall not exceed 10% of the total number of Scheme Shares available under the 2011 Scheme. 9

10 No Option shall be granted to such Controlling Shareholder or their Associates unless the actual number and terms of Options to be granted shall be approved by independent Shareholders in a separate resolution for each such person. A circular, letter or notice to Shareholders proposing such a resolution shall include a clear rationale for the proposed participation by such Controlling Shareholders or their Associate. Such a circular, letter or notice to Shareholders shall also include a clear rationale for the number and terms (including Subscription Price) of the Options to be granted. (b) Size of 2011 Scheme The total number of Scheme Shares (comprising new Shares and/or Treasury Shares) in respect of which Options may be granted on any date, when added to the number of new Shares issued and issuable and the number of Treasury Shares delivered, in respect of all Options granted under the 2011 Scheme, shall not exceed ten per cent (10%) of the issued share capital of the Company on the day preceding that date. (c) Acceptance of Offer An Option granted to an Employee by the Committee must be accepted by the Employee within fourteen (14) days from the Date of Grant of that Option, and in any event not later than 5.00 p.m. on the fourteenth (14th) day from such Date of Grant, by completing, signing and returning the acceptance form, accompanied by the payment of $1.00 as consideration. The Employee may accept or refuse the whole or any part of the Offer. (d) Exercise Price Subject to any adjustments pursuant to Rule 10, the Subscription Price per Share to be paid by way of subscription upon exercise of an Option shall be equal to the Market Price. (e) Alteration of Capital If a variation in the issued share capital of the Company (whether by way of a capitalisation of profits or reserves or rights issue, capital reduction, sub-division or consolidation of Shares) shall take place or if there is an offer or invitation made by the Company to Shareholders whereunder they may acquire rights to acquire or subscribe for Shares, then:- (i) (ii) (iii) the Subscription Price; the class and/or number of Scheme Shares comprised in an Option to the extent unexercised; and/or the class and/or number of Scheme Shares over which additional future Options may be granted to the Participants; may be adjusted in such manner as the Committee may determine to be appropriate, except in relation to a capitalisation issue, upon the written confirmation of the Auditors (acting only as experts and not as arbitrators) that in their opinion, such adjustment is fair and reasonable. Notwithstanding the provisions of Rule 10(a) above, no such adjustment shall be made if as a result a Participant will receive a benefit that a Shareholder does not receive. 10

11 The issue of securities as consideration for an acquisition or a private placement of securities will not be regarded as a circumstance requiring adjustment. In addition, the cancellation of issued Shares purchased or acquired by the Company by way of market purchase during the period when a share purchase mandate granted by Shareholders of the Company (including any renewal of such mandate) is in force shall not be regarded as a circumstance requiring adjustment. Upon any adjustment made, the Company shall notify the Participants (or their duly appointed legal personal representatives) in writing of the Subscription Price thereafter in effect and the class and/or number of Scheme Shares thereafter to be issued on the exercise of the Option. Any adjustment shall take effect upon such written notification being despatched. (f) Exercise Period A Participant may exercise an Option in whole or in part as follows:- (i) (ii) up to twenty per cent (20%) of the Option at any time after one (1) year of the Date of Grant of that Option; the next twenty per cent (20%) of the Option at any time after two (2) years of the Date of Grant of that Option; (iii) the next twenty per cent (20%) of the Option at any time after three (3) years of the Date of Grant of that Option; (iv) (v) the next twenty per cent (20%) of the Option at any time after four (4) years of the Date of Grant of that Option; and the next twenty per cent (20%) of the Option at any time after five (5) years of the Date of Grant of that Option. Provided Always that an Option shall be exercised before the end of ten (10) years of the Date of Grant of that Option and subject to such other conditions as may be introduced by the Committee from time to time. Any outstanding Options which were not exercised during each period referred to above may be carried forward to the next period. An Option shall, to the extent unexercised and unless determined otherwise by the Committee, immediately lapse without any claim against the Company:- (i) (ii) (iii) subject to Rules 7(c), (d) and (e), upon the Participant ceasing to be in the employment of any member of the Group for any reason whatsoever, or in the case of a Director, upon the Director either ceasing to hold the office of a director or not being re-appointed, as the case may be, for any reason whatsoever; upon the bankruptcy of the Participant or the happening of any other event which results in his being deprived of the legal or beneficial ownership of or interest in such Options; or in the event of any misconduct on the part of the Participant, as determined by the Committee in its absolute discretion or any breach of any regulation of the Company or the Group, such breach being regarded as serious by the Committee in its absolute discretion. 11

12 For the above purpose, a Participant shall be deemed to have ceased to be so employed as of the date the notice of termination of employment is tendered by or is given to him, unless such notice shall be withdrawn prior to its effective date. Provided always that the Committee may determine that an Option shall lapse on such other date and shall not have lapsed immediately on the occurrence of the event in Rule 7(b)(i). If a Participant ceases to be employed by the Group by reason of ill-health, injury, disability (in each case, as evidenced to the satisfaction of the Committee), redundancy, retirement or for any other reason approved in writing by the Committee, he may, at the discretion of the Committee, but subject to Rule 7(a), exercise any unexercised Options within the period of thirty (30) days after the date of such cessation of employment or before the end of ten (10) years of the Date of Grant of that Option, whichever is earlier, or such other period as approved by the Committee in writing. Upon expiry of such period, the Options shall lapse. If a Participant ceases to be employed by the Group by reason of the company in which he is principally employed ceasing to be a member of the Group or the undertaking or part of the undertaking of such company being transferred otherwise than to another company within the Group, provided the Committee gives its consent in writing, he may, at the discretion of the Committee, but subject to Rule 7(a), exercise any unexercised Option(s) within the period of thirty (30) days after the date of such cessation of employment or before the end of ten (10) years of the Date of Grant of that Option, whichever is earlier, or such other period as approved by the Committee in writing. Upon the expiry of such period, the Options shall lapse. If a Participant dies and at the date of his death the Participant holds any unexercised Options, such Options may at the absolute discretion of the Committee, but subject to Rule 7(a), be exercised by the duly appointed personal representative(s) of the Participant within the period of one (1) year after his death or before the end of ten (10) years of the Date of Grant, whichever is earlier, or such other period as approved by the Committee in writing. Upon the expiry of such period, the Options shall lapse. (g) Exercise of Options (a) (b) (c) An Option may be exercised in whole or in part, by a Participant giving notice in writing to the Company. Such notice must be accompanied by a remittance for the Aggregate Subscription Cost, the relevant Depository charges and such other documentation as the Committee may require. The Company shall, as soon as practicable after the exercise of an Option allot and issue the relevant Scheme Shares to the Participant and shall apply to the Singapore Exchange for permission to deal in and for quotation of such Scheme Shares if prior permission have not been obtained. The Scheme Shares shall be subject to all the provisions of the Articles of Association and shall rank in full for all dividends declared or recommended in respect of the then issued Shares the Record Date of which is on or after the date of the exercise of the Option. The Scheme Shares will rank pari passu in all respects with the then issued Shares of the Company. Record Date means the date on which Shareholders must be registered in order to participate in any dividends or other distributions or other rights. 12

13 (h) Duration of the 2011 Scheme The 2011 Scheme shall continue to be in force at the discretion of the Committee, subject to a maximum period of ten (10) years commencing 27 September 2011; Provided Always that the 2011 Scheme may continue beyond the above stipulated period with the approval of the Shareholders by way of an ordinary resolution passed at a general meeting and of any relevant authorities which may then be required. (i) Administration of the 2011 Scheme The 2011 Scheme shall be administered by the Committee in its absolute discretion with such powers and duties as are conferred on it by the Board of Directors. The Committee shall have the power, from time to time, to make and vary such regulations (not being inconsistent with the 2011 Scheme) for the implementation and administration of the 2011 Scheme as they deem fit. Any decision of the Committee, made pursuant to any provisions of the 2011 Scheme (other than a matter to be certified by the Auditors), shall be final and binding (including any decisions pertaining to disputes as to interpretation of the 2011 Scheme or any rule, regulation, or procedure thereunder as to any rights under the 2011 Scheme). The Company shall make the following disclosure in its annual report:- (i) The names of the members of the Company administering the 2011 Scheme; (ii) The information required in the table below for the following Participants:- (1) Directors; (2) Participants who are Controlling Shareholders and their Associates; and (3) Participants, other than those in (1) above, who receive five per cent (5%) or more of the total number of Options available under the 2011 Scheme. Name of Participant Options granted during financial year under review (including terms) Aggregate Options granted since commencement of Scheme to end of financial year under review Aggregate Options exercised since commencement of Scheme to end of financial year under review Aggregate Options outstanding as at end of financial year under review A Participant who is a member of the Committee shall not be involved in the deliberation in respect of the Options to be granted to that Participant. (j) Alteration of the 2011 Scheme Subject to the Rules, the 2011 Scheme may be modified or amended in any respect by a resolution of the Committee except that:- 13

14 (a) (b) (c) no modification or amendment shall alter adversely the rights attaching to any Options granted prior to such modification or alteration except with the consent in writing of such number of Participants who, if they exercised their Options in full, would thereby become entitled to not less than threequarters (3/4) of all the Scheme Shares which would be issued and allotted upon exercise in full of all outstanding Options; the definitions of Committee, Employee, Option Period, Participant, Subscription Price and the provisions of Rules 4, 5(a), 5(b), 5(c), 5(d), 5(e), 5(f), 5(g), 6, 7, 8(A)(c), 8(A)(d), 9, 10 and Rule 11 shall not be altered to the advantage of Participants except with the prior sanction of the Shareholders at a general meeting; and no modification or amendment shall be made without the prior approval of the Singapore Exchange and/or any other relevant competent regulatory authorities. Written notice of any modification or alteration shall be given to all Participants. Shareholders who are eligible to participate in the Scheme must abstain from voting on any resolution relating to the Scheme. (k) Take-over and Winding Up of the Company (a) In the event of a take-over offer being made for the Company, a Participant holding an Option shall, subject to Rule 7, Rule 9 and Rule 12(e), be entitled within six (6) months of the date on which such offer is made or, if such offer is conditional, within six (6) months of the date on which the offer becomes or is declared unconditional (but not after the expiry of the Option Period relating thereto), to exercise in full or in part any Option as yet unexercised. However, if during such period of six (6) months, a party becomes entitled or bound to exercise rights of compulsory acquisition of the Shares under the provisions of any applicable law and gives notice to the Participant that it intends to exercise such rights on a specified date, the Option shall remain exercisable by the Participant until the expiry of such specified date or the expiry of the Option Period relating thereto, whichever is earlier. Any Option not so exercised shall lapse unless the rights of acquisition or obligations to acquire shall have been exercised or performed, as the case may be. If such rights or obligations have not been exercised or performed, the Option shall, subject to Rule 7 and Rule 12(e), remain exercisable until the expiry of the Option Period relating thereto. For the avoidance of doubt, the above shall not come into operation in the event that a take-over offer which is conditional does not become or is not declared unconditional. (b) If under any applicable law, the court sanctions a compromise or arrangement, proposed for the purposes of, or in connection with, a scheme for the reconstruction of the Company or its amalgamation with another company or companies, each Participant shall be entitled, subject to Rule 7, Rule 9 and Rule 12(e), to exercise any Option then held by him during the period commencing on the date upon which the compromise or arrangement is sanctioned by the court and ending either on the expiry of sixty (60) days thereafter or the date upon which it becomes effective, whichever is later (but not after the expiry of the Option Period relating thereto), whereupon the Option shall automatically lapse and so thereafter become null and void. 14

15 (c) (d) (e) (f) In the event of a members solvent voluntary winding-up (other than for amalgamation or reconstruction) of the Company, the Participant shall be entitled, subject to Rules 7, 9 and 12(e), within thirty (30) days of the passing of the resolution of such winding-up (but in any event prior to the expiration of the Option Period relating thereto) to exercise in full any unexercised Option, after which such unexercised Option shall lapse and become null and void. If an order or an effective resolution is passed for the winding-up of the Company on the basis of its insolvency, all Options, to the extent unexercised, shall automatically lapse and thereafter be null and void. If in connection with the making of a general offer referred to in Rule 12(a) or the scheme referred to in Rule 12(b) or the winding up referred to in Rule 12(c), arrangements are made (which are confirmed in writing by the Auditors, acting only as experts and not as arbitrators, to be fair and reasonable) for the compensation of Participants, whether by the continuation of their Options or the payment of cash or the grant of other options or otherwise, a Participant holding an Option, which is not then exercised, shall not, except at the discretion of the Committee, be permitted to exercise that Option as provided for in Rule 12. To the extent that an Option is not exercised within the periods referred to in Rule 12, it shall lapse. (l) Participation by Non-Executive Directors Similar to the Existing Scheme, it is desired that the 2011 Scheme should also provide for the participation of the Non-Executive Directors so as to make the Company s remuneration for Non-Executive Directors more flexible. The Non- Executive Directors who will be currently eligible under the Scheme are Messrs Gay Chee Cheong, Teo Kiang Kok, Lee Joo Hai, Christopher Murugasu, Rajsekar Kuppuswami Mitta and Professor Tan Teck Meng. Non-Executive Directors are persons from different professions and working backgrounds. They are able to provide the Group with the benefit of their extensive experience, knowledge and expertise that can assist in furthering the business interests of the Group, and/or provide the Group with strategic or significant alliances or opportunities. The Company regards these persons as a resource pool from which the Group is able to tap for business contacts and networking, and for the benefit of their experiences and insights. Participation in the 2011 Scheme is being extended to Non-Executive Directors in recognition of their contributions. The Company will consider, inter alia, the contributions of such persons to the success and development of the Group when selecting them for participation in the 2011 Scheme. As the 2011 Scheme is intended to cater primarily to Employees and Executive Directors, it is anticipated that Options that may be granted to the Non-Executive Directors pursuant to the 2011 Scheme in the situations described above, would not comprise (whether on a individual or collective basis) a significant portion of the Shares available under the 2011 Scheme as the Non-Executive Directors would, mainly, continue to be remunerated for their services by way of directors fees. Rather it is envisaged that the bulk of the options that are granted pursuant to the Scheme will be to Employees and Executive Directors, as they will comprise the bulk of the participants of the Scheme. As such, similar to the Existing Scheme, the Company proposes to issue not more than five per cent (5%) (in aggregate) of the Scheme Shares available under the 2011 Scheme to the Non-Executive Directors. In order to minimise the potential conflict of interests and not to compromise the independence of the Company s independent Non- 15

16 Executive Directors, the Company does not intend to grant Options of significant sizes to any independent Non-Executive Director. Based on the foregoing, the Directors do not believe that the independence of the independent Non-Executive Directors would be compromised with the issue of not more than five per cent (5%) (in aggregate) of the Scheme Shares available under the 2011 Scheme to the Non-Executive Directors. The provision of Options to the Non-Executive Directors will ensure that the Company will be able to continue to attract onto its Board, directors who will be able to assist in furthering the business interests of the Group. This will help enhance the growth and long-term profitability of the Company. (m) Participation by Controlling Shareholder and their Associates Similar to the Existing Scheme, Controlling Shareholder(s) or their Associates shall be entitled to participate in the 2011 scheme. Although the Controlling Shareholder(s) or their Associates may already have shareholding interests in the Company, including them in the 2011 Scheme ensures that they are equally entitled, with the other eligible directors and employees of the Group who are not Controlling Shareholder(s) or their Associates, to take part and benefit from this system of remuneration. The Company is of the view that the Company should have a fair and equitable system to reward the eligible directors and employees who have made and continue to make important contributions to the long-term growth of the Group notwithstanding that they are Controlling Shareholder(s) or their Associates. A person who would otherwise be eligible should not be excluded from participating in the 2011 Scheme solely for the reason that he is a Controlling Shareholder or an Associate of a Controlling Shareholder. Specific approval of independent Shareholders is required for the participation of Controlling Shareholder(s) and their Associates in the 2011 Scheme. When it is proposed that Options be granted under the 2011 Scheme to eligible Employees who are Controlling Shareholder(s) or Associates of Controlling Shareholder(s), in accordance with the requirements of the Listing Manual, the actual number and terms of the Options to be granted to each such person are subject to the approval of independent Shareholders in a separate resolution. In seeking such independent Shareholders approval, clear justification as to their participation and the number and terms (including the Subscription Price) of Options to be granted to the Controlling Shareholder or Associate of Controlling Shareholder shall be provided. Accordingly, the Company is of the view that there are sufficient safeguards against any abuse of the 2011 Scheme resulting from the participation of Controlling Shareholder(s) or their Associates. As at the Latest Practicable Date, the Controlling Shareholder who is eligible to participate in the 2011 Scheme, subject to independent Shareholders approval, is, Ms Olivia Lum Ooi Lin, the Group President & CEO. 3. FINANCIAL EFFECTS OF THE OPTION SCHEME 3.1 Share Capital The 2011 Scheme will result in an increase in the issued share capital of the Company to the extent of the Scheme Shares that will be allotted and issued pursuant to the exercise of the Option(s) granted under the 2011 Scheme. This will in turn depend on, inter alia, the number of Shares comprised in the Option(s) granted, the number of Option(s) that are accepted and exercised and the Exercise Price of the Shares comprised in the Option(s). 16

17 3.2 NTA 3.3 EPS The issue of Scheme Shares upon the exercise of the Option(s) granted under the 2011 Scheme will increase the Company s consolidated NTA by the aggregate Exercise Price of the Scheme Shares issued. On a per Share basis, the effect on the NTA of the Company will be accretive if the Exercise Price is above the Company s consolidated NTA per Share, but dilutive otherwise. The 2011 Scheme will have a dilutive impact on the Company s consolidated EPS following the increase in the Company s number of issued Shares to the extent that Scheme Shares are allotted and issued upon the exercise of the Option(s). 3.4 Potential cost of issuing the Option(s) Financial Reporting Standard 102 ( FRS 102 ) relating to share-based payments takes effect for all listed companies beginning 1 January Under FRS 102, the recognition of an expense in respect of Option(s) granted under the 2011 Scheme is required. The expense will be based on the fair value of the Option(s) at each date of grant of the Option(s) and will be recognised over the vesting period. This fair value is normally estimated by applying the option pricing model at the date of grant of the Option(s), taking into account the terms and conditions of the grant of the Option(s) and recognised as a charge to the Company s consolidated profit and loss statement ( P&L ) over the period from the date of grant of the Option(s) to the vesting date (the Vesting Period ), with a corresponding credit to the Company s reserve account. Before the end of the Vesting Period and at the end of each accounting year, the estimate of the number of Option(s) that are expected to vest in each Participant by the vesting date is revised, and the impact of the revised estimate is recognised in the consolidated P&L with a corresponding adjustment to the Company s reserve account. After the vesting date, no adjustment of the charge to the consolidated P&L is made. 4. PROPOSED GRANT OF OPTIONS TO MS OLIVIA LUM OOI LIN 4.1 The Proposed Grant of Options Subject to the proposed 2011 Scheme being approved, the Company intends to grant Options to Ms Olivia Lum Ooi Lin, Group President & CEO, who is a Controlling Shareholder, on the following terms:- (i) Proposed Date of Grant : Any time no later than one month from the commencement of the proposed 2011 Scheme (ii) Number of Scheme Shares : 8,598,000 Scheme Shares (iii) Subscription Price per : Market Price (as defined in the 2011 Scheme) Scheme Share (iv) Option Period : The Options will be exercisable at any time during the period prescribed by Rule 7 of the 2011 Scheme 17

18 4.2 Rationale for the Grant of Options to and Participation of Ms Olivia Lum Ooi Lin Ms Olivia Lum Ooi Lin founded the Group and is in charge of the overall management of the Group. She is an integral part of the Group s core management team, providing leadership and strategic direction and is responsible for developing and steering the corporate plans and overseeing the business strategies of the Group. Ms Olivia Lum Ooi Lin has been instrumental to the growth of the Group since its inception in The Directors are of the view that Ms Olivia Lum Ooi Lin should be adequately compensated and entitled to the same incentives as other Employees. She should not be precluded from participating in the Scheme solely because she is a Controlling Shareholder. The Directors believe that the Group owes a main part of its success today to Ms Olivia Lum Ooi Lin. To-date, Ms Olivia Lum Ooi Lin, as Group President & CEO, is actively involved in directing its operations and strategic planning and remains a major driving force behind the growth and success of the Company. She is currently under an employment contract, the terms of which do not differ significantly from any other employee. Her annual remuneration in 2010 was between the band of S$1.0 million to S$1.25 million. The Directors are of the view that the grant of Options to and the participation of Ms Olivia Lum Ooi Lin in the 2011 Scheme is a fair way to ensure that her remuneration package is competitive in the market. It is also consistent with the Company s objectives to motivate its employees to achieve and maintain a high level of performance and contribution which are vital to the success of the Company. The Directors believe that Ms Olivia Lum Ooi Lin s participation in the 2011 Scheme will ensure that she is equally entitled, with the other employees who are not Controlling Shareholders, to take part and benefit from the 2011 Scheme thereby enhancing her long-term commitments to the Group, and will continue to motivate her to maintain her high level performance with a view to achieving long-term growth for our Group. In any event, the grant to Ms Olivia Lum Ooi Lin of the proposed number of Scheme Shares is in line with prevailing regulations. 5. DIRECTORS AND SUBSTANTIAL SHAREHOLDERS INTERESTS IN SHARES The interests of the Directors and Substantial Shareholders in the Shares as at the Latest Practicable Date, based on information in the Register of Directors and Substantial Shareholders as maintained pursuant to the Companies Act, were as follows: Directors Direct Interest % Number of Shares Deemed Interest % Olivia Lum Ooi Lin 252,351, ,000, Teo Kiang Kok NIL NIL 300, Lee Joo Hai 300, NIL NIL Gay Chee Cheong 940, NIL NIL Christopher Murugasu 729, , Tan Teck Meng NIL NIL 91, Substantial Shareholders Direct Interest % Number of Shares Deemed Interest % Olivia Lum Ooi Lin 252,351, ,000,

19 Details of Existing Options granted under the Existing Scheme to Directors of the Company as at the Latest Practicable Date are as follows*: Directors Number of Options Exercise Price Exercise Period Olivia Lum Ooi Lin 1,875,000 $ Dec 2003 to 7 Dec ,750,000 $ May 2005 to 8 May 2015 Teo Kiang Kok 375,000 $ Mar 2006 to 27 Mar ,000 $ Feb 2010 to 25 Feb ,000* $1.8920* 4 Mar 2011 to 3 Mar 2016 Lee Joo Hai 375,000 $ Mar 2006 to 27 Mar ,000 $ Feb 2010 to 25 Feb ,000* $1.8920* 4 Mar 2011 to 3 Mar 2016 Gay Chee Cheong 300,000 $ Mar 2006 to 27 Mar ,000 $ Feb 2010 to 25 Feb ,000* $1.8920* 4 Mar 2011 to 3 Mar 2016 Christopher Murugasu 437,500* $0.2688* 15 Oct 2001 to 14 Oct ,000 $ Apr 2003 to 6 Apr ,875 $ Oct 2003 to 15 Oct ,000 $ Feb 2010 to 25 Feb ,000* $1.8920* 4 Mar 2011 to 3 Mar 2016 Rajsekar Kuppuswami Mitta 375,000 $ Feb 2010 to 25 Feb ,000* $1.8920* 4 Mar 2011 to 3 Mar 2016 Tan Teck Meng 375,000 $ Feb 2010 to 25 Feb ,000* $1.8920* 4 Mar 2011 to 3 Mar 2016 * All the above options and prices save for those marked with * have been adjusted for prior bonus issues. 6. EXTRAORDINARY GENERAL MEETING The EGM, notice of which is set out on page 22 of this Circular, will be held at 202 Kallang Bahru, Hyflux Building, Singapore on 27 April 2011 at 2.30pm (or immediately after the conclusion or adjournment of the AGM to be held on the same date at 2.00pm) for the purpose of considering and, if thought fit, passing, with or without modifications the Ordinary Resolutions set out in the Notice of EGM on pages

20 7. ACTION TO BE TAKEN BY SHAREHOLDERS Shareholders who are unable to attend the EGM and who wish to appoint a proxy or proxies to attend and vote on their behalf should complete, sign and return the Proxy Form attached to the Notice of EGM in accordance with the instructions printed therein as soon as possible and, in any event, so as to arrive at the registered office of the Company at 202 Kallang Bahru, Hyflux Building, Singapore , not later than 48 hours before the time fixed for the EGM. The appointment of a proxy by a Shareholder does not preclude him from attending and voting in person at the EGM if he so wishes in place of the proxy if he finds that he is able to do so. A Depositor shall not be regarded as a member of the Company entitled to attend the EGM and to speak and vote thereat unless his name appears on the Depository Register maintained by CDP pursuant to Division 7A of Part IV of the Act at least 48 hours before the EGM. CPFIS investors may wish to check with their CPF Approved Nominees on the procedure and deadline for the submission of their written instructions to their CPF Approved Nominees to vote on their behalf. Any Shareholder entitled to participate in the 2011 Scheme should abstain from voting at the EGM in respect of any ordinary resolutions relating to the 2011 Scheme and should not accept nominations as proxies or otherwise for voting at the EGM in respect of the said Ordinary Resolutions. Directors and executives of the Company s subsidiaries who are eligible to participate in the 2011 Scheme and are also Shareholders, shall abstain from voting at the EGM. All the Directors will be eligible to participate in the 2011 Scheme. Therefore, such Directors (who are also Shareholders) shall also abstain from voting at the EGM in respect of the Ordinary Resolutions to be proposed at the EGM. The above mentioned persons who are eligible to participate in the 2011 Scheme will not accept appointments as proxies for voting at the EGM in respect of the Ordinary Resolutions unless specific instructions have been given in the proxy instrument on how the Shareholders wish their votes to be cast for each of these Ordinary Resolutions. 8. DIRECTORS RECOMMENDATION As all the Directors of the Company may be granted Options under the 2011 Scheme, they have refrained from making any recommendation as to how Shareholders should vote in respect of Ordinary Resolutions 1, 2 and 3 as set out in the Notice of the EGM. 9. DIRECTORS RESPONSIBILITY STATEMENT The Directors (including those who may have delegated detailed supervision of this Circular) collectively and individually accept responsibility for the accuracy of the information contained in this Circular and confirm, having made reasonable enquiries, that to the best of their knowledge and belief, the facts stated and opinions expressed in this Circular have been arrived at after due and careful consideration and are true and accurate in all material respects as at the Latest Practicable Date and that there are no material facts, the omission of which would make any statement in the Circular misleading in any material respect. 20

21 10. DOCUMENTS FOR INSPECTION Copies of the following documents may be inspected at the registered office of the Company at 202 Kallang Bahru, Hyflux Building, Singapore during normal business hours from the date of this Circular up to and including the date of the EGM:- (a) (b) (c) the Memorandum and Articles of Association of the Company; the Annual Report of the Company for the financial period ended 31 December 2010; and the Rules of the 2011 Scheme. Yours faithfully For and on behalf of the Board of Directors of Hyflux Ltd Olivia Lum Ooi Lin Group President & CEO 21