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AN
NU
AL R
EPO
RT
20
09
Elec & Eltek In
ternatio
nal C
om
pan
y Limited
www.eleceltek.com
Keep on Innovating Heading for Success
ANNUAL REPORT 2009
2 Corporate Profi le
3 Financial Highlights and Calendar
6 Production and Market Information
7 Five Years’ Financial Summary
8 Corporate Information
9 Structure of the Group
11 Chairman’s Letter
14 Statement on Corporate Governance
27 Profi les of Board of Directors and Core Management
33 Report of the Directors
42 Statement of Directors
43 Independent Auditors’ Report
45 Consolidated Income Statement
46 Consolidated Statement of Comprehensive Income
47 Statements of Financial Position
49 Statements of Changes in Equity
51 Consolidated Statement of Cash Flows
53 Notes to the Financial Statements
106 SGX Listing Manual Requirements
111 Notice of Annual General Meeting
Annual General Meeting – Proxy Form
Contents
Elec & Eltek International Company Limited
Annual Report 2009
02
Corporate Profi le
Established for more than 37 years, Elec & Eltek International Company Limited (“Elec & Eltek”) has
been listed on the Mainboard of Singapore Exchange since 1994. In 2004, Elec & Eltek was acquired
by Kingboard Chemical Holdings Limited, the world’s largest laminate manufacturer. Together with
other printed circuit boards (“PCB”) manufacturing sites under the umbrella of our parent company,
Elec & Eltek is currently the largest PCB enterprise in China and ranks No.7 in the world in terms of
sales revenue in 2008.
Besides engaging in the mass fabrication and distribution of high density interconnect (HDI),
backplanes, high-end servers and up to 40-layer rigid PCB, Elec & Eltek also offers quick-turn around
(QTA) service with only 3 days ex-factory time.
With annual production capacity of over 56 million square feet, Elec & Eltek today has 7 offices
worldwide, 16 plants across Asia – 1 in Hong Kong, 2 in Thailand and 13 in Mainland China, and
professional workforce of over 11,000 employees. Our customers include global leaders in different
electronics sectors with main focus on Computer & Computer Peripherals, High-end Communication
& Networking, Consumer Electronics and Automotive.
In addition to obtain various accreditations from customers, Elec & Eltek also received affirmation
from international organization. To recognize and credit our outstanding performance within the PCB
industry, Frost & Sullivan – a global growth consulting company established for more than 40 years,
has presented us the 2009 Asia Industrial Technologies Award as the PCB Company of the Year.
Being a prime leader in the PCB industry, Elec & Eltek is in a stable and healthy financial position
to weather any business volatility. To retain and sharpen our competitive edge, we are committed to
invest continuously in state-of-the-art equipment and new technology. We will also continue to explore
new business opportunities while at the same time delivering premium values to all stakeholders.
Elec & Eltek’s mission is to be a leading PCB manufacturer that supplies high quality and high
technology PCB in mass volume at competitive prices with excellent services.
Elec & Eltek International Company Limited
Annual Report 2009
03
Financial Highlights and Calendar31 December 2009
2009 2008
US$ million US$ million
Income Statement
Turnover 435 518
Profit before taxation 49 45
Profit after taxation and minority interests 46 43
Per Share
Net earnings (US cents) – Basic 25.53 23.83
Net earnings (US cents) – Diluted 25.53 23.83
Net tangible assets (US$) 2.11 1.95
Financial Position
Shareholders’ funds 368 340
Total assets 615 650
Financial Ratios
Current assets: Current liabilities (ratio) 1.43 1.18
Inventory turnover period (month) 1.36 1.10
Gearing ratio 0.15 0.25
2009 2008
Financial Calendar
Financial year results announced on 25 February 2010 26 February 2009
Annual Report and Accounts issued on 18 March 2010 31 March 2009
Annual General Meeting held on 5 April 2010 16 April 2009
Registers of Shareholders closed on 5:00 pm 9 April 2010 5:00 pm 23 April 2009
Dividend paid/payable on
Interim N/A 29 August 2008
Final 21 April 2010 8 May 2009
Elec & Eltek International Company Limited
Annual Report 2009
04
Financial Highlights and Calendar31 December 2009
TURNOVER BY GEOGRAPHICAL LOCATIONS
TURNOVER BY LAYER COUNT
Financial year 2009
HDI (6.2%)
8-Layer
& above
(25.6%)
Financial year 2008
2- to 6-Layer
(68.2%)
HDI (2.9%)
8-Layer
& above
(30.5%)
2- to 6-Layer
(66.6%)
Financial year 2009
Others (0.8%)
South East Asia
(21.5%)
Mainland
China
(including
Hong Kong)
(61.1%)
Other Asian
countries
(1.1%)
Europe
(8.8%)
North & Central
America
(6.7%)
Financial year 2008
Others (1.4%)
South East Asia
(19.4%)
Other Asian
countries
(2.9%)
Europe
(13.3%)
North & Central
America
(5.5%)
Mainland
China
(including
Hong Kong)
(57.5%)
Elec & Eltek International Company Limited
Annual Report 2009
05Financial Highlights and Calendar
US$ Million
700
600
500
400
300
200
100
0
US$ Million
60
50
40
30
20
10
0
TURNOVER
EARNINGS & DIVIDEND PAYOUT TREND
PROFIT TREND
COMPARE TOTAL ASSETS WITHSHAREHOLDERS’ FUNDS
US$ Million
700
600
500
400
300
200
100
0
US$ Million
60
50
40
30
20
10
02005 2006 2007 2008 2009
Financial Year
Profit after taxation & minority interests
(excluding exceptional items)
Profit after taxation but before minority interests
(excluding exceptional items)
Financial Year
Dividend payout
Profi t after taxation & minority interests
464.6
515.8
572.3
517.9
434.6
48.051.0
57.859.6
34.8 34.9
42.0 41.9
45.7 45.9
31.9
47.2
42.1
56.5
36.734.8
36.7
42.644.7 45.7 553.9
274.4
613.7
315.2
656.5
341.8
649.7
339.9
615.5
368.1
Financial Year
2005 2006 2007 2008 2009
2005 2006 2007 2008 2009 2005 2006 2007 2008 2009
Financial Year
Total assets
Shareholders’ funds
Elec & Eltek International Company Limited
Annual Report 2009
06
Production and Market Information
PRODUCTION CAPACITY AS AT 31 DECEMBER 2009
PCBs withMass Lamination
Pathumthani1 Plant
PCB Raw Materials
Shenzhen1 Plant
PCB Raw Materials
Kaiping1 Plant
PCBs with Mass Lamination
Nanjing1 Plant
PCBs with Mass Lamination
Huangpu4 Plants
PCBs with Mass Lamination
Kaiping6 Plants
PCBs with Mass Lamination
Hong Kong1 Plant
PCB Raw Materials
Rojana1 Plant
Thailand11.5 million sq.ft. (21%)
Mainland China and Hong Kong44.5 million sq.ft. (79%)
Current Total PCB Production Capacity56.0 million sq.ft. per annum
2010 WORLDWIDE PROJECTED PCB MARKET 2009 2010 2014
Projected World PCB Production USD Billion 40.6 44.3 52.5
Projected World Rigid PCB Production USD Billion 28.1 30.5 35.9
Regional Rigid PCB Value Growth Forecast CAAGR (2009-2014) %
Projected PCB Production By Area M m2 232.6 249.4 312.0
Projected Rigid PCB Production By Area M m2 203.7 216.6 268.2
Regional Rigid PCB Area Growth Forecast CAAGR (2009-2014) %
America $3.6 Bn
$3.3 Bn
4.5 M m2
-1.3%
-3.5%Europe $1.8 Bn
$1.7 Bn
4.5 M m2
0.6%
-1.9%$21.2 Bn
197.2 M m2
7.6%
6.4%
Asia (excl. Japan)$30.6 Bn Japan $8.4 Bn
$4.3 Bn
10.4 M m2
-2.9%
-4.8%
CAAGR: Compounded Annual Average Growth Rate
Source: Prismark Partners LLC, The Printed Circuit Report,
Fourth Quarter, February 2010
Elec & Eltek International Company Limited
Annual Report 2009
07
Five Years’ Financial Summary
2009 2008 2007 2006 2005
US$’000 US$’000 US$’000 US$’000 US$’000
Consolidated Results
Turnover 434,565 517,931 572,274 515,845 464,550
Profit before taxation 49,317 45,137 37,163 65,108 56,566
Taxation (3,419 ) (2,626 ) (2,272 ) (6,826 ) (6,327 )
Profit after taxation 45,898 42,511 34,891 58,282 50,239
Minority interests (221 ) 117 (94 ) (1,747 ) (3,000 )
Profit for the year 45,677 42,628 34,797 56,535 47,239
Financial Positions
Property, plant and equipment 347,115 379,905 357,299 356,158 313,586
Non-current deposits 1,253 1,664 3,825 1,557 4,715
Intangible assets – – – 2 7
Investment in an associate – 8,388 8,169 6,110 5,060
Investment properties 19,262 15,756 8,733 – –
Deferred tax assets 1,437 1,446 1,351 1,245 1,496
Current assets 246,424 242,503 277,120 248,656 229,074
Total assets 615,491 649,662 656,497 613,728 553,938
Non-current liabilities 66,336 94,534 52,178 94,795 65,129
Current liabilities 171,826 205,652 252,827 193,473 200,083
Total liabilities 238,162 300,186 305,005 288,268 265,212
Net assets 377,329 349,476 351,492 325,460 288,726
Represented by:
Shareholders’ funds 368,065 339,870 341,815 315,243 274,391
Minority interests 9,264 9,606 9,677 10,217 14,335
377,329 349,476 351,492 325,460 288,726
Elec & Eltek International Company Limited
Annual Report 2009
08
Corporate Information
BOARD OF DIRECTORS
Executive DirectorsMr. Chadwick Mok Cham Hung Vice-ChairmanMr. Li Muk KamMr. Philip Chan Sai KitMr. Clement SunMs. Claudia Heng Nguan LengMr. Li Chiu CheukMr. Chan Wai Leung
Non-executive DirectorsMr. Cheung Kwok Wing ChairmanMr. Chan Wing KwanMr. Chang Wing Yiu
Independent Non-executive DirectorsMr. Larry Lai Chong TuckDr. Raymond Leung Hai MingDr. Philip Wong Yu Hong (retired on 1 January 2010)
AUDIT COMMITTEEMr. Larry Lai Chong Tuck (Chairman)Dr. Raymond Leung Hai MingMr. Chan Wing Kwan (appointed on 1 January 2010)Dr. Philip Wong Yu Hong (retired on 1 January 2010)
NOMINATING COMMITTEEDr. Philip Wong Yu Hong (Chairman) (retired on 1 January 2010)Dr. Raymond Leung Hai Ming (Chairman)Mr. Larry Lai Chong TuckMr. Chan Wing Kwan (appointed on 1 January 2010)
REMUNERATION COMMITTEEDr. Philip Wong Yu Hong (Chairman) (retired on 1 January 2010)Dr. Raymond Leung Hai Ming (Chairman)Mr. Larry Lai Chong TuckMr. Chan Wing Kwan (appointed on 1 January 2010)
EMPLOYEES’ SHARE OPTION SCHEME COMMITTEEMr. Cheung Kwok WingMr. Chan Wing KwanMr. Chang Wing Yiu
SECRETARIESMs. Claudia Heng Nguan LengMs. Marian Ho Wui Mee
REGISTERED OFFICE80 Raffles Place #33–00UOB Plaza 1Singapore 048624Tel: 6225 2626Fax: 6225 1838
PRINCIPAL OFFICE4 Leng Kee Road#03-02 SiS BuildingSingapore 159088Tel: 6226 0488Fax: 6220 2377Website: www.eleceltek.com
SHARE REGISTRARBoardroom Corporate & Advisory Services Pte. Ltd.50 Raffles Place #32-01Singapore Land TowerSingapore 048623
STATUTORY AUDITORSDeloitte & Touche LLPPublic Accountants and Certified Public AccountantsPartner: Mr. Kee Cheng Kong Michael (appointed since the financial year ended 31 December 2007)
SOLICITORSRodyk & Davidson LLPChang See Hiang & Partners
PRINCIPAL BANKERSThe Hongkong and Shanghai Banking Corporation LimitedStandard Chartered BankHang Seng Bank LimitedCitibank, N.A.DBS Bank LtdBank of America, N.A.
Elec & Eltek International Company Limited
Annual Report 2009
09
Structure of the Group31 December 2009
The People’s Republic of China (“China”)/Hong Kong /Macao
Elec & Eltek International Company Limited Singapore
Investment Holdings
Overseas China
Kaiping Pacifi c Insulating Material Company Limited
China (100%)
Elec & Eltek (Thailand) Limited
Thailand (100%)
Kai Ping Elec & EltekCompany Limited (95%)
Nanjing Elec & Eltek Electronic Co., Ltd.
China (100%)
Pacific Insulating Material (Thailand) Limited
Thailand (100%)
Kaiping Elec & EltekNo.3 Company Limited (95%)
Elec & Eltek Company(Macao Commercial Offshore) Limited
Macao (100%)
Elec & Eltek TechnologyResearch & Marketing Pte. Ltd.
Singapore (100%)
Kaiping Elec & EltekNo.5 Company Limited (95%)
Elec & Eltek Multilayer PCB Limited
Hong Kong (100%)
Elec & Eltek (Guangzhou)Electronic Company Limited (98%)
Guangzhou Elec & Eltek Microvia Technology Limited (98%)
Major Subsidiaries Major Joint Ventures
Remarks: Percentages represent the Group’s effective shareholdings in the respective companies.
Shenzhen Pacific Insulating Material Co., Ltd. (93.5%)
Elec & Eltek International Company Limited
Annual Report 2009
11
Chairman’s Letter
Share Passion Create Harmony
Dear Shareholders,
It gives me great pleasure to present you the 2009 Annual Report for the financial year ended 31
December 2009 (“CY2009”) of Elec & Eltek International Company Limited (the “Company”) and its
subsidiary companies (the “Group”).
BUSINESS REVIEW
The Group concluded CY2009 with satisfactory performance in the fourth quarter in which we again
delivered growth in margins, profit and earnings. Fourth quarter net profit after tax was US$18.0
million compared with US$5.1 million in the fourth quarter of financial year ended 31 December
2008 (“CY2008”), represent an increase of 254.0% on the back of 30.6% increase in sales revenue
to US$127.2 million from US$97.4 million in the same period last year.
Sales revenue for CY2009 reduced by US$83.3 million or 16.1% to US$434.6 million compared
with US$517.9 million in CY2008. In spite of weaker performance in first quarter, net profit after
tax for CY2009 increased by 8.0% to US$45.9 million from US$42.5 million in the year-ago period,
as a result of excellent execution and a strong team spirit to weather through the adverse economic
conditions.
The encouraging performance was driven by strengthening demand in nearly all of our served markets
in the fourth quarter and the Group’s strong commitment on continuous technological development
and customers focus. Our ongoing efforts focused on improving yields and operational costs in a
proactive and dynamic manner helped to further strengthen the Group’s financial performance.
The proportion of sales from 2- to 6- layers and High Density Interconnect (“HDI”) printed circuits
boards (“PCBs”) increased to 68.2% and 6.2% in CY2009 as compared to 66.6% and 2.9%
respectively in the last financial year whilst the proportion of 8-layer and above PCBs accounted for
25.6% in CY2009.
Our focus on operating leverage and prudence working capital management enabled the Group to
further expand margins and generate strong cash flow. The Group ended CY2009 with US$60.0
million of cash on hand and generated positive cash flow of US$58.9 million. Net gearing ratio has
further improved to 15.2% as at year end from 23.3% as at 30 September 2009. Accordingly, the
Group is able to propose a high dividend payout ratio and well positioned to take advantage of any
prospective growth opportunities as supported by its strong balance sheet.
Elec & Eltek International Company Limited
Annual Report 2009
12
Chairman’s Letter
In the opinion of the Directors, no factor has
arisen during the period from 31 December 2009
to the date of this report that would materially
affect the results of the Company and/or the
Group for the year.
FUTURE PROSPECTS
Although overall economic conditions remain less
than certain, we have seen both an improvement
in demand levels, as well as stabilization of
demand patterns in our served markets. In
anticipation of increased corporate spending,
order momentum after December festival has
been steady. All of our manufacturing facilities
are operating near full capacity.
With more balanced PCB supply and demand in
the region, we expect critical raw material prices,
such as fibre glass, copper foils, and copper
clad laminates to trend further upward, and as
a result, PCB selling prices should be able to
hold well and even move slightly upwards in the
coming quarters. This, together with anticipated
higher business proportion on HDI in the new
financial year, would further improve our blended
average selling prices.
The Group’s significant actions undertaken in
2009 to enhance our competitive advantage
and build sustainable financial strength have
created a solid base for future performance. Our
dedicated new Kaiping HDI centre is in stage
of mass volume ramp up. It is expected a few
of the high value-added customers will start to
contribute positively to the Group’s HDI business
in the new financial year 2010.
Elec & Eltek International Company Limited
Annual Report 2009
13Chairman’s Letter
To ensure we are well positioned to exploit business opportunities as the electronics sector turns
around, the Group will cautiously evaluate the business opportunities available from both existing
customers and newly-developed customers, especially in the HDI business sector, and will launch
another expansion plan when the right market opportunities warrant. We are moving forward with
investments in support of previously announced capacity expansion on conventional PCBs. The
Group will continue to review and fortify our extensive business, and further sharpen our competitive
edge from time to time.
The Board of Directors is recommending a one-tier tax exempt final dividend of 25.0 US cents per
share, comprising a one-tier tax exempt final dividend of 15.0 US cents per share and a one-tier tax
exempt special dividend of 10.0 US cents per share which shall be subject to shareholders’ approval
at the forthcoming annual general meeting of the Company. This represents 97.9% of the net
earnings for CY2009.
I would like to thank my fellow Directors for their commitment to the Company during the financial
year under review. We bid farewell to Dr. Philip Wong Yu Hong, an Independent Non-executive
Director of the Company, who retired from his directorship on 1 January 2010. Dr. Wong has made
solid contributions to the Board over his tenure of service.
At the close of the challenging year, we want to acknowledge the resolve and commitment of our
employees around the world who came through this period of change with their hardwork and
dedication.
Not least of all, we thank our many loyal customers, suppliers, shareholders and business associates
for their continued support over the years.
Cheung Kwok Wing
Chairman
25 February 2010
Elec & Eltek International Company Limited
Annual Report 2009
14
Statement on Corporate Governance
INTRODUCTION
The Board of Directors (the “Board”) and management of Elec & Eltek International Company Limited
(the “Company”) continue to be committed to complying with the Code of Corporate Governance 2005
(the “2005 Code”) issued by the Corporate Governance Committee so as to promote greater corporate
transparency and protection of shareholders’ interests.
This Statement describes the corporate governance practices of the Company during the financial
year ended 31 December 2009 with reference to the 2005 Code. The Board is pleased to confirm
that the Company has generally adhered to the principles and guidelines as set out in the 2005
Code, save for Guideline 2.1 (There should be strong and independent element on the Board, with
independent directors making up at least one-third of the Board), the reason for which deviation is
explained below.
BOARD MATTERS
Board’s Conduct of Its Affairs
Principle 1: Effective board to lead and control the company
The Board oversees the business of the Company and every Director is expected to exercise objective
judgment on the Company’s affairs and to always consider the interests of the Company and its
subsidiary companies (the “Group”). The Board reviews and discusses reports by management on the
performance, plans and prospects of the Group.
In addition to general oversight of management, the Board also performs a number of specific
functions, including:
(i) reviewing, approving and monitoring fundamental financial and business strategies and major
corporate actions;
(ii) approving major acquisitions or disposals, corporate or financial restructuring, issuance of
shares and other equity or debt instruments, payment of dividends and other distribution to
shareholders;
(iii) assessing risks facing the Group and reviewing and implementing appropriate measures to
manage such risks;
(iv) selecting and evaluating the performance and compensation of key management executives;
(v) approving nominations to the Board;
Elec & Eltek International Company Limited
Annual Report 2009
15Statement on Corporate Governance
(vi) reviewing and endorsing the recommended framework of remuneration for the Board and key
management executives by the Remuneration Committee; and
(vii) assuming overall responsibility for corporate governance.
To give effect to the discharge of its responsibilities, the Board has established four Board
Committees, namely, the Nominating Committee, the Remuneration Committee, the Employees’
Share Option Scheme Committee and the Audit Committee. These committees have written mandates
and operating procedures which are reviewed periodically. The Chairman of each Board Committee
will report to the Board the outcome of the respective Board Committee meetings.
The Board conducts scheduled meetings on a quarterly basis to coincide with the announcement of
the Group’s quarterly and year end results and as warranted by particular circumstances. The Articles
of Association of the Company (the “Articles”) provides for directors to convene meetings by means of
telephone conference or other methods of simultaneous communication by electronic or telegraphic
means. The number of Board meetings and Board Committee meetings held from the date of the last
annual report to the date of this annual report, as well as the attendance of each Board member at
these meetings are disclosed below:
Board Committee
Audit Nominating Remuneration
Board Committee Committee Committee
Total number of meetings held 4 4 1 1
Cheung Kwok Wing 4 – – –
Chadwick Mok Cham Hung 4 – – –
Li Muk Kam 4 – – –
Philip Chan Sai Kit 4 – – –
Clement Sun 4 – – –
Claudia Heng Nguan Leng 4 – – –
Li Chiu Cheuk 4 – – –
Chan Wai Leung 4 – – –
Chan Wing Kwan[1] 4 1 1 1
Chang Wing Yiu 4 – – –
Larry Lai Chong Tuck 4 4 1 1
Raymond Leung Hai Ming 4 3 1 1
Philip Wong Yu Hong[2] 3 3 – –
[1] Appointed as member of Audit Committee, Nominating Committee and Remuneration Committee with effect
from 1 January 2010.
[2] Retired on 1 January 2010
Elec & Eltek International Company Limited
Annual Report 2009
16
Statement on Corporate Governance
The Board adopts an internal framework whereby a formal letter is sent to newly appointed directors
explaining their statutory duties and responsibilities as directors. All newly appointed directors
receive an orientation kit comprising, but not limited to, the Articles, directors’ code of professional
conduct, directors’ duties on notification, internal code for securities transactions, code of corporate
governance and other relevant materials.
Board Composition and Guidance
Principle 2: Strong and independent element on the board
Presently, the Board comprises twelve Directors as follows:
(i) seven Executive Directors;
(ii) three Non-executive Directors; and
(iii) two Independent Non-executive Directors.
The Board considers that the present Board size and the number of Board Committees facilitate
effective decision making and are appropriate for the nature and scope of the Group’s operation. The
Board will continuously examine its size, and composition with a view to ensure effective decision-
making be made from time to time.
The Board examines the independence of its Directors based on the criterion of independence
defined in the 2005 Code. An independent Director is one who has no relationship with the Company,
its related companies or its officers that could interfere, or be reasonably perceived to interfere with
the exercise of the Director’s independent business judgment with a view to the best interests of the
Company.
Chairman and Chief Executive Officer
Principle 3: Chairman and Chief Executive Officer to be separate persons to ensure appropriate balance of power, increased accountability and greater capacity of the board for independent decision making
The Chairman and the Vice-Chairman, who assumes the role and responsibility of the Chief Executive
Officer, bear responsibility for the workings of the Board and ensure the integrity and effectiveness of
the governance process of the Board. Whilst the Chairman sets the strategic direction for the Board,
the Vice-Chairman manages the business of the Group and ensures the execution of the Board’s
decisions.
Elec & Eltek International Company Limited
Annual Report 2009
17Statement on Corporate Governance
Board Membership
Principle 4: Formal and transparent process for the appointment of new directors to the board
The Board endeavours to ensure that there is an appropriate mix of core competencies and collective
expertise to provide the necessary knowledge and objective judgment to meet its responsibilities.
The Board benefits from the depth and breath of expertise each Director possesses, collectively
providing core competencies in finance, industry, business and management.
Nominating Committee
The current Nominating Committee members comprise Dr. Raymond Leung Hai Ming (Chairman)
and Mr. Larry Lai Chong Tuck who are Independent Non-executive Directors, and Mr. Chan Wing
Kwan who is a Non-executive Director.
The Nominating Committee is responsible for the following functions:
(i) evaluating the independence of the Directors on an annual basis and be satisfied that
notwithstanding that less than one-third of the current Board is made up of independent
Directors, the Board is able to exercise sound judgment on corporate affairs objectively and
independently;
(ii) reviewing and recommending to the Board, the retirement and re-election of Directors in
accordance with the Articles at each annual general meeting;
(iii) evaluating the Board’s performance as a whole as well as contribution of each Director to the
effectiveness of the Board; and
(iv) where a Director has multiple board representations, to assess if such Director is able to and
has been adequately carrying out his duties as a Director of the Company.
Where it is considered that the Board would benefit from the services of a new director with particular
skills, the Nominating Committee would, in consultation with the Board, determine the selection
criteria and identify candidates with the appropriate expertise for the position. The Nominating
Committee then nominates the most suitable candidates to the Board. Upon appointment, a formal
letter of appointment shall be provided to the appointed director indicating the director’s scope of
duty as well as the functions of the Board.
Elec & Eltek International Company Limited
Annual Report 2009
18
Statement on Corporate Governance
In accordance with the 2005 Code and the Articles, each Director is required to retire at least once
every three years by rotation and all newly appointed Directors are required to retire at the next annual
general meeting. The retiring Directors are eligible to offer themselves for re-election. The Nominating
Committee (save that a member shall abstain from recommendation in respect of their own re-
appointment) has recommended to the Board, the re-appointment of four Directors, Mr. Li Muk Kam,
Mr. Philip Chan Sai Kit, Mr. Clement Sun and Mr. Chang Wing Yiu, retiring by rotation pursuant to
the Articles at the forthcoming Annual General Meeting. The Board has accepted the Nominating
Committee’s recommendation, and all the abovementioned Directors, having accepted the Company’s
invitation for re-election, will be offering themselves for re-election at the forthcoming Annual General
Meeting.
The profiles of the Directors and their shareholding in the Company and its subsidiary companies
are set forth on pages 27 to 31 and 34 to 36 respectively of this Annual Report. The date of initial
appointment and last re-election of each director, together with his directorship (if any) in other listed
companies are set out below:
Date of initial Date of last Directorships in
Name of director Appointment appointment re-election other listed companies
Cheung Kwok Wing Non-executive/ 13 December 2004 16 April 2009 KBCHL
non-independent KBCFHL
Chan Wing Kwan Non-executive/ 13 December 2004 16 April 2009 KBCHL
non-independent KBCFHL
Chang Wing Yiu Non-executive/ 13 December 2004 12 April 2007 KBCHL
non-independent
Chadwick Mok Executive/ 13 December 2004 16 April 2009 KBCHL
Cham Hung non-independent
Li Muk Kam Executive/ 18 January 2005 12 April 2007 Nil
non-independent
Philip Chan Sai Kit Executive/ 18 January 2005 21 April 2008 Nil
non-independent
Elec & Eltek International Company Limited
Annual Report 2009
19Statement on Corporate Governance
Date of initial Date of last Directorships in
Name of director Appointment appointment re-election other listed companies
Clement Sun Executive/ 15 January 2007 12 April 2007 Nil
non-independent
Claudia Heng Executive/ 17 July 1995 16 April 2009 Nil
Nguan Leng non-independent
Li Chiu Cheuk Executive/ 1 January 2008 21 April 2008 Nil
non-independent
Chan Wai Leung Executive/ 1 January 2008 21 April 2008 Nil
non-independent
Larry Lai Chong Tuck Non-executive/ 26 February 2005 21 April 2008 Nil
independent
Raymond Leung Non-executive/ 1 January 2008 21 April 2008 China State Construction
Hai Ming independent International Holdings Ltd.
KBCHL – Kingboard Chemical Holdings Limited
KBCFHL – Kingboard Copper Foil Holdings Limited
Board Performance
Principle 5: Formal assessment of the effectiveness of the board as a whole and the contribution by each director to the effectiveness of the board
The Board uses its best efforts to ensure that each Director appointed to the Board possesses the
background and expertise in technology, business, finance and management skills critical to the
Group’s business to enable the Board to make sound and well-considered decisions.
Elec & Eltek International Company Limited
Annual Report 2009
20
Statement on Corporate Governance
The Nominating Committee has identified a set of performance criteria, which has also been
approved by the Board, that is linked to long term shareholders’ value, to be used for evaluating
the effectiveness of the Board as well as the performance of each Director. The set of performance
criteria includes qualitative and quantitative factors, but is not limited to the performance of
principal functions and fiduciary duties, level of participation at meetings, guidance provided to the
management and attendance records. Other performance criteria that may be used include return
on assets, return on equity, return on investment and the comparison of the Company’s share price
performance against appropriate indices of the Singapore Exchange Securities Trading Limited
(“SGX-ST”).
Access to Information
Principle 6: Board members to have complete, adequate and timely information
The management provides the Board and its various Board Committees with adequate and timely
information and reports prior to their respective meetings and on an on-going basis.
Directors have separate and independent access to the Company’s senior management and the
company secretaries for additional information. In addition, should Directors, whether as a group or
individually, need independent professional advice relating to the Company’s affairs, the management
will, upon direction by the Board, appoint a professional advisor selected by the Group or the
individual Director, to render the advice. The cost of such professional advice will be borne by the
Company.
At least one of the company secretaries will attend Board meetings, particularly the meetings for
reviewing the draft announcements of the Group’s quarterly and full year results, and is responsible
for ensuring that Board procedures are followed. Together with the management, the company
secretaries are responsible for ensuring compliance with the Companies Act (Cap. 50, Singapore
Statutes) and all other SGX-ST rules and regulations applicable to the Company.
The Articles provide that the appointment and removal of the company secretaries are subject to the
approval of the Board.
Elec & Eltek International Company Limited
Annual Report 2009
21Statement on Corporate Governance
REMUNERATION MATTERS
Principle 7: Formal and transparent procedure for developing policy on executive remuneration and for fixing remuneration packages of individual directors
Principle 8: Remuneration of directors should be adequate but not excessive
Principle 9: Disclosure on remuneration policy, level and mix of remuneration, and procedure for setting remuneration
Remuneration Committee
The current Remuneration Committee members comprise Dr. Raymond Leung Hai Ming (Chairman)
and Mr. Larry Lai Chong Tuck who are Independent Non-executive Directors, and Mr. Chan Wing
Kwan who is a Non-executive Director.
The Remuneration Committee will review and recommend remuneration policies and packages
for key management executives. The review will cover all aspects of remuneration, including but
not limited to, salaries, allowances, bonuses, share options and benefits-in-kind. In conducting its
review, the Remuneration Committee will give due regard to the financial and commercial health and
business needs of the Group. Where appropriate, external consultants will be appointed to assist the
Remuneration Committee in the review. The Remuneration Committee’s recommendations will be
submitted for endorsement by the entire Board.
The Remuneration Committee has a set of terms of reference defining its scope of authority, and is
responsible for the following functions:
(i) ensure the Remuneration Committee’s recommendations have been made in consultation with
the Chairman of the Board and submitted for endorsement by the entire Board; and
(ii) liaise with the Board in relation to the preparation of executive compensation for inclusion in
the Company’s Annual Report as required.
The Group’s remuneration policy is to provide compensation packages at rates which reward
successful performance and the enhancement of shareholder value and to attract, retain and
motivate the Directors and employees. Details of remuneration and benefits of Directors and top five
key management executives are disclosed in the section “SGX Listing Manual Requirements” on
pages 106 to 107.
Elec & Eltek International Company Limited
Annual Report 2009
22
Statement on Corporate Governance
Employees’ Share Option Scheme Committee
The Employees’ Share Option Scheme Committee comprises Mr. Cheung Kwok Wing, Mr. Chan Wing
Kwan and Mr. Chang Wing Yiu, all of whom are Non-executive Directors.
The Employees’ Share Option Scheme Committee is authorised to administer the 2002 Elec & Eltek
Employees’ Share Option Scheme (the “2002 Scheme”), including but not limited to, offer and grant
of share options to eligible participants in accordance to the rules of the 2002 Scheme, to modify
and/or amend the 2002 Scheme from time to time; and to take such steps, to complete and do all
such acts and things and to enter into such transactions, arrangements and agreements as may be
necessary or expedient to give full effect to the 2002 Scheme.
Information on the 2002 Scheme are disclosed on pages 37 to 39 in the Report of the Directors and
pages 99 to 101 in Note 26 to the financial statements.
The 2002 Scheme had since been terminated in November 2007 upon its expiry without affecting
the rights of holders of any options granted and outstanding under the 2002 Scheme. A new share
option scheme, namely, the 2008 Elec & Eltek Employees’ Share Option Scheme was adopted by the
Company on 9 May 2008.
ACCOUNTABILITY AND AUDIT
Accountability
Principle 10: The Board should present a balanced and understandable assessment of the Company’s performance, position and prospects
The Board is responsible for providing a balanced and understandable assessment of the Company’s
performance, position and prospects, including interim and other price sensitive public reports
and reports to regulators (if required). In presenting the quarterly and annual financial statements
to shareholders, it is the aim of the Board to provide the shareholders with a balanced and
comprehensible assessment of the Group’s position and prospects. The management will provide the
Board with appropriately detailed management accounts of the Group’s performance, position and
prospects.
Elec & Eltek International Company Limited
Annual Report 2009
23Statement on Corporate Governance
Audit Committee
Principle 11: Establishment of Audit Committee with written terms of reference
The current Audit Committee members comprise Mr. Larry Lai Chong Tuck (Chairman) and Dr.
Raymond Leung Hai Ming who are Independent Non-executive Directors, and Mr. Chan Wing Kwan
who is a Non-executive Director.
The Audit Committee has written terms of reference defining its scope of authority. During the
financial year and up to the date of this report, the Audit Committee met with the management,
internal auditor and statutory auditors of the Company and performed, inter alia, the following
functions:
(i) reviewed the annual audit plan of the Company’s statutory auditors and the results of their
examination of the financial statements of the Company, the consolidated financial statements
of the Group and statutory auditors’ report on those financial statements before submission to
the Board;
(ii) reviewed the Group’s financial and operating results and accounting policies;
(iii) recommended to the Board, subject to shareholders’ approval, the re-appointment of the
Company’s statutory auditors;
(iv) reviewed the internal audit plans, the results of internal audits and evaluation of the Group’s
systems of internal accounting controls, and the effectiveness of actions or policies taken by
management on the recommendations and observation;
(v) reviewed the Group’s interested person transactions;
(vi) reviewed the quarterly and annual announcements on the results and financial position of the
Company and the Group; and
(vii) reviewed the co-operation and assistance given by the management to the Company’s statutory
auditors.
In addition, the Audit Committee reviewed all non-audit services provided by the statutory auditors
during the financial year and is of the opinion that the provision of such services will not affect the
independence of the statutory auditors.
Elec & Eltek International Company Limited
Annual Report 2009
24
Statement on Corporate Governance
The Audit Committee has full access to and co-operation from the management and the statutory and
internal auditors and has full discretion to invite any Director or executive officer to attend its meeting.
The statutory and internal auditors have unrestricted access to the Audit Committee.
The Company has adopted a whistleblower policy which allows the staff of the Group to raise
concerns, in confidence, about suspected improper conduct or incident in matters of financial
reporting, internal accounting controls, auditing and other matters or potential violations of the laws;
and for the independent investigation of such matters and appropriate follow-up action.
Internal Controls
Principle 12: Sound system of internal controls
The Group’s system of internal controls are designed to provide reasonable assurance that assets
are safeguarded, that proper accounting records are maintained, and that financial information used
within the business and for publication are reliable.
The statutory auditors, in the course of conducting their annual audit procedures on the statutory
financial statements, also reviewed the Group’s significant internal financial controls to the extent of
their scope as laid out in their audit plan. Any material non-compliance and internal financial control
weaknesses noted by the auditors are reported to the Audit Committee together with the auditors’
recommendations. The management would then take action to rectify the weaknesses highlighted.
The Audit Committee, in the course of their review of the reports presented by the internal auditors
and statutory auditors, also reviewed the effectiveness of the Group’s system of internal controls and
is satisfied that there are adequate internal controls to meet the needs of the Group in its current
business environment. As such, the Board is satisfied with the adequacy of the internal controls,
including financial, operational and compliance controls, and risk management systems.
Internal Audit
Principle 13: Independent internal audit function
The Group has an adequately resourced independent internal audit function to conduct regular review
of the systems of internal controls and to report independently the findings and recommendations of
any internal control weakness to the Audit Committee and to senior management for remedial action.
Elec & Eltek International Company Limited
Annual Report 2009
25Statement on Corporate Governance
The internal audit function would report to the Chairman of the Audit Committee and assist the Board
in monitoring and managing business risks and internal controls. The Audit Committee reviews
and approves the internal audit plan. Reports from the internal auditors containing the summary
of findings and recommendations are tabled and discussed at meetings of the Audit Committee
quarterly.
The Audit Committee has reviewed the internal audit function and is satisfied as to its adequacy.
COMMUNICATION WITH SHAREHOLDERS
Principle 14: Regular, effective and fair communication with shareholders
Principle 15: Greater shareholder participation at Annual General Meeting
The Board is mindful of its obligation to provide timely and fair disclosure of material information to
its shareholders. Financial results, annual reports, circulars and other announcements are released
through SGXNET, and annual reports and circulars are sent to all shareholders by post.
Price sensitive information is first publicly released, either before the Company meets with any group
of investors or investment analysts or simultaneously with such meetings, if necessary.
All materials on the Company’s quarterly financial results and other announcements are available on
the Company’s website.
Notices of shareholders’ meetings are advertised in the newspapers. Shareholders are encouraged
to communicate their views and ask questions regarding the Group and resolutions being proposed
during shareholders’ meetings.
At shareholders’ meetings, each distinct issue is proposed as a separate resolution.
Under the Articles, a shareholder of the Company is allowed to appoint one or two proxies to attend
and vote at all shareholders’ meetings on his/her behalf. The Articles currently do not allow a
shareholder to vote in absentia such as voting via mail, e-mail or facsimile due to security, integrity
and other pertinent issues.
The statutory auditors and the members of the Audit Committee, Nominating Committee and/or
Remuneration Committee are present at shareholders’ meetings to assist the Directors in addressing
any queries by shareholders.
Elec & Eltek International Company Limited
Annual Report 2009
26
Statement on Corporate Governance
INTERESTED PERSON TRANSACTIONS
The Company has adopted an internal policy in respect of any transaction with interested persons and
has set out the procedures for review and approval of the Company’s interested person transactions.
For the current financial year, the amount of interested person transactions to be disclosed pursuant
to Rule 920(1)(a)(ii) of the Listing Manual of SGX-ST are disclosed in the section “SGX Listing Manual
Requirements” on pages 107 to 108.
INTERNAL CODE ON DEALING IN SECURITIES
In compliance with Rule 1207(18) of the Listing Manual, the Company has adopted an Internal Code
which prohibits dealings in the Company’s securities by directors and employees and their connected
persons one month before the release of the full year results and two weeks before the release of the
quarterly results and if they are in possession of unpublished price-sensitive information. Apart from
setting out the implications of insider trading, the Internal Code also provides a comprehensive system
of controls in monitoring the dealing in the Company’s securities by its employees, in particular, the
identification of the parties subject to the control system and the prompt reporting of such dealings by
the management to the Board.
On behalf of the Board
Chadwick Mok Cham Hung
Vice-Chairman
Chan Wing Kwan
Director
25 February 2010
Elec & Eltek International Company Limited
Annual Report 2009
27
Profiles of Board of Directors and Core Management
MR. CHADWICK MOK CHAM HUNG
Mr. Chadwick Mok Cham Hung has been the Executive Director since 13 December 2004 and
became the Vice-Chairman of the Company on 18 January 2005. He is responsible for developing
overall business directions and management strategies of the Elec & Eltek Group. He is currently
assuming the role and responsibilities of the Chief Executive Officer.
Mr. Mok holds a MA in Electrical and Information Engineering from the University of Cambridge and
a MBA Degree with distinction from Imperial College, the University of London and has over 11 years’
experience in the financial services industry. Mr. Mok is an associate member of the Institute of
Chartered Accountants in England & Wales and a fellow member of Hong Kong Institute of Certified
Public Accountants.
Mr. Mok is the executive director of Kingboard Chemical Holdings Limited.
MR. LI MUK KAM
Mr. Li Muk Kam joined the Elec & Eltek Group in 1982 and served in various senior positions in
different operations such as manufacturing, marketing & sales and corporate strategy, finance &
administration. He was appointed the Executive Director of the Company on 18 January 2005 and is
responsible for sales and marketing development of HDI business.
Mr. Li holds a Higher Certificate in Mechanical Engineering from The Hong Kong Polytechnic
University and a Master Degree in Manufacturing Systems Engineering from the University of
Warwick.
MR. PHILIP CHAN SAI KIT
Mr. Philip Chan Sai Kit joined the Elec & Eltek Group in 1989 and served as the regional sales head
firstly responsible for the Europe and then America region. He was appointed the Executive Director
of the Company on 18 January 2005 and is responsible for all activities in relation to business
development, supply chain management and market research functions of the Elec & Eltek Group.
Mr. Chan holds a Bachelor Degree in Civil Engineering from Coventry (Lanchester) Polytechnic in the
UK and a Master Degree in Business Administration from the Bulacan State University, Republic of
the Philippines.
Elec & Eltek International Company Limited
Annual Report 2009
28
Profiles of Board of Directors and Core Management
MR. CLEMENT SUN
Mr. Clement Sun joined the Elec & Eltek Group in 1983 and served in various senior positions in
the manufacturing operations in Hong Kong and Mainland China. He was appointed the Executive
Director of the Company on 15 January 2007 and is responsible for all activities in relation to the
strategic business unit of Hong Kong, Shenzhen and Thailand manufacturing facilities of the Elec &
Eltek Group.
Mr. Sun holds a Diploma in Production and Industrial Engineering from The Hong Kong Polytechnic
University and a Master Degree in Business Administration from the Bulacan State University,
Republic of the Philippines.
MS. CLAUDIA HENG NGUAN LENG
Ms. Claudia Heng Nguan Leng joined the Elec & Eltek Group in 1994 and has been the Executive
Director since July 1995. In her current capacity as Vice President - Group Finance, and Company
Secretary of the Company, she has the overall responsibility for the corporate financial affairs of the
Group, including treasury, tax planning and compliance functions. She also oversees the Group’s
information systems, human resource matters, legal and secretariat and investor relations functions.
Ms. Heng holds a Master in Business Administration from Manchester Business School and a Master
in Applied Finance from Macquarie University. She is a Fellow Certified Public Accountant of the
Institute of Certified Public Accountants in Singapore and a Fellow Certified Public Accountant of CPA
Australia. She is also a member of the Singapore Institute of Directors.
MR. LI CHIU CHEUK
Mr. Li Chiu Cheuk was appointed the Executive Director of the Company with effect from 1 January
2008. He is responsible for all activities in relation to the strategic business unit of the Guangzhou
manufacturing facilities of the Elec & Eltek Group.
Mr. Li joined the Elec & Eltek Group in 1986 and served in various senior positions in the
manufacturing operations in Hong Kong and Mainland China. Apart from his appointment as
Executive Director of the Company, he is also the General Manager - Guangzhou plants, responsible
for the overall operational management of the Guangzhou strategic business unit.
Mr. Li holds a Higher Diploma in Production & Industrial Engineering from The Hong Kong
Polytechnic University and a Master Degree in Business Administration from the Bulacan State
University, Republic of the Philippines.
Elec & Eltek International Company Limited
Annual Report 2009
29Profiles of Board of Directors and Core Management
MR. CHAN WAI LEUNG
Mr. Chan Wai Leung was appointed the Executive Director of the Company with effect from 1 January
2008. Mr. Chan is responsible for the overall management of the Elec & Eltek Group’s operation in
Kaiping site. Mr. Chan is the son of Mr. Chan Wing Kwan, Non-executive Director of the Company.
Prior to joining the Elec & Eltek Group, Mr. Chan has over 5 years’ working experience in group
procurement and corporate development.
Mr. Chan graduated in 1998 with a Bachelor of Applied Science in Engineering Science from the
University of Toronto and obtained a Master of Philosophy in Electronic Engineering from The Chinese
University of Hong Kong in 2004. After completing his undergraduate degree, Mr. Chan involved
himself in advanced electronic engineering design in Canada.
MR. CHEUNG KWOK WING
Mr. Cheung Kwok Wing has been the Non-executive Director since 13 December 2004 and was
appointed the Chairman of the Company on 3 February 2005. He is a member of the Employees’
Share Option Scheme Committee of the Company. Mr. Cheung is the brother-in-law of Mr. Chang
Wing Yiu, Non-executive Director of the Company.
Mr. Cheung won the Young Industrialist Award of Hong Kong 1993, which was organized by the
Federation of Hong Kong Industries and was described as “far-sighted, enterprising, and having
insight in the business”. In 2006, he won the Hong Kong Business Owner-Operator Award 2006,
which was organised by DHL and South China Morning Post. Mr. Cheung has over 13 years’
experience in the sales and distribution of electronic components including laminates prior to the
establishment of the Kingboard Group.
Mr. Cheung is the chairman, executive director and co-founder of Kingboard Chemical Holdings
Limited.
Elec & Eltek International Company Limited
Annual Report 2009
30
Profiles of Board of Directors and Core Management
MR. CHAN WING KWAN
Mr. Chan Wing Kwan has been the Non-executive Director of the Company since 13 December
2004. He was appointed as a new member of the Audit Committee, Remuneration Committee and
Nominating Committee of the Company with effect from 1 January 2010. He is also a member of the
Employees’ Share Option Scheme Committee of the Company. Mr. Chan is the father of Mr. Chan Wai
Leung, Executive Director of the Company.
Mr. Chan acquired a Degree of Doctor of Business Science from Pacific Western University, L.A..
Prior to the setting up of the Kingboard Group, Mr. Chan had over 22 years’ experience in the sales
and distribution of electronic components, industrial chemicals and printed circuit boards.
Mr. Chan is the managing director, executive director and co-founder of Kingboard Chemical Holdings
Limited.
MR. CHANG WING YIU
Mr. Chang Wing Yiu has been the Non-executive Director of the Company since 13 December 2004.
He is a member of the Employees’ Share Option Scheme Committee of the Company. Mr. Chang is
the brother-in-law of Mr. Cheung Kwok Wing, Non-executive Director and Chairman of the Company.
Mr. Chang graduated from The Hong Kong Polytechnic University with a Higher Diploma in Marine
Electronics. He has over 18 years’ experience in laminates production.
Mr. Chang is the executive director of Kingboard Chemical Holdings Limited.
Elec & Eltek International Company Limited
Annual Report 2009
31Profiles of Board of Directors and Core Management
MR. LARRY LAI CHONG TUCK
Mr. Larry Lai Chong Tuck was appointed the Independent Non-executive Director of the Company
on 26 February 2005. He serves as Chairman of the Audit Committee of the Company. He is also a
member of the Nominating Committee and the Remuneration Committee of the Company.
Mr. Lai graduated with a Bachelor of Arts Degree from the National University of Singapore. He holds
also a Graduate Diploma in Financial Management and a Diploma in Counseling Psychology.
Mr. Lai presently manages his own business consulting firm, Asteri Consulting Private Limited. Prior
to this, he was a senior career expatriate banker with over 20 years of diverse international banking
expertise. Mr. Lai was an active member of the business community he operated in. He served in the
EXCO of the Dutch Business Group in Vietnam and the Shanghai Singapore Business Group in China
during his career posting. Today, he is still actively engaged in local community work particularly
within the educational and charity sectors.
DR. RAYMOND LEUNG HAI MING
Dr. Raymond Leung Hai Ming was appointed the Independent Non-executive Director of the
Company on 1 January 2008. He is a member of the Audit Committee, Nominating Committee and
Remuneration Committee of the Company. In addition, he was appointed to serve as Chairman of the
Nominating Committee and the Remuneration Committee of the Company with effect from 1 January
2010.
Dr. Leung is a qualified Fellow Engineer of the Institute of Civil Engineers, the American Society of
Civil Engineers (“ASCE(HK)”), The Hong Kong Institute of Engineers, Society of Builders, the Hong
Kong Institute of Construction Managers (“HKICM”), Senior Member of the Institute of Electricity
and Electronics Engineers, with a Doctor of Philosophy in Information Engineering from The Chinese
University of Hong Kong and a Master Degree in Construction Management from the University of
Toronto, Canada. He is a member to the Appeal Tribunal Panel of HKSAR Building Department, the
Past President of HKICM and Hong Kong Institute of Arbitrators, Founding President and Governor of
Hong Kong Mediation Centre and Founding President of ASCE(HK).
Dr. Leung is presently the Chief Executive Officer of C & L Holdings Ltd., whose business activities
comprise of Project Management, Direct Investment, Financial Services and China Business
Consultancy.
Elec & Eltek International Company Limited
Annual Report 2009
32
Profiles of Board of Directors and Core Management
VICE PRESIDENT – QUALITY ASSURANCE
Mr. Oscar Cheung Yiu Wai has more than 25 years of relevant experience in the manufacturing
industry, 17 years of which was with PCB industry. He joined the Elec & Eltek Group in April 2007 as
Vice President – Quality Assurance, responsible for the development of quality system, improvement
of quality performance and formulation of quality assurance directions for the Group.
Mr. Cheung holds a Master of Science Degree in Manufacturing Systems Engineering from the
University of Warwick.
CHIEF INTERNAL AUDIT OFFICER
Ms. Anna Cheung Po King first joined the Elec & Eltek Group in January 2003 as the Chief Financial
Officer. As part of strengthening the Group’s enterprise-wide risk management process, Ms. Cheung
was appointed as the Chief Internal Audit Officer from January 2005 and is fully responsible for
internal audit function of the Group.
Prior to joining the Elec & Eltek Group, Ms. Cheung had over 11 years of experience in financial
planning and general management in manufacturing and trading enterprises.
Ms. Cheung holds a Bachelor of Science Degree from the University of East Anglia in the U.K.. She
is an associate member with the Institute of Chartered Accountants of England & Wales and a fellow
member of Hong Kong Institute of Certified Public Accountants.
GENERAL MANAGER – THAILAND PLANT
Ms. Sumarn Jermsawasdipong joined the Elec & Eltek Group since 1990 as Accounting Manager.
Prior to joining the Elec & Eltek Group, she had over 9 years of experiences in Finance, Auditing and
Management in the electronics industry. Ms. Sumarn now serves as the General Manager – Thailand
plant, responsible for the overall operational management of the PCB plant in Thailand.
Ms. Sumarn holds a Bachelor Degree (1st Class Honour) in Accounting from Chulalongkorn
University and a Master Degree in Business Administration from Thammasart University. She is a
Certified Public Accountant of The Institute of Certified Accountants and Auditors of Thailand.
GENERAL MANAGER – KAIPING PLANT
Mr. Ng Hon Chung joined the Elec & Eltek Group since 1979. He has more than 30 years of
experience in PCB manufacturing and served in various senior positions in the manufacturing
operations in Hong Kong and Mainland China before taking up plant management function of Kaiping
plant. Currently Mr. Ng is the General Manager of Kaiping North Campus responsible for the overall
operational management of the PCB plant.
Mr. Ng holds a Master of Science Degree in Manufacturing Systems Engineering from the University
of Warwick.
Elec & Eltek International Company Limited
Annual Report 2009
33
Report of the Directors
The directors present their report together with the audited consolidated financial statements of the
Group and statement of financial position and statement of changes in equity of the Company for the
financial year ended 31 December 2009.
DIRECTORS
The directors of the Company in office at the date of this Report are:
Cheung Kwok Wing
Chadwick Mok Cham Hung
Li Muk Kam
Philip Chan Sai Kit
Clement Sun
Claudia Heng Nguan Leng
Li Chiu Cheuk
Chan Wai Leung
Chan Wing Kwan
Chang Wing Yiu
Larry Lai Chong Tuck
Raymond Leung Hai Ming
ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES
Except as disclosed in this Report, neither at the end of the financial year nor at any time during
the financial year did there subsist any arrangement whose object is to enable the directors of the
Company to acquire benefits by means of the acquisition of shares or debentures in the Company or
any other body corporate.
Elec & Eltek International Company Limited
Annual Report 2009
34
Report of the Directors
DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES
The directors of the Company holding office at the end of the financial year had no interests in the
share capital and debentures of the Company, its ultimate holding company, Kingboard Chemical
Holdings Limited (“Kingboard”), and related corporations (other than wholly-owned subsidiary
companies) as recorded in the register of directors’ shareholdings kept by the Company under Section
164 of the Companies Act (Cap. 50, Singapore Statutes) (the “Act”) except as disclosed below:
Shareholdings Shareholdings in which
registered in name of or directors are deemed
Name of directors beneficially held by directors to have an interest
and companies in At 31.12.2009 At At At At
which interests are held and 21.1.2010 31.12.2008 21.1.2010 31.12.2009 31.12.2008
The Company
(Ordinary shares)
Cheung Kwok Wing 188,000 60,000 128,350,165 128,345,165 127,987,165 @
Chadwick Mok Cham Hung 147,000 74,000 – – –
Li Muk Kam 1,035,876 1,035,876 – – –
Philip Chan Sai Kit 156,481 156,481 – – –
Clement Sun 40,000 40,000 – – –
Claudia Heng Nguan Leng 322,800 322,800 – – –
The Company
(Options to subscribe for the
Company’s ordinary shares)
At subscription price of US$2.033
Cheung Kwok Wing 973,200 973,200 – – –
Chadwick Mok Cham Hung 973,200 973,200 – – –
Li Muk Kam 768,000 768,000 – – –
Philip Chan Sai Kit 912,000 912,000 – – –
Clement Sun 240,000 240,000 – – –
Claudia Heng Nguan Leng 192,000 192,000 – – –
Li Chiu Cheuk 162,000 162,000 – – –
Chan Wing Kwan 973,200 973,200 – – –
Chang Wing Yiu 973,200 973,200 – – –
At subscription price of US$2.375
Philip Wong Yu Hong + 60,000 + 60,000 – – –
Larry Lai Chong Tuck 60,000 60,000 – – –
Elec & Eltek International Company Limited
Annual Report 2009
35Report of the Directors
DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (Continued)
Shareholdings Shareholdings in which
registered in name of or directors are deemed
Name of directors beneficially held by directors to have an interest
and companies in At 31.12.2009 At At At At
which interests are held and 21.1.2010 31.12.2008 21.1.2010 31.12.2009 31.12.2008
Kingboard
(Ordinary shares of
HK$0.10 each)
Cheung Kwok Wing 3,301,725 2,451,725 261,131,929 261,131,929 261,131,929 #
Chan Wing Kwan 1,020,250 945,250 60,000 60,000 60,000
Chang Wing Yiu 2,677,074 2,302,074 678,200 678,200 678,200
Chadwick Mok Cham Hung 1,810,000 1,510,000 – – –
Philip Chan Sai Kit 28,000 18,000 – – –
Chan Wai Leung – – 500 500 500
Kingboard
(Options to subscribe for
unissued ordinary shares
of HK$0.10 each)
Chan Wing Kwan 966,600 1,341,600 – – –
Chang Wing Yiu 859,800 1,234,800 – – –
Kingboard Laminates
Holdings Limited
(fellow subsidiary)
(Ordinary shares of
HK$0.10 each)
Cheung Kwok Wing 1,641,500 1,141,500 2,147,264,000 2,147,264,000 2,244,550,500 δ
Chan Wing Kwan – – 100,000 100,000 100,000
Chang Wing Yiu – – 100,000 100,000 100,000
Li Muk Kam 33,000 33,000 – – –
Philip Chan Sai Kit 27,500 27,500 25,000 25,000 25,000
Clement Sun 30,000 30,000 – – –
Claudia Heng Nguan Leng 21,000 21,000 706,500 730,250 760,250
Li Chiu Cheuk – – 20,000 20,000 20,000
Chan Wai Leung 22,000 22,000 – – –
Elec & Eltek International Company Limited
Annual Report 2009
36
Report of the Directors
DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (Continued)
Shareholdings Shareholdings in which
registered in name of or directors are deemed
Name of directors beneficially held by directors to have an interest
and companies in At 31.12.2009 At At At At
which interests are held and 21.1.2010 31.12.2008 21.1.2010 31.12.2009 31.12.2008
Kingboard Copper Foil
Holdings Limited
(fellow subsidiary)
(Ordinary shares of
US$0.10 each)
Cheung Kwok Wing 1,000,000 – 465,975,000 465,975,000 459,972,000 ̂
@ 90,741,550 (2008: 90,741,550) shares are held by Elec & Eltek International Holdings Limited (“EEIH”).
34,321,615 (2008: 34,321,615) shares are held by Elitelink Holdings Limited (“Elitelink”). The balance of
3,282,000 (2008: 2,924,000) shares are held by Kingboard Investments Limited (“KBIL”). EEIH, Elitelink
and KBIL are wholly-owned subsidiary companies of Kingboard. As at 21 January 2010, 90,741,550,
34,321,615 and 3,287,000 shares are held by EEIH, Elitelink and KBIL respectively.
+ Dr. Philip Wong Yu Hong retired as independent non-executive director on 1 January 2010. As at 21
January 2010, 60,000 share options held by Dr. Philip Wong Yu Hong had lapsed.
# These shares are held by Hallgain Management Limited (“HML”). At the end of the reporting period, HML
holds approximately 30.97% interests in the issued share capital of Kingboard and in turn Mr. Cheung
Kwok Wing holds approximately 23% shareholding interests in HML.
δ 2,015,000,000 (2008: 2,175,000,000) shares are held by Jamplan (BVI) Limited, 115,006,500 (2008:
54,667,500) shares are held by KBIL, 15,757,500 (2008: 13,383,000) shares are held by Kingboard
and 1,500,000 (2008: 1,500,000) shares are held by HML. Jamplan (BVI) Limited is a wholly-owned
subsidiary company of Kingboard.
^ 449,002,000 (2008: 449,002,000) shares are held by Excel First Investments Limited (“Excel”),
16,553,000 (2008: 10,970,000) shares are held by Kingboard Laminates Limited (“KLL”) and 420,000
(2008: Nil) shares are held by KBIL. Both Excel and KLL are wholly-owned subsidiary companies of
Kingboard.
By virtue of Section 7 of the Act, Mr. Cheung Kwok Wing is deemed to have interests in the subsidiary
companies of the Company.
Save as disclosed above, there were no other changes in any of the above-mentioned interests
between the end of the financial year and 21 January 2010.
Elec & Eltek International Company Limited
Annual Report 2009
37Report of the Directors
DIRECTORS’ RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS
Since the beginning of the financial year, no director has received or become entitled to receive a
benefit which is required to be disclosed under Section 201(8) of the Act, by reason of a contract
made by the Company or a related corporation with the director or with a firm of which he is a
member, or with a company in which he has a substantial financial interest except for salaries,
bonuses and other benefits as disclosed in the financial statements. Certain directors received
remuneration from related corporations in their capacity as directors and/or executives of those
related corporations.
SHARE OPTIONS
(a) Options to take up unissued sharesThe 2008 Elec & Eltek Employee's Share Option Scheme (the “2008 Scheme”) was approved
by the shareholders of the Company at an Extraordinary General Meeting held on 21 April
2008 and was adopted by the Company on 9 May 2008 upon fulfilment of all the conditions
precedent as set out in Rule 2 of the 2008 Scheme. Since its adoption, no option has been
granted by the Company pursuant to the 2008 Scheme.
Under the 2008 Scheme, options granted to the directors and employees may, except in
certain special circumstances, be exercised at any time after the first or second anniversary
of the date of grant but no later than the expiry date. The options may be exercised in full or
in respect of 1,000 ordinary shares of the Company (“Shares”) or a multiple thereof, on the
payment of the aggregate exercise price. The exercise price is based on the average of the
last dealt prices for a Share on the Singapore Exchange Securities Trading Limited (“SGX-ST”)
for a period of five consecutive market days immediately preceding the date of grant. The
Employees' Share Option Scheme Committee may at its discretion fix the exercise price at a
discount not exceeding 20 percent to the above price.
The Company had granted share options to eligible employees under the 2002 Elec & Eltek
Employees' Share Option Scheme (the “2002 Scheme”) which was terminated upon its expiry
without affecting the rights of holders of any options granted and outstanding under the 2002
Scheme. Particulars of the options granted under the 2002 Scheme are set out below in this
Report and in Note 26 to the financial statements.
The 2002 Scheme is administered by the Employee's Share Options Scheme Committee whose
members are:
Mr. Cheung Kwok Wing
Mr. Chan Wing Kwan
Mr. Chang Wing Yiu
Elec & Eltek International Company Limited
Annual Report 2009
38
Report of the Directors
SHARE OPTIONS (Continued)
(a) Options to take up unissued shares (Continued)Under the 2002 Scheme, options granted to the directors and employees may, except in
certain special circumstances, be exercised at any time after one or two years from the date
of grant but no later than the expiry date. The options may be exercised in full or in respect of
1,000 Shares or a multiple thereof, on the payment of the aggregate subscription price. The
subscription price is based on the average of the last dealt price of the Shares on the SGX-ST
for the last five market days immediately preceding the date of grant. The Employees' Share
Option Scheme Committee may at its discretion fix the subscription price at a discount not
exceeding 20 percent to the above price.
(b) Unissued shares under option and options exercisedThe number of Shares available under the 2002 Scheme, subject to certain conditions being
satisfied, shall not exceed 15% of the issued share capital of the Company. The number of
outstanding share options under the 2002 Scheme is as follows:
Number of options to subscribe for ordinary shares
Balance at Balance at Subscription
1 January 31 December price
Date of grant 2009 Lapsed 2009 per share Exercisable period
US$
24.6.2005 8,380,800 (105,600 ) 8,275,200 2.033 26.11.2006 to 24.5.2010
29.9.2005 120,000 – 120,000 2.375 5.9.2006 to 4.9.2010
12.12.2006 833,000 (102,000 ) 731,000 2.400 13.11.2008 to 12.11.2011
9,333,800 (207,600 ) 9,126,200
There were no share options granted to full time employees of the Group during the financial year. A
total of 15,714,000 options were granted under the 2002 Scheme since the commencement of the
2002 Scheme to the expiry of the 2002 Scheme, to subscribe for unissued ordinary shares in the
Company.
Elec & Eltek International Company Limited
Annual Report 2009
39Report of the Directors
SHARE OPTIONS (Continued)
The information on directors of the Company participating in the 2002 Scheme is as follows:
Aggregate Aggregate Aggregate
options options options
granted since exercised since lapsed since
commencement commencement commencement Aggregate
Options of the of the of the options
granted 2002 Scheme 2002 Scheme 2002 Scheme outstanding
during the to the end of to the end of to the end of at the end of
Name of director financial year financial year financial year financial year financial year
Cheung Kwok Wing – 973,200 – – 973,200
Chadwick Mok Cham Hung – 973,200 – – 973,200
Li Muk Kam – 960,000 (192,000 ) – 768,000
Philip Chan Sai Kit – 960,000 (48,000 ) – 912,000
Clement Sun – 240,000 – – 240,000
Claudia Heng Nguan Leng – 240,000 (48,000 ) – 192,000
Li Chiu Cheuk – 162,000 – – 162,000
Chan Wing Kwan – 973,200 – – 973,200
Chang Wing Yiu – 973,200 – – 973,200
Philip Wong Yu Hong – 60,000 – – 60,000
Larry Lai Chong Tuck – 60,000 – – 60,000
Save for (as disclosed above), Messrs. Cheung Kwok Wing, Chadwick Mok Cham Hung, Li Muk
Kam, Philip Chan Sai Kit, Chan Wing Kwan and Chang Wing Yiu, none of the participants under the
2002 Scheme have received more than 5% of the total number of options available under the 2002
Scheme.
Save as disclosed above, there have been no other options granted to the eligible employees, directors
and the Company’s substantial shareholders and their associates pursuant to the 2002 Scheme and
the 2008 Scheme.
Elec & Eltek International Company Limited
Annual Report 2009
40
Report of the Directors
AUDIT COMMITTEE
The Audit Committee of the Company, comprising all non-executive directors, is chaired by Mr. Larry
Lai Chong Tuck, an independent non-executive director, and includes Dr. Raymond Leung Hai Ming,
an independent non-executive director, and Mr. Chan Wing Kwan, a non-executive director. The
Audit Committee has met four times since the last Annual General Meeting (“AGM”) and has reviewed
the following, where relevant, with the executive directors and statutory and internal auditors of the
Company:
(a) the audit plans and results of the internal auditors' examination and evaluation of the Group’s
systems of internal accounting controls and management's responses to the internal auditors’
recommendations;
(b) the Group’s financial and operating results and accounting policies;
(c) the annual audit plan of the Company’s statutory auditors and the results of their examination
of the financial statements of the Company, the consolidated financial statements of the Group
and statutory auditors' report on those financial statements before their submission to the
directors of the Company;
(d) the quarterly and annual announcements on the results and financial position of the Company
and the Group;
(e) the co-operation and assistance given by the management to the Company’s statutory auditors;
(f) the re-appointment of the statutory auditors of the Company; and
(g) the Group’s interested person transactions.
In addition, the Audit Committee reviewed all non-audit services provided by the statutory auditors
during the financial year and is of the opinion that the provision of such services will not affect the
independence of the statutory auditors.
The Audit Committee has full access to and has the co-operation of the management and has been
given the resources required for it to discharge its function properly. It also has full discretion to invite
any director and executive officer to attend its meetings. The statutory and internal auditors have
unrestricted access to the Audit Committee.
The Audit Committee has recommended to the directors the nomination of Deloitte & Touche LLP for
re-appointment as statutory auditors of the Company at the forthcoming AGM of the Company.
Elec & Eltek International Company Limited
Annual Report 2009
41Report of the Directors
AUDITORS
The auditors, Deloitte & Touche LLP, have expressed their willingness to accept re-appointment.
On behalf of the Board
Chadwick Mok Cham Hung
Vice-Chairman
Chan Wing Kwan
Director
25 February 2010
Elec & Eltek International Company Limited
Annual Report 2009
42
Statement of Directors
In the opinion of the directors, the consolidated financial statements of the Group and the statement
of financial position and statement of changes in equity of the Company as set out on page 45 to 105
are drawn up so as to give a true and fair view of the state of affairs of the Group and the Company as
at 31 December 2009 and of the results, changes in equity and cash flows of the Group and changes
in equity of the Company for the year ended and at the date of this statement, there are reasonable
grounds to believe that the Company will be able to pay its debts when they fall due.
On behalf of the Board
Chadwick Mok Cham Hung
Vice-Chairman
Chan Wing Kwan
Director
25 February 2010
Elec & Eltek International Company Limited
Annual Report 2009
43
Independent Auditors’ Report
TO THE MEMBERS OF ELEC & ELTEK INTERNATIONAL COMPANY LIMITED
We have audited the accompanying financial statements of Elec & Eltek International Company
Limited (the “Company”) and its subsidiary companies (the “Group”) which comprise the statements
of financial position of the Group and the Company as at 31 December 2009, and the income
statement, statement of comprehensive income, statement of changes in equity and statement of
cash flows of the Group and the statement of changes in equity of the Company for the year then
ended, and a summary of significant accounting policies and other explanatory notes as set out on
pages 45 to 105.
Management’s responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with the provisions of the Companies Act (Cap. 50, Singapore Statutes) (the “Act”)
and Singapore Financial Reporting Standards. This responsibility includes: devising and maintaining
a system of internal accounting controls sufficient to provide a reasonable assurance that assets
are safeguarded against loss from unauthorised use or disposition; and transactions are properly
authorised and that they are recorded as necessary to permit the preparation of true and fair profit
and loss account and balance sheets and to maintain accountability of assets; selecting and applying
appropriate accounting policies; and making accounting estimates that are reasonable in the
circumstances.
Auditors’ responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Singapore Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to
the entity’s preparation and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Elec & Eltek International Company Limited
Annual Report 2009
44
Independent Auditors’ Report
Opinion
In our opinion,
(a) the consolidated financial statements of the Group and the statement of financial position and
statement of changes in equity of the Company are properly drawn up in accordance with the
provisions of the Act and Singapore Financial Reporting Standards so as to give a true and
fair view of the state of affairs of the Group and of the Company as at 31 December 2009 and
of the results, changes in equity and cash flows of the Group and changes in equity of the
Company for the year ended on that date; and
(b) the accounting and other records required by the Act to be kept by the Company and by
those subsidiary companies incorporated in Singapore of which we are the auditors have been
properly kept in accordance with the provisions of the Act.
Deloitte & Touche LLP
Public Accountants and Certified Public Accountants
Singapore
25 February 2010
Elec & Eltek International Company Limited
Annual Report 2009
45
Consolidated Income StatementFor the year ended 31 December 2009
See accompanying notes to financial statements
THE GROUP
NOTES 2009 2008
US$’000 US$’000
Revenue 434,565 517,931
Cost of sales (351,757 ) (430,231 )
Gross profit 82,808 87,700
Interest income 339 1,332
Distribution and selling costs (10,443 ) (13,839 )
Administrative expenses (24,183 ) (27,677 )
Other operating income 828 891
Finance costs 6 (1,729 ) (4,820 )
Share of profits of an associate 1,697 1,550
Profit before taxation 49,317 45,137
Income tax expense 7 (3,419 ) (2,626 )
Profit for the year 8 45,898 42,511
Profit attributable to:
Owners of the Company 45,677 42,628
Minority interests 221 (117 )
45,898 42,511
United States United States
cents cents
Earnings per share: 10
– basic 25.53 23.83
– diluted 25.53 23.83
Elec & Eltek International Company Limited
Annual Report 2009
46
Consolidated Statement of Comprehensive IncomeFor the year ended 31 December 2009
See accompanying notes to financial statements
THE GROUP
2009 2008
US$’000 US$’000
Profit for the year 45,898 42,511
Other comprehensive income (expense):
Exchange differences on translation of
foreign operations 1,491 (4,395 )
Less: Reclassification adjustment for gain included in
profit or loss for disposal of an associate (1,202 ) –
289 (4,395 )
Revaluation of property 720 603
Other comprehensive income (expense) for the year 1,009 (3,792 )
Total comprehensive income for the year 46,907 38,719
Total comprehensive income attributable to:
Owners of the Company 46,795 38,404
Minority interests 112 315
46,907 38,719
Elec & Eltek International Company Limited
Annual Report 2009
47
Statements of Financial PositionAs at 31 December 2009
THE GROUP THE COMPANY
NOTES 2009 2008 2009 2008
US$’000 US$’000 US$’000 US$’000
ASSETS
Current assets
Cash and bank balances 11 60,054 68,672 43 36
Trade receivables 12 130,243 110,513 – –
Bills receivables 6,367 4,061 – –
Other receivables 13 10,022 19,675 3 3
Amounts due from subsidiary
companies 14 – – 327,154 106,973
Inventories 15 39,738 39,582 – –
Total current assets 246,424 242,503 327,200 107,012
Non-current assets
Property, plant and equipment 16 347,115 379,905 17 26
Deposit for acquisition of plant
and equipment 1,253 1,664 – –
Investment properties 17 19,262 15,756 – –
Subsidiary companies 18 – – 23,071 22,671
Interest in an associate 19 – 8,388 – –
Deferred tax assets 23 1,437 1,446 – –
Total non-current assets 369,067 407,159 23,088 22,697
Total assets 615,491 649,662 350,288 129,709
Elec & Eltek International Company Limited
Annual Report 2009
48
Statements of Financial PositionAs at 31 December 2009
See accompanying notes to financial statements
THE GROUP THE COMPANY
NOTES 2009 2008 2009 2008
US$’000 US$’000 US$’000 US$’000
LIABILITIES AND EQUITY
Current liabilities
Bank overdrafts and loans 20 53,532 65,063 – –
Trade payables 21 84,573 88,250 – –
Bills payables 1,588 12,957 – –
Other payables 22 30,089 38,620 371 304
Amounts due to subsidiary
companies 14 – – 199,507 2,031
Provision for taxation 2,044 762 – –
Total current liabilities 171,826 205,652 199,878 2,335
Non-current liabilities
Bank loans 20 63,920 92,536 – –
Deferred tax liabilities 23 2,416 1,998 – –
Total non-current liabilities 66,336 94,534 – –
Capital, reserves and
minority interests
Share capital 24 98,656 98,656 98,656 98,656
Treasury shares 25 (1,356 ) (1,356 ) (1,356 ) (1,356 )
Reserves 270,765 242,570 53,110 30,074
Equity attributable to owners
of the Company 368,065 339,870 150,410 127,374
Minority interests 9,264 9,606 – –
377,329 349,476 150,410 127,374
Total liabilities and equity 615,491 649,662 350,288 129,709
Elec & Eltek International Company Limited
Annual Report 2009
49
Statements of Changes in EquityFor the year ended 31 December 2009
Attributable to owners of the Company
Foreign
currency Share
Share Treasury Capital Statutory Revaluation Other Retained translation option Minority Total
capital shares reserve reserve reserve reserve earnings reserve reserve Total interests equity
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
(Note)
THE GROUP
Balance at 1 January 2008 98,656 (896 ) 2,702 2,697 844 166 217,862 18,130 1,654 341,815 9,677 351,492
Total comprehensive income (expense)
for the year – – – – 603 – 42,628 (4,827 ) – 38,404 315 38,719
Purchase of treasury shares – (460 ) – – – – – – – (460 ) – (460 )
Transfer from retained earnings
to statutory reserve – – – 909 – – (909 ) – – – – –
Transfer to retained earnings
upon lapse of share options – – – – – – 251 – (251 ) – – –
Amortization for the vesting period
(Share-based payments) (Note 26) – – – – – – – – 361 361 – 361
Dividends paid (Note 9)
– in respect of previous financial year – – – – – – (22,361 ) – – (22,361 ) (386 ) (22,747 )
– in respect of current financial year – – – – – – (17,889 ) – – (17,889 ) – (17,889 )
Balance at 31 December 2008 98,656 (1,356 ) 2,702 3,606 1,447 166 219,582 13,303 1,764 339,870 9,606 349,476
Total comprehensive income for the year – – – – 720 – 45,677 398 – 46,795 112 46,907
Transfer from retained earnings
to statutory reserve – – – 6 – – (6 ) – – – – –
Transfer to retained earnings
upon lapse of share options – – – – – – 28 – (28 ) – – –
Amortization for the vesting period
(Share-based payments) (Note 26) – – – – – – – – 183 183 – 183
Dividends paid (Note 9)
– in respect of previous financial year – – – – – – (18,783 ) – – (18,783 ) (454 ) (19,237 )
Balance at 31 December 2009 98,656 (1,356 ) 2,702 3,612 2,167 166 246,498 13,701 1,919 368,065 9,264 377,329
Note:
The capital reserve relates to amounts set aside by subsidiary companies operating in Thailand for declaration of
dividends as required under the laws of Thailand.
Elec & Eltek International Company Limited
Annual Report 2009
50
Statements of Changes in EquityFor the year ended 31 December 2009
See accompanying notes to financial statements
Share
Share Treasury Retained option Total
capital shares earnings reserve equity
US$’000 US$’000 US$’000 US$’000 US$’000
THE COMPANY
Balance at 1 January 2008 98,656 (896 ) 41,345 844 139,949
Total comprehensive income
for the year – – 27,989 – 27,989
Purchase of treasury shares – (460 ) – – (460 )
Amortization for the vesting
period (Share-based
payments) (Note 26) – – – 146 146
Transfer to retained earnings
upon lapse of share options – – 11 (11 ) –
Dividends paid (Note 9)
– in respect of previous
financial year – – (22,361 ) – (22,361 )
– in respect of current
financial year – – (17,889 ) – (17,889 )
Balance at 31 December 2008 98,656 (1,356 ) 29,095 979 127,374
Total comprehensive income
for the year – – 41,736 – 41,736
Amortization for the vesting
period (Share-based
payments) (Note 26) – – – 83 83
Dividends paid (Note 9)
- in respect of previous
financial year – – (18,783 ) – (18,783 )
Balance at 31 December 2009 98,656 (1,356 ) 52,048 1,062 150,410
Elec & Eltek International Company Limited
Annual Report 2009
51
Consolidated Statement of Cash FlowsFor the year ended 31 December 2009
2009 2008
US$’000 US$’000
OPERATING ACTIVITIES
Profit before taxation 49,317 45,137
Adjustments for:
Allowance for doubtful debts 152 1,749
Finance costs 1,729 4,820
Depreciation of property, plant and equipment 47,529 47,989
Gain on disposal of a subsidiary company – (590 )
Loss on disposal of property, plant and equipment 1,340 –
Loss on fair value change of investment properties 5 4
Reversal of allowance for inventory obsolescence (810 ) (1,191 )
Share-based payment expense 183 361
Interest income (339 ) (1,332 )
Share of profits of an associate (1,697 ) (1,550 )
Operating income before movements in
working capital 97,409 95,397
Decrease in inventories 654 20,587
(Increase) decrease in trade and other receivables (12,535 ) 40,045
Decrease in trade and other payables (23,577 ) (16,044)
Net cash generated from operations 61,951 139,985
Interest income received 339 1,332
Interest paid (1,729 ) (4,820)
Income taxes paid (1,696 ) (3,738)
NET CASH FROM OPERATING ACTIVITIES 58,865 132,759
INVESTING ACTIVITIES
Proceeds from disposal of property, plant and equipment 1,462 371
Purchase of property, plant and equipment (19,574 ) (77,609 )
Decrease in deposits paid for acquisition
of property, plant and equipment 411 2,161
Disposal of a subsidiary company – (469 )
Disposal of an associate 10,583 –
Dividend received from an associate 401 682
NET CASH USED IN INVESTING ACTIVITIES (6,717 ) (74,864 )
Elec & Eltek International Company Limited
Annual Report 2009
52
Consolidated Statement of Cash FlowsFor the year ended 31 December 2009
See accompanying notes to financial statements
NOTES 2009 2008
US$’000 US$’000
FINANCING ACTIVITIES
Proceeds from bank borrowings 35,318 108,227
Repayment of bank borrowings (75,463 ) (84,299 )
Payment for share buy-back – (460 )
Dividends paid by the Company (18,783 ) (40,250 )
Dividends paid by subsidiary companies to
minority shareholders (454 ) (386 )
NET CASH USED IN FINANCING ACTIVITIES (59,382 ) (17,168 )
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (7,234 ) 40,727
CASH AND CASH EQUIVALENTS AT THE
BEGINNING OF THE YEAR 68,670 31,539
EFFECT OF FOREIGN EXCHANGE RATE CHANGES
ON THE BALANCES OF CASH HELD
IN FOREIGN CURRENCIES, NET (1,382 ) (3,596 )
CASH AND CASH EQUIVALENTS AT THE END
OF THE YEAR 60,054 68,670
CASH AND CASH EQUIVALENTS CONSIST OF
Fixed deposits 11 6,924 17,941
Cash at bank and on hand 11 53,130 50,731
60,054 68,672
Bank overdrafts – unsecured 20 – (2 )
60,054 68,670
Elec & Eltek International Company Limited
Annual Report 2009
53
Notes to the Financial StatementsFor the year ended 31 December 2009
1. GENERAL
Elec & Eltek International Company Limited (Registration Number 199300005H) (the
“Company”) is a limited liability company incorporated and domiciled in Singapore. The
Company’s ultimate holding company is Kingboard Chemical Holdings Limited, incorporated
in Cayman Islands. Related companies in these financial statements refer to the ultimate
holding company and its subsidiary companies. Related parties in these financial statements
refer to entities with common directors or shareholders of the ultimate holding company and its
subsidiary companies.
The Company is listed on the Main Board of the Singapore Exchange Securities Trading
Limited. The financial statements are expressed in United States Dollars, which is the
functional currency of the Company.
The Company’s principal office is located at 4 Leng Kee Road, #03-02 SiS Building, Singapore
159088 and its registered office is located at 80 Raffles Place, #33-00 UOB Plaza 1, Singapore
048624.
The Group’s manufacturing operations are located in Hong Kong, Thailand and the People’s
Republic of China (“the PRC”).
The principal activity of the Company is investment holding. Its subsidiary companies are
primarily engaged in the fabrication and distribution of double-sided, multi-layer and high
density interconnect (“HDI”) printed circuit boards (“PCB”). Details of the principal activities of
the subsidiary companies are disclosed in Note 18. There have been no significant changes in
the nature of these activities during the financial year.
The consolidated financial statements of the Group and statement of financial position and
statement of changes in equity of the Company for the year ended 31 December 2009 were
authorised for issuance by the Board of Directors on 25 February 2010.
Elec & Eltek International Company Limited
Annual Report 2009
54
Notes to the Financial StatementsFor the year ended 31 December 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of accountingThe financial statements have been prepared in accordance with the historical cost basis,
except for the revaluation of certain non-current assets, and are drawn up in accordance with
the provisions of the Companies Act (Cap. 50, Singapore Statutes) and Singapore Financial
Reporting Standards (“FRS”).
Adoption of new and revised standards in the current financial yearIn the current financial year, the Group has adopted all the new and revised FRSs and
Interpretations of FRS (“INT FRS”) that are relevant to its operations and effective for annual
periods beginning on or after 1 January 2009. The adoption of these new/revised FRSs and INT
FRSs does not result in changes to the Group’s and Company’s accounting policies and has
no material effect on the amounts reported for the current or prior years, except as disclosed
below:
FRS 1 – Presentation of Financial Statements (Revised)FRS 1 (2008) has introduced terminology changes (including revised titles for the financial
statements) and changes in the format and content of the financial statements. In addition,
the revised Standard requires the presentation of a third statement of financial position at the
beginning of the earliest comparative period presented if the entity applies new accounting
policies retrospectively or makes retrospective restatements or reclassifies items in the financial
statements.
Amendments to FRS 107 Financial Instruments: Disclosures – Improving Disclosures about Financial InstrumentsThe amendments to FRS 107 expand the disclosures required in respect of fair value
measurements and liquidity risk. The Group has elected not to provide comparative information
for these expanded disclosures in the current year in accordance with the transitional reliefs
offered in these amendments.
FRS 108 – Operating SegmentsThe Group adopted FRS 108 with effect from 1 January 2009. FRS 108 requires operating
segments to be identified on the basis of internal reports about components of the Group that
are regularly reviewed by the chief operating decision maker in order to allocate resources
to the segment and to assess its performance. In contrast, the predecessor Standard (FRS
14 Segment Reporting) required an entity to identify two sets of segments (Business and
Geographical), using a risks and rewards approach, with the entity’s system of internal financial
reporting to key management personnel serving only as the starting point for the identification
of such segments. The adoption of FRS 108 did not result in any change to the segmental
disclosure as presented in the previous audited financial statements.
Elec & Eltek International Company Limited
Annual Report 2009
55Notes to the Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of accounting (Continued)At the date of authorisation of these financial statements, the following FRSs, INT FRSs and
amendments to FRS that are relevant to the Group and the Company were issued but not
effective:
FRS 39 Recognition and Measurement – Eligible Hedged Items
FRS 39 Recognition and Measurement and INT FRS 109
Reassessment of Embedded Derivatives
– Amendments relating to Embedded Derivatives
FRS 28 Investment in Associates (Revised)
FRS 7 Amendments to Statement of Cash Flows
FRS 27 Consolidated and Separate Financial Statements (Revised)
FRS 103 Business Combinations (Revised)
Consequential amendments were also made to various standards as a result of these new/
revised standards.
FRS 27 (Revised) – Consolidated and Separate Financial Statements; and FRS 103 (Revised) Business CombinationsFRS 27 (Revised) is effective for annual periods beginning on or after 1 July 2009. FRS 103
(Revised) is effective for business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after 1 July 2009.
Apart from matters of presentation, the principal amendments to FRS 27 that will impact the
Group concern the accounting treatment for transactions that result in changes in a parent’s
interest in a subsidiary company. It is likely that these amendments will significantly affect the
accounting for such transactions in future accounting periods, but the extent of such impact
will depend on the details of the transactions, which cannot be anticipated. The changes will
be adopted prospectively for transactions after the date of adoption of the revised Standard
and, therefore, no restatements will be required in respect of transactions prior to the date of
adoption.
Similarly, FRS 103 is concerned with accounting for business combination transactions. The
changes to the Standard are significant, but their impact can only be determined once the
details of future business combinations is known. The amendments to FRS 103 will be adopted
prospectively for transactions after the date of adoption of the revised Standard and, therefore,
no restatements will be required in respect of transactions prior to the date of adoption.
Elec & Eltek International Company Limited
Annual Report 2009
56
Notes to the Financial StatementsFor the year ended 31 December 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of accounting (Continued)FRS 28 (Revised) Investments in AssociatesIn FRS 28 (Revised), the principle adopted under FRS 27 (Revised) (see above) that a loss
of control is recognised as a disposal and re-acquisition of any retained interest at fair value
is extended by consequential amendment to FRS 28 (Revised); therefore, when significant
influence is lost, the investor measures any investment retained in the former associate at fair
value, with any consequential gain or loss recognised in profit or loss.
FRS 28 (Revised) will be adopted for periods beginning on or after 1 July 2009 and will be
applied prospectively in accordance with the relevant transitional provisions and, therefore, no
restatements will be required in respect of transactions prior to the date of adoption.
Amendments to FRS 7 Statement of Cash FlowsThe amendments (part of Improvements to FRSs issued in June 2009) specify that only
expenditures that result in a recognised asset in the statement of financial position can be
classified as investing activities in the statement of cash flows. Consequently, cash flows in
respect of development costs that do not meet any criteria in FRS 38 Intangible Assets for
capitalisation as part of an internally generated intangible asset (and, therefore, are recognised
in profit or loss as incurred) will be reclassified from investing to operating activities in the
statement of cash flows. The amendments to FRS 7 will be adopted for periods beginning on or
after 1 January 2010.
Management anticipates that the adoption of the above FRSs, INT FRSs and amendments to
FRS in future periods will not have a material impact on the financial statements of the Group
and of the Company in the period of their initial adoption.
Basis of consolidationThe consolidated financial statements incorporate the financial statements of the Company
and entities (including special purpose entities) controlled by the Company (its subsidiary
companies). Control is achieved where the Company has the power to govern the financial and
operating policies of an entity so as to obtain benefits from its activities.
The results of subsidiary companies acquired or disposed of during the period are included in
the consolidated statement of comprehensive income from the effective date of acquisition or
up to the effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiary companies to
bring their accounting policies in line with those used by other members of the Group.
Elec & Eltek International Company Limited
Annual Report 2009
57Notes to the Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of consolidation (Continued)All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Minority interests in the net assets of consolidated subsidiary companies are identified
separately from the Group’s equity therein. Minority interests consist of the amount of those
interests at the date of the original business combination (see below) and the minority’s share
of changes in equity since the date of the combination. Losses applicable to the minority in
excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of
the Group except to the extent that the minority has a binding obligation and is able to make an
additional investment to cover its share of those losses.
In the Company’s financial statements, investments in subsidiary companies and an associate
are carried at cost less any impairment in net recoverable value that has been recognised in
profit or loss.
Business combinationsThe acquisition of subsidiary companies is accounted for using the purchase method. The
cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange,
of assets given, liabilities incurred or assumed, and equity instruments issued by the Group
in exchange for control of the acquiree, plus any costs directly attributable to the business
combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that
meet the conditions for recognition under FRS 103 are recognised at their fair values at the
acquisition date.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being
the excess of the cost of the business combination over the Group’s interest in the net fair value
of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment,
the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and
contingent liabilities exceeds the cost of the business combination, the excess is recognised
immediately in profit or loss.
The interest of minority shareholders in the acquiree is initially measured at the minority’s
proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.
Elec & Eltek International Company Limited
Annual Report 2009
58
Notes to the Financial StatementsFor the year ended 31 December 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instrumentsFinancial assets and financial liabilities are recognised on the Group’s statements of financial
position when the Group becomes a party to the contractual provisions of the instrument.
Effective interest methodThe effective interest method is a method of calculating the amortised cost of a financial
instrument and of allocating interest income or expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash receipts or payments
(including all fees on points paid or received that form an integral part of the effective
interest rate, transaction costs and other premiums or discounts) through the expected life
of the financial instrument, or where appropriate, a shorter period. Income and expense are
recognised on an effective interest basis for debt instruments.
Financial assets
Investments are recognised and derecognised on a trade date basis where the purchase or sale
of an investment is under a contract whose terms require delivery of the investment within the
timeframe established by the market concerned, and are initially measured at fair value, net of
transaction costs, except for those financial assets classified as at fair value through profit or
loss which are initially measured at fair value.
Other financial assets are classified as “loans and receivables”.
Loans and receivablesTrade receivables, bill receivables and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as “loans and receivables”.
Loans and receivables are measured at amortised cost using the effective interest method less
impairment. Interest is recognised by applying the effective interest method, except for short-
term receivables when the recognition of interest would be immaterial.
Impairment of financial assetsFinancial assets are assessed for indicators of impairment at the end of each reporting period.
Financial assets are impaired where there is objective evidence that, as a result of one or more
events that occurred after the initial recognition of the financial asset, the estimated future cash
flows of the investment have been impacted.
For financial assets carried at amortised cost, the amount of the impairment is the difference
between the asset’s carrying amount and the present value of estimated future cash flows,
discounted at the original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all
financial assets with the exception of trade receivables where the carrying amount is reduced
through the use of an allowance account. When a trade receivable is uncollectible, it is written
off against the allowance account. Subsequent recoveries of amounts previously written off
are credited against that allowance account. Changes in the carrying amount of the allowance
account are recognised in profit or loss.
Elec & Eltek International Company Limited
Annual Report 2009
59Notes to the Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets (Continued)If, in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment loss was recognised,
the previously recognised impairment loss is reversed through profit or loss to the extent the
carrying amount of the investment at the date the impairment is reversed does not exceed what
the amortised cost would have been had the impairment not been recognised.
Derecognition of financial assetsThe Group derecognises a financial asset only when the contractual rights to the cash flows
from the asset expire, or it transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity. If the Group neither transfers nor retains
substantially all the risk and rewards of ownership and continues to control the transferred
financial asset, the Group recognises its retained interest in the asset and an associate liability
for amounts it may have to pay. If the Group retains substantially all the risks and rewards of
ownership of a transferred financial asset, the Group continues to recognise the financial asset
and also recognises a collateralised borrowing for the proceeds received.
Financial liabilities and equity instruments
Classification as debt or equityFinancial liabilities and equity instruments issued by the Group are classified according to
the substance of the contractual arrangements entered into and the definitions of a financial
liability and an equity instrument.
Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of the
Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds
received, net of direct issue costs.
Treasury sharesWhen the Company purchases the Company’s equity share capital, the consideration paid,
including any directly attributable costs, is taken against “Treasury Shares” within equity. When
the shares are subsequently disposed, the realised gains or losses on disposal of the treasury
shares are recognised in equity.
Elec & Eltek International Company Limited
Annual Report 2009
60
Notes to the Financial StatementsFor the year ended 31 December 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial liabilities and equity instruments (Continued)
Financial liabilitiesTrade and other payables and bill payables are initially measured at fair value, net of
transaction costs, and are subsequently measured at amortised cost, using the effective
interest rate method, with interest expense recognised on an effective yield basis.
Interest-bearing bank loans and overdrafts are initially measured at fair value, and are
subsequently measured at amortised cost, using the effective interest method. Any difference
between the proceeds (net of transaction costs) and the settlement or redemption of borrowings
is recognised over the term of the borrowings in accordance with the Group’s accounting policy
for borrowing costs (see below).
Financial guarantee contract liabilities are measured initially at their fair values and
subsequently at the higher of the amount of obligation under the contract recognised as a
provision in accordance with FRS 37 Provisions, Contingent Liabilities and Contingent Assets
and the amount initially recognised less cumulated amortization in accordance with FRS 18
Revenue.
Derecognition of financial liabilitiesThe Group derecognises financial liabilities when, and only when, the Group’s obligations are
discharged, cancelled or they expire.
LeasesLeases are classified as finance leases whenever the terms of the lease transfer substantially
all the risks and rewards of ownership to the lessee. All other leases are classified as operating
leases.
The Group as lesseeRentals payable under operating leases are charged to profit or loss on a straight-line basis
over the term of the relevant lease unless another systematic basis is more representative of
the time pattern in which economic benefits from the leased asset are consumed. Contingent
rentals arising under operating leases are recognised as an expense in the period in which they
are incurred.
In the event that lease incentives are received to enter into operating leases, such incentives
are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction
of rental expense on a straight-line basis, except where another systematic basis is more
representative of the time pattern in which economic benefits from the leased asset are
consumed.
Elec & Eltek International Company Limited
Annual Report 2009
61Notes to the Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
InventoriesInventories are stated at the lower of cost and net realisable value. Cost comprises direct
materials and, where applicable, direct labour costs and those overheads that have been
incurred in bringing the inventories to their present location and condition. Cost is calculated
using the first-in, first-out method. Net realisable value represents the estimated selling price
less all estimated costs of completion and costs to be incurred in marketing, selling and
distribution.
Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulated depreciation and any
accumulated impairment losses.
Construction-in-progress are stated at cost. No depreciation is provided until the construction is
completed and the asset are available for use.
Depreciation is charged so as to write off the cost or valuation of assets, other than freehold
land and properties under construction, over their estimated useful lives, using the straight-line
method, on the following bases:
Freehold buildings 20 years
Leasehold land and buildings 50 – 75 years
Leasehold improvements lower of 10 years or lease terms
Furniture and fixtures 5 years
Plant and equipment 5 – 10 years
Motor vehicles and yacht 5 – 7 years
The estimated useful lives, residual values and depreciation method are reviewed at each year
end, with the effect of any changes in estimate accounted for on a prospective basis.
The gain or loss arising on disposal or retirement of an item of property, plant and equipment is
determined as the difference between the sales proceeds and the carrying amounts of the asset
and is recognised in profit or loss.
Investment propertyInvestment property, which is property held to earn rentals and/or for capital appreciation, is
measured initially at its cost, including transaction costs. Subsequent to initial recognition,
investment property is measured at fair value. Gains or losses arising from changes in the fair
value of investment property are included in profit or loss for the period in which they arise.
Elec & Eltek International Company Limited
Annual Report 2009
62
Notes to the Financial StatementsFor the year ended 31 December 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Impairment of tangible and intangible assetsAt the end of each reporting period, the Group reviews the carrying amounts of its tangible and
intangible assets, where applicable, to determine whether there is any indication that those
assets have suffered an impairment loss. If any such indication exists, the recoverable amount
of the asset is estimated in order to determine the extent of the impairment loss (if any). Where
it is not possible to estimate the recoverable amount of an individual asset, the Group estimates
the recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than
its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised immediately in profit or loss.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-
generating unit) is increased to the revised estimate of its recoverable amount, but so that
the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset (cash-generating unit) in
prior years. A reversal of an impairment loss is recognised immediately in profit or loss.
AssociateAn associate is an entity over which the Group has significant influence and that is neither
a subsidiary company nor an interest in a joint venture. Significant influence is the power to
participate in the financial and operating policy decisions of the investee but is not control or
joint control over those policies.
The results and assets and liabilities of an associate are incorporated in these financial
statements using the equity method of accounting, except when the investment is classified as
held for sale, in which case it is accounted for under FRS 105 Non-current Assets Held for Sale
and Discontinued Operations. Under the equity method, investment in an associate is carried
in the consolidated statements of financial position at cost as adjusted for post-acquisition
changes in the Group’s share of the net assets of the associate, less any impairment in the
value of individual investments. Losses of an associate in excess of the Group’s interest in that
associate (which includes any long-term interests that, in substance, form part of the Group’s
net investment in the associate) are not recognised, unless the Group has incurred legal or
constructive obligation or made payments on behalf of the associate.
Elec & Eltek International Company Limited
Annual Report 2009
63Notes to the Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Associate (Continued)Any excess of the cost of acquisition over the Group’s share of the net fair value of the
identifiable assets, liabilities and contingent liabilities of the associate recognised at the date
of acquisition is recognised as goodwill. The goodwill is included within the carrying amount
of the investment and is assessed for impairment as part of the investment. Any excess of the
Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities
over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.
Where a group entity transacts with an associate of the Group, profits and losses are eliminated
to the extent of the Group’s interest in the relevant associate.
ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a
result of a past event, it is probable that the Group will be required to settle the obligation, and
a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required to
settle the present obligation at the end of the reporting period, taking into account the risks and
uncertainties surrounding the obligation. Where a provision is measured using the cash flows
estimated to settle the present obligation, its carrying amount is the present value of those cash
flows.
When some or all of the economic benefits required to settle a provision are expected to be
recovered from a third party, the receivable is recognised as an asset if it is virtually certain that
reimbursement will be received and the amount of the receivable can be measured reliably.
Share-based paymentsThe Group issues equity-settled share-based payment to certain employees.
Equity-settled share-based payments are measured at fair value of the equity instruments at
the date of grant. Details regarding the determination of the fair value of equity-settled share-
based transactions are set out in Note 26. The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line basis over the vesting
period, based on the Group’s estimate of the number of equity instruments that will eventually
vest. At the end of each reporting period, the Group revises its estimate of the number of equity
instruments expected to vest. The impact of the revision of the original estimates, if any, is
recognised in profit or loss such that the cumulative expense reflects the revised estimate, with
a corresponding adjustment to the equity-settled employee benefits reserve.
The policy described above is applied to all equity-settled share-based payments that were
granted after 22 November 2002 that vested after 1 January 2005. No amount has been
recognised in the financial statements in respect of other equity-settled share-based payments.
Fair value is measured using the Trinomial Lattice model. The expected life used in the model
has been adjusted, based on management’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioural considerations.
Elec & Eltek International Company Limited
Annual Report 2009
64
Notes to the Financial StatementsFor the year ended 31 December 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Statutory reserveThe People’s Republic of China’s laws and regulations require Sino-foreign cooperative joint
ventures to provide for certain statutory reserves, mainly reserve fund and enterprise expansion
fund, which are appropriated from net income as reported in the statutory financial statements.
The use of these reserves is at the discretion of the entities’ board of directors. The reserve
fund can only be used, upon approval by the relevant authority, to offset accumulated losses
or increase capital. The enterprise expansion fund can only be used to increase capital upon
approval by the relevant authority.
Revenue recognitionRevenue is measured at the fair value of the consideration received or receivable. Revenue is
reduced for estimated customer returns, rebates and other similar allowances.
Revenue from the sale of manufactured goods is recognised when all the following conditions
are satisfied:
• the Group has transferred to the buyer the significant risks and rewards of ownership of
the goods;
• the Group retains neither continuing managerial involvement to the degree usually
associated with ownership nor effective control over the goods sold;
• the amount of revenue can be measured reliably;
• it is probable that the economic benefits associated with the transaction will flow to the
entity; and
• the costs incurred or to be incurred in respect of the transaction can be measured
reliably.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the
effective interest rate applicable.
Dividend income from investments is recognised when the shareholders’ rights to receive
payment have been established.
Elec & Eltek International Company Limited
Annual Report 2009
65Notes to the Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their
intended use or sale, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale. Investment income earned on the temporary
investment of specific borrowings pending their expenditure on qualifying assets is deducted
from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in profit or loss in the period in which they are
incurred.
Retirement benefit costsPayments to defined contribution retirement benefit plans are charged as expenses as they
fall due. Payments made to state-managed retirement benefit schemes, such as the Singapore
Central Provident Fund, state-sponsored retirement benefit scheme in the PRC and Mandatory
Provident Fund in Hong Kong, are dealt with as payments to defined contribution plans where
the Group’s obligations under the plans are equivalent to those arising in a defined contribution
retirement benefit plan.
Employee leave entitlementEmployee entitlements to annual leave are recognised when they accrue to employees. A
provision is made for the estimated liability for annual leave as a result of services rendered by
employees up to the end of the reporting period.
Income taxIncome tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the period. Taxable profit differs from
profit as reported in the income statement because it excludes items of income or expense that
are taxable or deductible in other years and it further excludes items that are not taxable or tax
deductible. The Group’s liability for current tax is calculated using tax rates (and tax laws) that
have been enacted or substantively enacted in countries where the Company and its subsidiary
companies operate by the end of the reporting period.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and liabilities are not recognised
if the temporary difference arises from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a transaction that affects neither the
taxable profit nor the accounting profit.
Elec & Eltek International Company Limited
Annual Report 2009
66
Notes to the Financial StatementsFor the year ended 31 December 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income tax (Continued)Deferred tax liabilities are recognised for taxable temporary differences arising on investments
in subsidiary companies and associates, except where the Group is able to control the reversal
of the temporary difference and it is probable that the temporary difference will not reverse in
the foreseeable future.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and
reduced to the extent that it is no longer probable that sufficient taxable profits will be available
to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the
liability is settled or the asset realised based on the tax rates (and tax laws) that have been
enacted or substantively enacted by the end of the reporting period.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities and when they relate to income taxes levied by
the same taxation authority and the Group intends to settle its current tax assets and liabilities
on a net basis.
Current and deferred tax are recognised as an expense or income in profit or loss, except
when they relate to items credited or debited outside profit or loss, in which case the tax is also
recognised outside profit or loss, or where they arise from the initial accounting for a business
combination. In the case of a business combination, the tax effect is taken into account in
calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of
the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.
Foreign currency transactions and translationThe individual financial statements of each group entity are measured and presented in the
currency of the primary economic environment in which the entity operates (its functional
currency). The consolidated financial statements of the Group and the statements of financial
position of the Company are presented in United States Dollars, which is the functional
currency of the Company, and the presentation currency for the consolidated financial
statements.
In preparing the financial statements of the individual entities, transactions in currencies other
than the entity’s functional currency are recorded at the rates of exchange prevailing on the
date of the transaction. At the end of each reporting period, monetary items denominated in
foreign currencies are retranslated at the rates prevailing at the end of the reporting period.
Non-monetary items carried at fair value that are denominated in foreign currencies are
retranslated at the rates prevailing on the date when the fair value was determined. Non-
monetary items that are measured in terms of historical cost in a foreign currency are not
retranslated.
Elec & Eltek International Company Limited
Annual Report 2009
67Notes to the Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreign currency transactions and translation (Continued)Exchange differences arising on the settlement of monetary items, and on retranslation of
monetary items are included in profit or loss for the period. Exchange differences arising on
the retranslation of non-monetary items carried at fair value are included in profit or loss for the
period except for differences arising on the retranslation of non-monetary items in respect of
which gains and losses are recognised in other comprehensive income. For such non-monetary
items, any exchange component of that gain or loss is also recognised in other comprehensive
income.
For the purpose of presenting consolidated financial statements, the assets and liabilities of
the Group’s foreign operations (including comparatives) are expressed in United States Dollars
using exchange rates prevailing at the end of the reporting period. Income and expense items
(including comparatives) are translated at the average exchange rates for the period, unless
exchange rates fluctuated significantly during that period, in which case the exchange rates
at the dates of the transactions are used. Exchange differences arising, if any, are recognised
in other comprehensive income and accumulated in a separate component of equity. On the
disposal of a foreign operation, the cumulative amount of the exchange differences relating to
that foreign operation accumulated in a separate component of equity, shall be reclassified
from equity to profit or loss (as a reclassification adjustment) when the gain or loss on disposal is
recognised.
On consolidation, exchange differences arising from the translation of the net investment in
foreign entities (including monetary items that, in substance, form part of the net investment
in foreign entities), and of borrowings and other currency instruments designated as hedges of
such investments, are recognised in other comprehensive income and accumulated in foreign
currency translation reserve (attributed to minority interest, as appropriate).
Cash and cash equivalentsCash and cash equivalents comprise cash on hand and demand deposits, bank overdrafts and
other short-term highly liquid investments that are readily convertible to a known amount of
cash and are subject to an insignificant risk of changes in value.
Elec & Eltek International Company Limited
Annual Report 2009
68
Notes to the Financial StatementsFor the year ended 31 December 2009
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies, which are described in Note 2,
management is required to make judgements, estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other sources. The estimates
and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision and future periods if the revision
affects both current and future periods.
Critical judgements in applying the entity’s accounting policiesApart from those involving estimations (see below), management is of the opinion that there is
no instance of application of judgements that are expected to have a significant effect on the
amounts recognised in the financial statements.
Key sources of estimation uncertaintyThe key assumptions concerning the future, and other key sources of estimation uncertainty
at the end of the reporting period, that have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial year, are discussed
below:
(i) Depreciation of property, plant and equipmentProperty, plant and equipment are depreciated on a straight-line basis over their
estimated useful lives. Management estimates the useful lives of property, plant and
equipment to be within 5 to 75 years. The carrying amount of the Group’s property, plant
and equipment at 31 December 2009 was US$347,115,000 (2008: US$379,905,000).
Changes in the expected level of usage and technological developments could impact
the economic useful lives and the residual values of these assets, and therefore future
depreciation charges could be revised.
(ii) Investment properties (Note 17)The fair value of each investment property is individually determined at the end of each
reporting period by independent valuers based on a market value assessment, on an
existing use basis. The valuers have relied on the discounted cash flow analysis and the
capitalisation of income approach as their primary methods, supported by the direct
comparison method. These methodologies are based upon estimates of future results
and a set of assumptions specific to each property to reflect its tenancy and cash flow
profile. The fair value of each investment property reflects, among other things, rental
income from current leases and assumptions about rental income from future leases in
the light of current market conditions. The fair value also reflects, on a similar basis, any
cash outflows that could be expected in respect of the property.
Elec & Eltek International Company Limited
Annual Report 2009
69Notes to the Financial Statements
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)
Key sources of estimation uncertainty (Continued)
(iii) Allowance for doubtful debtsThe policy for allowances for doubtful debts of the Group is based on the evaluation
of collectability and aging analysis of accounts and on management’s judgement.
The allowances as at 31 December 2009 amounted to US$5,665,000 (2008:
US$10,189,000). A considerable amount of judgement is required in assessing the
ultimate realisation of these receivables, including the current creditworthiness and the
past collection history of each customer. If the financial conditions of customers of the
Group were to deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. The carrying amounts of the Group’s trade and
bills receivables as at 31 December 2009 are US$130,243,000 and US$6,367,000
(2008: US$110,513,000 and US$4,061,000) respectively.
(iv) Allowance for inventory obsolescenceThe management of the Group reviews an aging analysis at the end of each reporting
period, and makes allowance for inventory obsolescence for items that are identified
as obsolete and slow-moving. The allowance for inventories as at 31 December 2009
amounted to US$4,036,000 (2008: US$4,861,000). The management estimates the
net realisable value for goods for resale based primarily on the latest selling prices and
current market conditions. The carrying amount of the inventories of the Group as at 31
December 2009 is US$39,738,000 (2008: US$39,582,000).
(v) Income and deferred taxesThe Group has exposure to income taxes in several jurisdictions. Significant judgement
is involved in determining the group-wide provision for income taxes. There are certain
transactions and computations for which the ultimate tax determination is uncertain
during the ordinary course of business. The Group recognises liabilities for expected tax
issues based on estimates of whether additional taxes will be due. Where the final tax
outcome of these matters is different from the amounts that were initially recognised,
such differences will impact the income tax and deferred tax provisions in the period in
which such determination is made. The Group’s tax payable amounts at 31 December
2009 is US$2,044,000 (2008: US$762,000). The Group’s deferred tax assets and
deferred tax liabilities at 31 December 2009 are US$1,437,000 (2008: US$1,446,000)
and US$2,416,000 (2008: US$1,998,000), respectively.
Elec & Eltek International Company Limited
Annual Report 2009
70
Notes to the Financial StatementsFor the year ended 31 December 2009
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT
Categories of financial instrumentsThe following table sets out the financial instruments as at the end of the reporting period:
THE GROUP THE COMPANY
2009 2008 2009 2008
US$’000 US$’000 US$’000 US$’000
Financial assets
Loans and receivables (including
cash and bank balances) 205,394 201,853 327,200 107,010
Financial liabilities
Amortised cost 216,247 282,278 199,507 2,031
Financial risk management policies and objectivesThe Group’s major financial instruments include bank balances and cash, bank borrowings,
trade and other receivables and bills receivables, trade and other payables and bills payables.
Details of these financial instruments are disclosed in respective notes. The risks associated
with these financial instruments and the policies on how to mitigate these risks are set out
below. The management manages and monitors these exposures to ensure appropriate
measures are implemented on a timely and effective manner.
Foreign exchange risk managementSeveral subsidiary companies of the Company have foreign currency sales/purchases
denominated in currencies other than the entity’s functional currencies, which expose the
Group to foreign currency risk.
Whenever possible, the Group seeks to maintain a natural hedge through the matching of
liabilities, including borrowings, against assets in the same currency or against the entity’s
functional currency, in particular its future revenue stream. Transactional exposures in
currencies other than entities’ functional currency are kept to minimal level.
When necessary, foreign exchange forward contracts are used by the Group to manage its
foreign currency exposure arising from its operating activities.
Elec & Eltek International Company Limited
Annual Report 2009
71Notes to the Financial Statements
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Continued)
Foreign exchange risk management (Continued)At the end of the reporting period, the carrying amounts of monetary assets and monetary
liabilities denominated in currencies other than the respective group entities’ functional
currencies are as follows:
THE GROUP THE COMPANY
Liabilities Assets Liabilities Assets
2009 2008 2009 2008 2009 2008 2009 2008
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
USD 1,607 1,015 4,003 9,332 – – – –
HKD 119,109 102,830 10,338 21,920 – – 5,517 2,156
RMB 42,418 58,898 56,709 34,231 9 – – –
SGD 232 197 38 30 148 119 38 102
GBP 37 39 15 26 – – – –
EUR 1,916 4,678 8,011 8,381 – – – –
JPY 4,844 10,665 2 4 – – – –
The following table details the sensitivity to a 5% increase and decrease in the Chinese
Renminbi against the United States Dollars. 5% is the sensitivity rate used when reporting
foreign currency risk internally to key management personnel and represents management’s
assessment of the possible change in foreign exchange rates. The sensitivity analysis includes
only outstanding foreign currency denominated monetary items and adjusts their translation at
the period end for a 5% change in foreign currency rates.
If the Chinese Renminbi strengthens by 5% against the United States Dollars, profit or loss will
increase (decrease) by:
THE GROUP
2009 2008
US$’000 US$’000
United States Dollars 547 (1,557 )
For a 5% weakening of the Chinese Renminbi against the United States Dollars, there would be
an equal and opposite impact on the profit and loss. This is mainly attributable to the exposure
outstanding on receivables and payables at the end of the reporting period in the Group.
Elec & Eltek International Company Limited
Annual Report 2009
72
Notes to the Financial StatementsFor the year ended 31 December 2009
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Continued)
Foreign exchange risk management (Continued)Under the Linked Exchange Rate system in Hong Kong, the financial exposure on exchange
rate fluctuation between Hong Kong Dollars and United States Dollars is considered by the
management to be insignificant, and therefore no sensitivity analysis has been prepared for
Hong Kong Dollars.
In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign
exchange risk as the year end exposure does not reflect the exposure during the year.
Interest rate risk managementThe Group’s primary interest rate risk relates to its borrowings from banks. The interest rates
and terms of repayment of the term loan and revolving loans, trust receipt loans and other
short-term bank loans of the Group are disclosed in Note 20.
Interest rate sensitivityThe sensitivity analyses below have been determined based on the exposure to interest rates
for non-derivative instruments as referred to above at the end of the reporting period and
the stipulated change taking place at the beginning of the financial year and held constant
throughout the reporting period in the case of instruments that have floating rates. A 50
basis point increase or decrease is used when reporting interest rate risk internally to key
management personnel and represents management’s assessment of the reasonably possible
change in interest rates.
If interest rates had been 50 basis points higher or lower and all other variables were held
constant, the Group’s profit for the year ended 31 December 2009 would decrease/increase
by US$662,000 (2008: decrease/increase by US$795,000). This is mainly attributable to the
Group’s exposure to interest rates on its variable rate borrowings.
Credit risk managementCredit risk is the risk that counterparties are unable to meet their obligations resulting in
financial loss to the Group. It is the Group’s policy to enter into transactions with a diversity of
credit-worthy parties to mitigate any significant concentration of credit risk. The Group ensures
that sales of products are rendered to customers with appropriate credit history and has
internal mechanisms to monitor the granting of credit and management of credit exposures.
The Group has made provisions for potential losses on credits extended. Surplus funds are
placed with reputable financial institutions. The Group’s maximum exposure to credit risk in the
event the counterparties fail to perform their obligations in relation to each class of recognised
financial assets is the carrying amount of those assets as indicated in the statement of financial
position. As at financial year end, there was no significant concentration of credit risk to the
Group or the Company.
Further details of credit risks on trade receivables is disclosed in Note 12.
Elec & Eltek International Company Limited
Annual Report 2009
73Notes to the Financial Statements
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Continued)
Liquidity risk managementThe Group’s cash and short-term deposits, operating cash flow and availability of banking
facilities are actively managed to ensure that there is adequate working capital and that
repayment and funding needs are met.
Liquidity and interest risk analysis
Non-derivative financial liabilitiesThe following tables detail the remaining contractual maturity for non-derivative financial
liabilities. The tables have been drawn up based on the undiscounted cash flows of financial
liabilities based on the earliest date on which the Group and the Company can be required to
pay.
Weighted
average On demand Within Within Total Total
effective or within 6 months 2 to 5 undiscounted carrying
interest rate 6 months to 1 year years amount Adjustment amount
% US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
THE GROUP
2009
Bank overdrafts
and loans 1.35 36,147 17,684 64,783 118,614 (1,162 ) 117,452
Trade and other payables – 95,157 3,638 – 98,795 – 98,795
131,304 21,322 64,783 217,409 (1,162 ) 216,247
2008
Bank overdrafts
and loans 3.38 36,703 29,380 95,678 161,761 (4,162 ) 157,599
Trade and other payables – 122,511 2,168 – 124,679 – 124,679
159,214 31,548 95,678 286,440 (4,162 ) 282,278
Elec & Eltek International Company Limited
Annual Report 2009
74
Notes to the Financial StatementsFor the year ended 31 December 2009
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Continued)
Liquidity and interest risk analysis (Continued)
Non-derivative financial liabilities (Continued)
Weighted
average On demand Within Within Total Total
effective or within 6 months 2 to 5 undiscounted carrying
interest rate 6 months to 1 year years amount Adjustment amount
% US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
THE COMPANY
2009
Amount due to subsidiary
companies – 199,507 – – 199,507 – 199,507
2008
Amount due to subsidiary
companies – 2,031 – – 2,031 – 2,031
The maximum amount that the Company could be forced to settle under the financial
guarantee contracts as disclosed in Note 20, if the full guarantee amount is claimed by the
counterparty, is US$186,000 (2008: US$185,000). The earliest period that the guarantee
could be called is within 1 year (2008: 1 year) from the end of the reporting period.
Non-derivative financial assetsThe following tables detail the expected maturity for non-derivative financial assets. The tables
below have been drawn up based on the undiscounted contractual maturities of the financial
assets including interest that will be earned on those assets except where the Group and the
Company anticipates that the cash flow will occur in a different period.
Elec & Eltek International Company Limited
Annual Report 2009
75Notes to the Financial Statements
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Continued)
Liquidity and interest risk analysis (Continued)
Non-derivative financial assets (Continued)
Weighted
average On demand Within Within Total Total
effective or within 6 months 2 to 5 undiscounted carrying
interest rate 6 months to 1 year years amount Adjustment amount
% US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
THE GROUP
2009
Cash and bank balances 0.68 60,156 – – 60,156 (102 ) 60,054
Trade and other receivables – 142,733 2,607 – 145,340 – 145,340
202,889 2,607 – 205,496 (102 ) 205,394
2008
Cash and bank balances 1.90 68,998 – – 68,998 (326 ) 68,672
Trade and other receivables – 130,300 2,881 – 133,181 – 133,181
199,298 2,881 – 202,179 (326 ) 201,853
THE COMPANY
2009
Cash and bank balances – 43 – – 43 – 43
Trade and other receivables – 3 – – 3 – 3
Amount due from subsidiary
companies – 327,154 – – 327,154 – 327,154
327,200 – – 327,200 – 327,200
2008
Cash and bank balances – 36 – – 36 – 36
Trade and other receivables – 1 – – 1 – 1
Amount due from subsidiary
companies – 106,973 – – 106,973 – 106,973
107,010 – – 107,010 – 107,010
Elec & Eltek International Company Limited
Annual Report 2009
76
Notes to the Financial StatementsFor the year ended 31 December 2009
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Continued)
Fair value of financial assets and financial liabilitiesFair value is defined as the amount at which the instrument could be exchanged in a current
transaction between knowledgeable willing parties in an arm’s length transaction, other than in
a forced or liquidation sale. Fair values are obtained through quoted market prices, discounted
cash flow models and option pricing models as appropriate.
Financial instruments whose carrying amounts approximate fair valuesManagement has determined that the carrying amounts of cash and bank balances, trade and
other receivables, amounts due from (to) subsidiary companies, bank overdrafts, trade and
other payables and interest bearing loans and borrowings, based on their notional amounts,
reasonably approximate their fair values because these are mostly short term in nature or are
repriced frequently.
Capital risk management policies and objectivesThe Group manages its capital to ensure that the entities in the Group will be able to continue
as a going concern while maximising the return to stakeholders through the optimisation of the
debt and equity balance. The Group’s overall strategy remains unchanged from prior year.
The capital structure of the Group consists of bank borrowings and equity attributable to
owners of the Company, comprising issued capital, reserves and retained earnings.
The Company manages its capital to ensure that it will able to continue as a going concern, to
maximise the return to stakeholders through the optimisation of the debt and equity balance,
and to ensure that all externally imposed capital requirements are complied with.
5. HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS
The Company is a subsidiary of Kingboard Chemical Holdings Limited, incorporated in Cayman
Islands, which is also the Company’s ultimate holding company. Related companies in these
financial statements refer to members of the holding company’s group of companies.
Some of the Group’s transactions and arrangements are between members of the Group and
the effect of these on the basis determined between the parties is reflected in these financial
statements. The intercompany balances are unsecured, interest-free and repayable on demand
unless otherwise stated.
Transactions between the Company and its subsidiary companies, which are related companies
of the Company, have been eliminated on consolidation and are not disclosed in this note.
Details of transactions between the Group and other related companies are disclosed below.
Elec & Eltek International Company Limited
Annual Report 2009
77Notes to the Financial Statements
5. HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS (Continued)
Trading transactionsThe significant transactions between the Group and its related parties and the effects of these
transactions on terms agreed among the companies are as follows:
THE GROUP
2009 2008
US$’000 US$’000
Income
Sales to related companies 6,388 5,777
Management fee income from a related company 1,254 259
Expenses
Purchases from related companies 94,457 113,706
Purchases from a related party 289 220
Consultation fees paid to a related party 73 72
Construction fee paid to a related party 84 105
Management fee paid to related companies 2,618 2,739
In addition, directors and key management executives received remuneration for services
rendered during the financial year. Non-cash benefits including share options were also
granted.
Compensation of directors and key management personnelTotal compensation paid to Company’s directors and key management executives, as well as
fees paid to the Company’s directors and directors of subsidiary companies are as follows:
THE GROUP
2009 2008
US$’000 US$’000
Directors
Salaries, bonuses and other costs 1,745 1,620
Provident fund and other defined contributions 32 58
Share-based payments 110 192
1,887 1,870
Key management executives
(excluding executive directors)
Salaries, bonuses and other costs 1,565 1,734
Provident fund and other defined contributions 35 48
Share-based payments 18 32
1,618 1,814
Elec & Eltek International Company Limited
Annual Report 2009
78
Notes to the Financial StatementsFor the year ended 31 December 2009
6. FINANCE COSTS
THE GROUP
2009 2008
US$’000 US$’000
Interest on bank loans 1,729 4,796
Interest on bank overdrafts – 24
1,729 4,820
7. INCOME TAX EXPENSE
THE GROUP
2009 2008
US$’000 US$’000
Tax expense comprises:
Singapore income tax
Current income taxation 4 5
Foreign income tax
Current income taxation 2,974 2,306
2,978 2,311
Deferred tax 441 315
3,419 2,626
Income tax for the Group is calculated at the rate prevailing for the respective jurisdiction.
It materially differs from the amount determined by applying the Singapore income tax rate
of 17% (2008: 18%) to pre-tax profits mainly due to tax privileges granted to the subsidiary
companies in the PRC and Thailand. Certain subsidiary companies in the PRC are only liable
for 50% of normal corporate profits tax and a subsidiary company in Thailand is exempted from
corporate profits tax for between three to seven years with effect from the date the operating
income is first earned.
Elec & Eltek International Company Limited
Annual Report 2009
79Notes to the Financial Statements
7. INCOME TAX EXPENSE (Continued)
The tax charge for the year can be reconciled as follows:
THE GROUP
2009 2008
% %
Tax at Singapore income tax rate 17.0 18.0
Lower statutory tax rates and tax incentives in other
countries (7.9 ) (16.7 )
Tax benefits not recognised 0.5 8.7
Others (2.7 ) (4.2 )
Effective tax rate 6.9 5.8
8. PROFIT FOR THE YEAR
THE GROUP
2009 2008
US$’000 US$’000
Profit for the year has been arrived at after charging
(crediting):
Directors’ emoluments
– Remuneration 1,706 1,581
– Fees 39 39
– Contributions to defined contribution plans 32 58
Staff costs (excluding directors’ emoluments)
– Salaries and employees benefits 56,359 62,128
– Contributions to defined contribution plans 2,284 2,814
Depreciation of property, plant and equipment 47,529 47,989
Statutory auditor’s emoluments
– Audit fees paid to auditor 362 353
– Non-audit fees paid to auditor 133 136
Share-based payment expense 183 361
Gain on disposal of a subsidiary company – (590 )
Gain on disposal of an associate (36 ) –
Loss on disposal of property, plant and equipment 1,340 –
Loss on fair value change of investment properties 5 4
Allowance for doubtful debts 152 1,749
Reversal of allowance for inventory obsolescence (810 ) (1,191)
Loss on foreign exchange 93 1,116
Elec & Eltek International Company Limited
Annual Report 2009
80
Notes to the Financial StatementsFor the year ended 31 December 2009
9. DIVIDENDS
The amount and the rates of dividends paid are:
THE GROUP
AND THE COMPANY
2009 2008
US$’000 US$’000
In respect of previous financial year:
Ordinary dividend:
– Final one-tier tax exempt dividend United States
5.0 cents (2008: United States 4.5 cents) 8,944 8,050
Special dividend:
– Final one-tier tax exempt dividend United States
5.5 cents (2008: United States 8.0 cents) 9,839 14,311
18,783 22,361
In respect of current financial year:
Ordinary dividend:
- Interim one-tier tax exempt dividend: Nil
(2008: United States 10.0 cents) – 17,889
The Directors have recommended a one-tier tax exempt final dividend of United States 15.0
cents (2008: 5.0 cents) per share and a one-tier tax exempt special dividend of United States
10.0 cents (2008: 5.5 cents) per share totalling US$44,722,000 (2008: US$18,783,000) to
be payable in respect of the current financial year. This dividend will be recorded as a liability
on the statement of financial position of the Company and of the Group upon approval by the
shareholders of the Company at the forthcoming Annual General Meeting of the Company.
Elec & Eltek International Company Limited
Annual Report 2009
81Notes to the Financial Statements
10. EARNINGS PER SHARE
The calculation of the basic and diluted earnings per share attributable to the owners of the
Company is based on the following:
THE GROUP
2009 2008
Basic Diluted Basic Diluted
US$’000 US$’000 US$’000 US$’000
Profit attributable to owners
of the Company 45,677 45,677 42,628 42,628
2009 2008
Number of shares Number of shares
’000 ’000 ’000 ’000
Weighted average
number of ordinary shares
used to compute basic and
diluted earnings per share 178,887 178,887 178,911 178,911
Earnings per share (US cents) 25.53 25.53 23.83 23.83
The same weighted average number of ordinary shares was used to compute both the basic
as well as the diluted earnings per share because the subscription prices of the Company’s
outstanding share options were higher than the average market price for both years.
Elec & Eltek International Company Limited
Annual Report 2009
82
Notes to the Financial StatementsFor the year ended 31 December 2009
11. CASH AND BANK BALANCES
THE GROUP THE COMPANY
2009 2008 2009 2008
US$’000 US$’000 US$’000 US$’000
Fixed deposits 6,924 17,941 – –
Cash at bank and on hand 53,130 50,731 43 36
60,054 68,672 43 36
Cash and bank balances comprise cash held by the Group and short-term bank deposits.
Fixed deposits bear interest at average effective interest rate of 0.68% (2008: 1.90%) per
annum and for a tenure of less than three months.
The Group’s and the Company’s cash and bank balances that are not denominated in the
functional currencies of the respective entities are as follows:
THE GROUP THE COMPANY
2009 2008 2009 2008
US$’000 US$’000 US$’000 US$’000
Denominated in:
Euro 7,472 6,832 – –
Hong Kong Dollars 7,110 20,667 – –
Chinese Renminbi 38,060 12,506 – –
Singapore Dollars 35 27 35 27
United States Dollars 713 6,039 – –
12. TRADE RECEIVABLES
THE GROUP
2009 2008
US$’000 US$’000
Third parties 124,108 107,479
Related companies 6,135 3,034
130,243 110,513
An allowance has been made for estimated irrecoverable amounts from the sales of goods to
third parties of US$5,665,000 (2008: US$10,189,000). This allowance has been determined
by reference to past default experience and assessment of recoverability by management.
Elec & Eltek International Company Limited
Annual Report 2009
83Notes to the Financial Statements
12. TRADE RECEIVABLES (Continued)
The amount due from related companies are unsecured, interest-free and are subject to credit
terms of 90 to 120 days.
Trade receivables are non-interest bearing and generally on 90 to 120 days’ terms. They
are recognised at their original invoice amounts which approximate their fair values on initial
recognition.
The Group has made substantial provision for all receivables which are overdue more than 180
days because historical experience is that such receivables are generally not fully recoverable.
Included in the Group’s trade receivable balance are debtors with a carrying amount of
US$17.2 million (2008: US$41.0 million) which are past due at the reporting date for which
the Group has not provided as there has not been a significant change in credit quality and the
amounts are still considered recoverable. The Group does not hold any collateral over these
balances. The average age of these receivables are 100 days (2008: 91 days).
In determining the recoverability of a trade receivable, the Group considers any change in
the credit quality of the trade receivable from the date credit was initially granted up to the
reporting date. The concentration of credit risk is limited due to the customer base being
large and unrelated. Accordingly, the directors believe that there is no further credit provision
required in excess of the allowance for doubtful debts.
Movement in the allowance for doubtful debts:
THE GROUP
2009 2008
US$’000 US$’000
Balance at beginning of the year 10,189 9,491
Currency realignment 4 28
Amounts written off during the year (4,680 ) (1,079 )
Increase in allowance recognised in profit or loss 152 1,749
Balance at end of the year 5,665 10,189
Elec & Eltek International Company Limited
Annual Report 2009
84
Notes to the Financial StatementsFor the year ended 31 December 2009
12. TRADE RECEIVABLES (Continued)
The Group’s trade receivables that are not denominated in the functional currencies of the
respective entities are as follows:
THE GROUP
2009 2008
US$’000 US$’000
Denominated in:
Chinese Renminbi 10,085 4,881
Hong Kong Dollars 3,214 1,218
Euro 531 1,181
13. OTHER RECEIVABLES
THE GROUP THE COMPANY
2009 2008 2009 2008
US$’000 US$’000 US$’000 US$’000
Deposits 319 483 – –
Prepaid expenses 1,292 1,068 – 2
Other tax refundable 5,977 14,295 – –
Others 2,434 3,829 3 1
10,022 19,675 3 3
The Group’s and the Company’s other receivables that are not denominated in the functional
currencies of the respective entities are as follows:
THE GROUP THE COMPANY
2009 2008 2009 2008
US$’000 US$’000 US$’000 US$’000
Denominated in:
Euro 8 367 – –
Hong Kong Dollars 14 34 – –
Chinese Renminbi 8,040 16,567 – –
Singapore Dollars 3 3 3 3
Elec & Eltek International Company Limited
Annual Report 2009
85Notes to the Financial Statements
14. AMOUNTS DUE FROM (TO) SUBSIDIARY COMPANIES
The amounts due from (to) subsidiary companies are unsecured, interest free and repayable
on demand. The Company has not made any allowance as the directors are of the view that
these receivables are collectible.
The Company’s amount due from subsidiary companies that are not denominated in the
functional currency of the Company are as follows:
THE COMPANY
2009 2008
US$’000 US$’000
Amount due from subsidiary companies
Denominated in:
Hong Kong Dollars 5,517 2,156
Singapore Dollars – 72
15. INVENTORIES
THE GROUP
2009 2008
US$’000 US$’000
Raw materials 15,531 14,263
Work-in-progress 15,112 12,713
Finished goods 9,095 12,606
39,738 39,582
The cost of inventories recognised as an expense of US$351.8 million (2008: US$430.2
million) includes US$0.8 million in respect of reversal of allowance for inventory obsolescence
(2008: US$1.2 million). The reversal of the allowance for inventory obsolescence was related
to the progressive consumption of slow moving inventories which allowance has been made
previously.
Elec & Eltek International Company Limited
Annual Report 2009
86
Notes to the Financial StatementsFor the year ended 31 December 2009
16. PROPERTY, PLANT AND EQUIPMENT
Furniture Plant Motor Freehold Freehold Leasehold Leasehold Leasehold and and vehicles Construction– land buildings land buildings improvements fixtures equipment and yacht in-progress Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
THE GROUPCostAt 1 January 2008 8,098 6,674 23,072 96,921 47,749 11,781 467,043 2,680 6,411 670,429Currency realignment (311 ) (245 ) (41 ) (277 ) (75 ) (25 ) (842 ) (66 ) (64 ) (1,946 )Reclassifications – – – 182 1,807 – 41,365 – (43,354 ) –Additions – – – 1,204 3,327 259 20,179 152 52,488 77,609Disposals – – – – (54 ) (354 ) (8,807 ) (203 ) – (9,418 )Revaluation – – – 603 – – – – – 603Transfer to investment properties – – – (7,027 ) – – – – – (7,027 )
At 31 December 2008 7,787 6,429 23,031 91,606 52,754 11,661 518,938 2,563 15,481 730,250Currency realignment 2 2 78 254 115 36 1,537 3 64 2,091Reclassifications – – – 1,742 1,842 260 7,299 – (11,143 ) –Additions – – – 356 1,582 104 8,692 94 8,746 19,574Disposals – – – (14 ) (2,697 ) (2,050 ) (23,886 ) (169 ) – (28,816 )Revaluation – – – 720 – – – – – 720Transfer to investment properties – – – (3,950 ) – – – – – (3,950 )
At 31 December 2009 7,789 6,431 23,109 90,714 53,596 10,011 512,580 2,491 13,148 719,869
Accumulated DepreciationAt 1 January 2008 – 5,148 4,298 15,950 25,462 9,474 250,907 1,891 – 313,130Currency realignment – (218 ) (9 ) (91 ) (65 ) (18 ) (1,318 ) (8 ) – (1,727 )Charge for the financial year – 339 463 2,101 4,049 884 39,899 254 – 47,989Disposals – – – – (52 ) (352 ) (8,469 ) (174 ) – (9,047 )
At 31 December 2008 – 5,269 4,752 17,960 29,394 9,988 281,019 1,963 – 350,345Currency realignment – 2 16 44 62 32 1,171 6 – 1,333Charge for the financial year – 169 466 1,557 4,303 777 40,046 211 – 47,529Transfer to investment properties – – – (439 ) – – – – – (439 )Disposals – – – – (2,563 ) (2,046 ) (21,236 ) (169 ) – (26,014 )
At 31 December 2009 – 5,440 5,234 19,122 31,196 8,751 301,000 2,011 – 372,754
Carrying AmountAt 31 December 2009 7,789 991 17,875 71,592 22,400 1,260 211,580 480 13,148 347,115
At 31 December 2008 7,787 1,160 18,279 73,646 23,360 1,673 237,919 600 15,481 379,905
Elec & Eltek International Company Limited
Annual Report 2009
87Notes to the Financial Statements
16. PROPERTY, PLANT AND EQUIPMENT (Continued)
Furniture and Office
fixtures equipment Total
US$’000 US$’000 US$’000
THE COMPANY
Cost
At 1 January 2008 20 119 139
Additions 13 10 23
Disposals (8 ) (41 ) (49 )
At 31 December 2008 and
31 December 2009 25 88 113
Accumulated Depreciation
At 1 January 2008 19 109 128
Charge for the financial year 3 5 8
Disposals (8 ) (41 ) (49 )
At 31 December 2008 14 73 87
Charge for the financial year 4 5 9
At 31 December 2009 18 78 96
Carrying Amount
At 31 December 2009 7 10 17
At 31 December 2008 11 15 26
Details of the freehold and leasehold properties held by the Group as at 31 December 2009 are
set out below:
Description and location Gross area Tenure Use
(sq. m.)
Freehold:
(i) Land at No. 134 82,080 – Industrial
Moo 2 Soi Sriyothin
Pakred-Pathumthani Road,
Bang-Khayang,
Muang District, Thailand
(ii) Land at Rojana Industrial 17,180 – Industrial
Park No. 1/68 Moo 5,
Pranakorn, Sri Ayutthaya,
Thailand
Elec & Eltek International Company Limited
Annual Report 2009
88
Notes to the Financial StatementsFor the year ended 31 December 2009
16. PROPERTY, PLANT AND EQUIPMENT (Continued)
Description and location Gross area Tenure Use
(sq. m.)
Leasehold:
(i) Land at New Technology 122,877 50 years commencing Industrial
Development Zone, from 30 July 1997
Kai Ping, Guangdong
Province, The PRC
(ii) Land at New Technology 158,500 50 years commencing Industrial
Development Zone, from 15 March 2004
Kai Ping, Guangdong
Province, The PRC
(iii) Land at New Technology 53,265 50 years commencing Industrial
Development Zone, from 30 November 2006
Kai Ping, Guangdong
Province, The PRC
(iv) Land at lot BW-5, 25,907 50 years commencing Industrial
Guangzhou Economic & from 31 December 1993
Technological Development
District, The PRC
(v) Land at Eastern Park of 160,554 50 years commencing Industrial
Guangzhou Economic & from 16 August 2000
Technological Development
District, The PRC
(vi) Factories and office units in 12,456 75 years commencing Industrial
Merit Industrial Centre, from 5 October 1953
Hong Kong and renewable for a
further 75 years
(vii) Land at Nanjing Economic 13,661 50 years commencing Industrial
& Technological from 28 November 2000
Development Zone,
Jiangsu Province, The PRC
During the year, US$60,000 (2008: US$591,000) of finance cost was capitalised and included
in the cost of leasehold buildings and plant and equipment. The capitalisation rate used to
determine the amount of borrowing costs eligible for capitalisation is 1.35% (2008: 3.34%).
Elec & Eltek International Company Limited
Annual Report 2009
89Notes to the Financial Statements
17. INVESTMENT PROPERTIES
THE GROUP
2009 2008
US$’000 US$’000
At fair value
Balance at beginning of year 15,756 8,733
Loss on fair value change include in profit or loss (5 ) (4 )
Transfer from property, plant and equipment 3,511 7,027
Balance at end of the year 19,262 15,756
The fair values of the Group’s investment properties at 31 December 2009 and 31 December
2008 have been determined on the basis of valuation carried out at the respective year end
date by independent valuer having an appropriate recognised professional qualification and
recent experience in the location and category of the properties being valued. The valuations
were arrived at by reference to market evidence of transaction prices for similar properties. It
was performed in accordance with valuation standards on properties as laid down by the Hong
Kong Institute of Surveyors and the Appraisal and Valuation Standards as published by the
Royal Institute of Chartered Surveyors.
The Group’s investment properties are held under leasehold interests. The property rental
income from the Group’s investment properties which are leased out under operating leases,
amounted to US$1,534,980 (2008: US$1,773,150). Direct operating expenses (including
repairs and maintenance) arising from the rental-generating investment properties are
immaterial.
During the year, there was a transfer of a building amounting to US$2,791,000 from property,
plant and equipment to investment properties which carried at fair value of US$3,511,000.
The resulting revaluation surplus of US$720,000 at the date of transfer has been credited to
revaluation reserve.
Elec & Eltek International Company Limited
Annual Report 2009
90
Notes to the Financial StatementsFor the year ended 31 December 2009
17. INVESTMENT PROPERTIES (Continued)
Details of investment properties held by the Group as at 31 December 2009 are set out below:
Description and location Tenure Unexpired term of the lease
The PRC
(i) Factories at Eastern Park of
Guangzhou Economic and
Technological Development District,
The PRC
Leasehold 50 years commencing from
16 August 2000
Hong Kong
(ii) Office units at Merit Industrial
Centre, Hong Kong
Leasehold 75 years commencing from
5 October 1953 and
renewable for a further
75 years
18. SUBSIDIARY COMPANIES
THE COMPANY
2009 2008
US$’000 US$’000
Unquoted equity shares, at cost 22,186 22,186
Recognition of financial guarantee provided
to subsidiary companies 885 485
23,071 22,671
The Company issued financial guarantees to banks for credit facilities of its subsidiary
companies and recorded a deemed financial guarantee fee income in accordance with the
provisions of FRS 39 – Financial Instruments: Recognition and Measurement. The deemed
income was amortised over the period of the guarantee. The guarantee fee was not charged by
the Company to the subsidiary companies. The full amount of the guarantee fee, including the
unamortised portion, is deemed to be additional investment in the subsidiary companies.
Elec & Eltek International Company Limited
Annual Report 2009
91Notes to the Financial Statements
18. SUBSIDIARY COMPANIES (Continued)
Details of the subsidiary companies at 31 December 2009 are as follows:
Proportion of Country of ownership incorporation interest andName of subsidiary company and operation voting power held Principal activities 2009 2008 % %
Principal subsidiary companies
^ Elec & Eltek (Guangzhou) The PRC 98.0 98.0 Manufacturing and Electronic Company Limited distribution of PCBs 依利安達(廣州)電子有限公司
^ Guangzhou Elec & Eltek The PRC 98.0 98.0 Manufacturing and High Density Interconnect distribution of PCBs Technology No. 1 Company Limited 廣州依利安達精密互連科技 第一有限公司
^ Guangzhou Elec & Eltek The PRC 98.0 98.0 Manufacturing and Microvia Technology Limited distribution of PCBs 廣州依利安達微通科技有限公司
^ Kai Ping Elec & Eltek The PRC 95.0 95.0 Manufacturing and Company Limited distribution of PCBs 開平依利安達電子有限公司
^ Kaiping Elec & Eltek The PRC 95.0 95.0 Manufacturing and No.2 Company Limited distribution of PCBs 開平依利安達電子第二有限公司
^ Kaiping Elec & Eltek The PRC 95.0 95.0 Manufacturing and No.3 Company Limited distribution of PCBs 開平依利安達電子第三有限公司
^ Kaiping Elec & Eltek The PRC 95.0 95.0 Manufacturing and No.5 Company Limited distribution of PCBs 開平依利安達電子第五有限公司
^ Nanjing Elec & Eltek The PRC 100.0 100.0 Manufacturing and Electronic Co., Ltd. distribution of PCBs 南京依利安達電子有限公司
@ Elec & Eltek Multilayer Hong Kong 100.0 100.0 Manufacturing and PCB Limited distribution of PCBs 依利多層線路板有限公司
Elec & Eltek International Company Limited
Annual Report 2009
92
Notes to the Financial StatementsFor the year ended 31 December 2009
18. SUBSIDIARY COMPANIES (Continued)
Proportion of
Country of ownership
incorporation interest and
Name of subsidiary company and operation voting power held Principal activities
2009 2008
% %
Principal subsidiary companies (continued)
ß Elec & Eltek (Thailand) Limited Thailand 100.0 100.0 Manufacturing and
distribution of PCBs
% Elec & Eltek Company Macao 100.0 100.0 Trading of PCBs and
(Macao Commercial provision of sales and
Offshore) Limited marketing services
依利安達(澳門離岸商業服務) 有限公司
* Elec & Eltek Technology Singapore 100.0 100.0 Technology research
Research & Marketing and marketing
Pte. Ltd.
^ Kaiping Pacific Insulating The PRC 100.0 100.0 Manufacturing and
Material Company Limited distribution of high-end
開平太平洋絕緣材料有限公司 PCB raw materials
ß Pacific Insulating Material Thailand 100.0 100.0 Manufacturing and
(Thailand) Limited distribution of PCB
raw materials
^ Shenzhen Pacific Insulating The PRC 93.5 93.5 Manufacturing and
Material Co., Ltd. distribution of PCB
深圳太平洋絕緣材料有限公司 raw materials
* Audited by Deloitte & Touche LLP – Singapore.
@ Audited by Deloitte Touche Tohmatsu – Hong Kong.
ß Audited by Deloitte Touche Tohmatsu Jaiyos – Thailand.
% Audited by Deloitte Touche Tohmatsu – Macao for statutory purpose. Deloitte Touche Tohmatsu –
Hong Kong audited the financial statements for consolidation purposes.
^ Audited by Guangzhou Xin Zhong Nan Certified Public Accountants Co., Ltd., a Certified
Public Accountants firm in the PRC under PRC Generally Accepted Accounting Principles for
local compliance. Deloitte Touche Tohmatsu – Hong Kong audited the financial statements for
consolidation purposes.
Elec & Eltek International Company Limited
Annual Report 2009
93Notes to the Financial Statements
19. INTEREST IN AN ASSOCIATE
2009 2008
US$’000 US$’000
Cost of investment in an associate – 5,441
Share of post-acquisition reserves – 2,947
Carrying amount of investment – 8,388
Proportion of
Country of ownership interest
Name incorporation Principal activities and voting power held
2009 2008
Held through a subsidiary company
United Hill Group Limited British Virgin Investment holding – 49%
(“United Hill”) Islands
On 16 December 2009, Elec & Eltek Jiangmen (BVI) High Tech Limited (“E&E Jiangmen”), a
wholly-owned subsidiary of the Company, entered into an agreement with Ocean Glory Ltd.
(“Ocean Glory”), an independent third party, under which Ocean Glory agreed to purchase the
entire 49% interest in United Hill at a consideration of US$10,583,000. At completion of the
transaction, E&E Jiangmen recognised a gain of US$36,000.
Summarised financial information of the associate is set out below:
At disposal
date 2008
US$’000 US$’000
Total assets 41,094 40,175
Total liabilities (19,570 ) (23,056 )
Net assets 21,524 17,119
Revenue 11,981 11,539
Profit for the year 3,390 3,163
Group’s share of profits of an associate 1,661 1,550
Gain on disposal of an associate 36 –
1,697 1,550
Elec & Eltek International Company Limited
Annual Report 2009
94
Notes to the Financial StatementsFor the year ended 31 December 2009
20. BANK OVERDRAFTS AND LOANS
THE GROUP 2009 2008 US$’000 US$’000
Unsecured: HKD bank loans 113,993 155,004 Japanese Yen bank loans 3,459 – USD bank overdrafts – 2 Trust receipts – 2,593
117,452 157,599
Comprising amounts following due: – within one year 53,532 65,063 – more than one year 63,920 92,536
117,452 157,599
The effective interest rate of bank overdrafts in 2008 was 5.40% per annum.
The Group’s unsecured bank loans are repayable in quarterly or monthly instalments commencing from 2006 and ending in 2013 and bear interest at weighted effective rate of 1.35% (2008: 3.37%) per annum. The interest rates of these floating rate loans repriced at 0.5% to 1.25% (2008: 0.5% to 1.55%) per annum over 1, 2 or 3 months London Interbank Offer Rate (LIBOR) or Hong Kong Interbank Offer Rate (HIBOR).
The above credit facilities are provided under:
(a) corporate guarantees from the Company;
(b) the Company undertakes to maintain:
(i) a consolidated tangible net worth at a level not less than US$250,000,000 at any time;
(ii) a consolidated gearing ratio and consolidated interest cover ratio at a level of not higher than 85% and not less than 5 times, respectively at all time; and
(c) negative pledges from the Company.
The Group has complied with the financial covenants as at the end of the financial year.
There are no fixed or floating charges against any assets belonging to the Group or the Company.
All borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk.
The fair value of the Group’s borrowings approximates their carrying amount.
Elec & Eltek International Company Limited
Annual Report 2009
95Notes to the Financial Statements
21. TRADE PAYABLES
THE GROUP
2009 2008
US$’000 US$’000
Third parties 47,052 56,682
Related companies 37,521 31,568
84,573 88,250
Trade payables are non-interest bearing and generally on 90 to 120 days’ terms. The Group
has financial risk management policies in place to ensure that all payables are within the credit
timeframe.
The Group’s trade payables that are not denominated in the functional currencies of the
respective entities are as follows:
2009 2008
US$’000 US$’000
Denominated in:
Hong Kong Dollars 3,952 5,376
Chinese Renminbi 27,698 46,238
Euro 1,692 239
Japanese Yen 145 90
United States Dollars 1,594 979
Trade payables principally comprise amounts outstanding for trade purchases and ongoing
costs.
Amount due to related companies are unsecured, interest-free and are repayable on demand.
Elec & Eltek International Company Limited
Annual Report 2009
96
Notes to the Financial StatementsFor the year ended 31 December 2009
22. OTHER PAYABLES
THE GROUP THE COMPANY
2009 2008 2009 2008
US$’000 US$’000 US$’000 US$’000
Accrued expenses 17,455 15,148 185 119
Financial guarantee contracts – – 186 185
Other payables 12,634 23,472 – –
30,089 38,620 371 304
The Group’s and the Company’s other payables that are not denominated in the functional
currencies of the respective entities are as follows:
THE GROUP THE COMPANY
2009 2008 2009 2008
US$’000 US$’000 US$’000 US$’000
Denominated in:
Chinese Renminbi 14,720 12,660 9 –
Euro 101 4,053 – –
Hong Kong Dollars 1,164 3,142 – –
Japanese Yen 16 940 – –
Singapore Dollars 218 174 148 119
United States Dollars 13 36 – –
23. DEFERRED TAXATION
The followings are the major deferred tax liabilities and assets recognised by the Group, and
the movements thereon, during the current and prior reporting periods:
THE GROUP
2009 2008
US$’000 US$’000
Deferred tax assets 1,437 1,446
Deferred tax liabilities (2,416 ) (1,998 )
Elec & Eltek International Company Limited
Annual Report 2009
97Notes to the Financial Statements
23. DEFERRED TAXATION (Continued)
Deferred tax assets
Excess of tax written down value over carrying amount of fixed assets Others Total US$’000 US$’000 US$’000
THE GROUPAt 1 January 2008 1,182 169 1,351Currency realignment 82 – 82(Charge) credit to profit or loss for the year (13 ) 26 13
At 31 December 2008 1,251 195 1,446Currency realignment 5 – 5(Charge) credit to profit or loss for the year (28 ) 14 (14 )
At 31 December 2009 1,228 209 1,437
Deferred tax liabilities
Excess of carrying amount of fixed assets over tax written Undistributed down value earnings Total US$’000 US$’000 US$’000
THE GROUPAt 1 January 2008 (1,657 ) – (1,657 )Currency realignment (13 ) – (13 )Credit (charge) to profit or loss for the year 258 (586 ) (328 )
At 31 December 2008 (1,412 ) (586 ) (1,998 )Currency realignment 9 – 9Credit (charge) to profit or loss for the year 123 (550 ) (427 )
At 31 December 2009 (1,280 ) (1,136 ) (2,416 )
At the end of the reporting period, the Group has unutilised tax losses of US$31.9 million (2008: US$29.0 million) available for offset against future profits. No deferred tax asset has been recognised (2008: nil) due to the unpredictability of future profit streams.
Elec & Eltek International Company Limited
Annual Report 2009
98
Notes to the Financial StatementsFor the year ended 31 December 2009
24. SHARE CAPITAL
THE GROUP AND THE COMPANY
2009 2008
No. of Shares US$’000 No. of shares US$’000
Issued and fully paid:
At beginning and end
of financial year 179,635,062 98,656 179,635,062 98,656
As at the end of the reporting period, the Company has a total of 178,887,062 (2008:
178,887,062) issued ordinary shares excluding treasury shares.
The holders of ordinary shares are entitled to receive dividends as and when declared by the
Company. All ordinary shares carry one vote per share without restriction and has no par value.
Details of the outstanding options to subscribe for unissued ordinary shares of the Company
are set out in Note 26.
As at the end of the financial year, there are options outstanding granted to directors and
employees of the Group and associates of controlling shareholders to subscribe for unissued
shares totalling 9,126,200 (2008: 9,333,800) ordinary shares each as described in the report
of directors.
25. TREASURY SHARES
THE GROUP AND THE COMPANY
2009 2008
No. of Shares US$’000 No. of shares US$’000
At beginning of financial year 748,000 1,356 487,000 896
Repurchase during the year – – 261,000 460
At end of financial year 748,000 1,356 748,000 1,356
In 2008, the Company acquired 261,000 shares of its own shares through on market
purchases on the Singapore Exchange Securities Trading Limited. Such shares were held as
treasury shares, with no voting rights and dividend entitlements, for future application. The
total consideration paid to acquire the shares was US$460,000 and this was deducted against
shareholders’ equity.
Elec & Eltek International Company Limited
Annual Report 2009
99Notes to the Financial Statements
26. SHARE-BASED PAYMENTS
The Company had granted share options to eligible employees under the 2002 Elec & Eltek
Employees’ Share Option Scheme (the “2002 Scheme”) which was terminated upon its expiry
without affecting the rights of holders of any options granted and outstanding under the 2002
Scheme.
In 2008, a new share option scheme, namely, the 2008 Elec & Eltek Employees’ Share Option
Scheme (the “2008 Scheme”) was approved by the shareholders at the Extraordinary General
Meeting held on 21 April 2008 and was adopted by the Company on 9 May 2008 upon
fulfilment of all the conditions precedent as set out in Rule 2 of the 2008 Scheme. Since its
adoption, no option has been granted by the Company pursuant to the 2008 Scheme.
The 2008 Scheme is open to full-time employees and directors of any company within the
Group, the parent group and of an associated company of the Company, subject to certain
conditions being satisfied.
The 2008 Scheme entitles the option holders to exercise their options and subscribe for new
ordinary shares in the Company either at an “Exercise Price”, which equals to the average
of the last dealt prices of the Company’s shares for a period of five consecutive market days
immediately preceding the relevant date of grant, or at a discount to the Exercise Price as
defined earlier, whereby the discount shall not exceed 20% of the Exercise Price.
Options granted at the Exercise Price or at a discount to the Exercise Price may be exercised
after the first or second anniversary respectively, of the date of grant and expiring on the fifth
anniversary of the date of grant.
The duration of the 2008 Scheme is ten years and the total number of shares that may be issued
shall not exceed 10% of the total number of shares in issue as at the adoption date or subject
to certain conditions being satisfied, 15% of the total issued shares of the Company excluding
treasury shares from time to time.
The Company did not grant any share option under the 2008 Scheme in 2008 and 2009.
Elec & Eltek International Company Limited
Annual Report 2009
100
Notes to the Financial StatementsFor the year ended 31 December 2009
26. SHARE-BASED PAYMENTS (Continued)
Information with respect to the movement of share options of the Company during the current
financial year is as follows:
Balance Balance
as at as at
1 January 31 December Subscription
Date of grant 2009 Lapsed 2009 price Expiry date
US$
24.6.2005 8,380,800 (105,600 ) 8,275,200 2.033 24.5.2010
29.9.2005 120,000 – 120,000 2.375 4.9.2010
12.12.2006 833,000 (102,000 ) 731,000 2.400 12.11.2011
9,333,800 (207,600 ) 9,126,200
Information with respect to the movement of share options of the Company during the previous
financial year is as follows:
Balance Balance
as at as at
1 January 31 December Subscription
Date of grant 2008 Lapsed 2008 price Expiry date
US$
24.6.2005 9,579,000 (1,198,200 ) 8,380,800 2.033 24.5.2010
29.9.2005 180,000 (60,000 ) 120,000 2.375 4.9.2010
12.12.2006 928,000 (95,000 ) 833,000 2.400 12.11.2011
10,687,000 (1,353,200 ) 9,333,800
In the above tables, adjustments were made to the subscription price and number of share
options granted on 24 June 2005 and 29 September 2005 under the 2002 Scheme with effect
from 13 October 2005, upon the bonus issue of shares on the basis of one (1) bonus share
for every five (5) ordinary shares held in the capital of the Company. Such adjustments were
reviewed by the Company’s Employees’ Share Option Scheme Committee.
Elec & Eltek International Company Limited
Annual Report 2009
101Notes to the Financial Statements
26. SHARE-BASED PAYMENTS (Continued)
Details of the share options and the estimated fair value of the options are as follows:
Option 1 Option 2 Option 3
Date of grant 24 June 2005 29 September 2005 12 December 2006
Estimated fair value per option US$0.2033 US$0.1997 US$0.3293
These fair values were calculated using the Trinomial Lattice Model. The inputs into the model
were as follows:
Option 1 Option 2 Option 3
Share price at grant date US$2.53 US$2.92 US$2.74
Subscription price US$2.033 * US$2.375 * US$2.40
Expected volatility 25.4% 21.2% 36.6%
Expected life (years) 5 5 5
Risk free interest rate 3.7% 4.2% 3.7%
Expected dividend yield 7.5% 7.5% 7.5%
* The subscription price reflected are after adjustment made to effect the bonus issue of shares on
the basis of one bonus share for every five ordinary shares held in the capital of the Company on
13 October 2005.
Expected volatility was determined by calculating the historical volatility of the Company’s
share price over the previous five years. The expected life used in the model has been
adjusted, based on management’s best estimate, for the effects of non-transferability, exercise
restrictions and behavioural considerations.
As at end of the reporting period, the total exercisable share options were 9,126,200 (2008:
9,333,800).
There was no option exercised in both years. The share options outstanding at the end of year
have a weighted average contracted age of 1.5 (2008: 2.5) years.
The Group recognised total expenses of US$183,000 (2008: US$361,000) related to equity-
settled share-based payment transactions during the year.
Elec & Eltek International Company Limited
Annual Report 2009
102
Notes to the Financial StatementsFor the year ended 31 December 2009
27. RETIREMENT BENEFIT OBLIGATIONS
Defined contribution plansThe employees of the Group that are located in Singapore, the PRC and Hong Kong are
members of the Central Provident Fund Board in Singapore, a state-sponsored retirement
benefit plan in the PRC and Mandatory Provident Fund Scheme in Hong Kong, operated by the
Government of Singapore, the PRC and Hong Kong, respectively. The respective entities are
required to contribute a specified percentage of payroll costs to the retirement benefit schemes
to fund the benefits. The only obligation of the Group with respect to the retirement benefit
plans is to make the specified contributions.
The total expense recognised in profit or loss of US$2,316,000 (2008: US$2,872,000)
represents contributions payable to these plans by the Group at rates specified in the rules
of the respective plans. The amounts were paid during the year and over the end of the
subsequent reporting period.
28. CONTINGENT LIABILITIES
THE GROUP THE COMPANY
2009 2008 2009 2008
US$’000 US$’000 US$’000 US$’000
Bank guarantees given to third
parties (unsecured) 729 779 – –
Corporate guarantees given by the
Company to secure bank credit
facilities granted to subsidiary
companies (unsecured) – – 367,188 348,268
The Group’s subsidiary company, Kaiping Elec & Eltek No.3 Company Limited (“KPEE#3”) is
currently involved in potential lawsuits, claims and proceedings with one of our PRC customers
amounting to approximately RMB30.0 million (approximately US$4.4 million), arising from
some negative feedback from the end users of the assembled products using PCBs supplied
by KPEE#3. At the same time, the Group is now seeking to recover the long overdue trade
receivables of approximately RMB1.0 million (approximately US$0.1 million) from the same
customer.
Based on the legal advice obtained by the Group, the Board is of the opinion that the
abovementioned claim has no merit and the potential lawsuit will not have a material adverse
effect on the consolidated financial position of the Group.
Elec & Eltek International Company Limited
Annual Report 2009
103Notes to the Financial Statements
29. CAPITAL COMMITMENTS
THE GROUP
2009 2008
US$’000 US$’000
Capital expenditure not provided for in the
financial statements:
Commitments for capital contributions in
subsidiary companies 3,533 17,925
Commitments in respect of contracts placed for
plant expansion 18,002 12,968
21,535 30,893
30. OPERATING LEASES ARRANGEMENT
The Group as lessee
THE GROUP
2009 2008
US$’000 US$’000
Minimum lease payments under operating leases
recognised as an expense in the current year 727 781
At the end of the reporting period, the Group had outstanding commitments under non-
cancellable operating leases, when fall due as follows:
THE GROUP
2009 2008
US$’000 US$’000
Within one year 380 361
In two to five years 213 272
Total 593 633
Operating lease payments represent rental payable by the Group for some of its office
properties and leases are negotiated for an average of 2 years.
Elec & Eltek International Company Limited
Annual Report 2009
104
Notes to the Financial StatementsFor the year ended 31 December 2009
30. OPERATING LEASES ARRANGEMENT (Continued)
The Group as lessorThe Group rents outs its investment properties in the People’s Republic of China and
Hong Kong under operating leases. Property rental income earned during the year was
US$1,534,980 (2008: US$1,773,150). Properties has committed tenants for the next two
years.
At the end of the reporting period, the Group has contracted with tenants for the following
future minimum lease payments:
THE GROUP
2009 2008
US$’000 US$’000
Within one year 1,664 1,513
In the second to fifth years inclusive 2,908 4,390
4,572 5,903
31. INFORMATION BY SEGMENT ON GROUP’S OPERATIONS
The Group’s operating activities are attributable to a single reporting segment focusing on
fabrication and distribution of PCBs. This reportable segment has been identified on the basis
of internal management reports prepared in accordance with accounting policies conform to
FRSs, that are regularly reviewed by the Executive Directors of the Company. The Executive
Directors of the Company regularly reviews revenue analysis. However, other than revenue
analysis, no operating results by segments and other discrete financial information is available
for the assessment of performance of the respective products. The Executive Directors of the
Company reviews the overall results of the Group as a whole to make decisions about resources
allocation. Accordingly, no analysis of this single reporting segment is presented.
Elec & Eltek International Company Limited
Annual Report 2009
105Notes to the Financial Statements
31. INFORMATION BY SEGMENT ON GROUP’S OPERATIONS (Continued)
Revenue by geographical areaThe Group’s revenue from continuing operations from external customers and information
about its non-current assets by geographical location are detailed below:
Revenue from
external customers Non-current assets
2009 2008 2009 2008
US$’000 US$’000 US$’000 US$’000
Asia
The PRC (including Hong Kong) 265,306 297,531 339,592 374,214
South East Asia 93,640 100,631 29,475 32,945
Others 4,949 15,108 – –
363,895 413,270 369,067 407,159
Europe 38,137 68,966 – –
North and Central America 29,231 28,438 – –
Rest of the World 3,302 7,257 – –
434,565 517,931 369,067 407,159
Revenue by layer countThe proportion of PCBs sales by layer count is provided below:
2009 2008
% %
2- to 6-Layer 68.2 66.6
8-Layer & above 25.6 30.5
HDI 6.2 2.9
100.0 100.0
Elec & Eltek International Company Limited
Annual Report 2009
106
SGX Listing Manual Requirements
1. Directors’ Remuneration
The following information relates to remuneration of directors of Elec & Eltek International
Company Limited (the “Company”).
Number of Directors in remuneration bands
Group
2009 2008
S$500,000 (US$344,709 equivalent) and above 2 –
S$250,000 to S$499,999
(US$172,354 to US$344,709 equivalent) 3 5
Below S$250,000 (US$172,354 equivalent) 4 5
Total 9 10
The number of directors disclosed for 2008 includes director who resigned during the financial
year ended 31 December 2008. In addition, the four directors nominated from Kingboard
Chemical Holdings Limited, namely, Messrs Cheung Kwok Wing, Chadwick Mok Cham Hung,
Chan Wing Kwan and Chang Wing Yiu did not receive any remuneration from the Company or
from any of its subsidiary companies.
Summary of Directors’ remuneration (in percentage terms) for the financial year ended 31 December 2009
Other
Name of Director Salary Bonus Fees # Benefits Total
% % % % %
Chadwick Mok Cham Hung – – – – –
Li Muk Kam 78 15 – 7 100
Philip Chan Sai Kit 61 33 – 6 100
Clement Sun 60 37 – 3 100
Claudia Heng Nguan Leng 74 11 – 15 100
Li Chiu Cheuk 56 41 – 3 100
Chan Wai Leung 97 – – 3 100
Cheung Kwok Wing – – – – –
Chan Wing Kwan – – – – –
Chang Wing Yiu – – – – –
Philip Wong Yu Hong – 32 63 5 100
Larry Lai Chong Tuck – 32 63 5 100
Raymond Leung Hai Ming – 33 67 – 100
# subject to approval by the shareholders at each annual general meeting.
Elec & Eltek International Company Limited
Annual Report 2009
107SGX Listing Manual Requirements
2. Remuneration Data
The remuneration paid to the top five key management executives who are not Directors of
the Company fall within the remuneration band of S$217,212 (US$149,750 equivalent) to
S$333,899 (US$230,196 equivalent) for the financial year ended 31 December 2009.
During the financial year under review, no employee whose annual remuneration exceeded
S$150,000 was related to the Chairman, the Chief Executive Officer or any other Director of the
Company.
3. Interested Person Transactions
The amount of interested person transactions to be disclosed pursuant to Rule 920 (1)(a)(ii) of
the Listing Manual of the Singapore Exchange Securities Trading Limited for the financial year
ended 31 December 2009 are as follows:
Aggregate value of all interested person transactions
during the financial year
(including transactions less than S$100,000)
Excluding transactions
conducted under Conducted under
shareholders’ mandate shareholders’ mandate
Name of Interested Person pursuant to Rule 920 pursuant to Rule 920
US$’000 2009 2008 2009 2008
Purchase of plant and equipment
Chung Shun Laminates
(Macao Commercial Offshore) Limited
formerly known as Kingboard Laminates
(Macao Commercial Offshore) Limited 191 – – –
191 – – –
Elec & Eltek International Company Limited
Annual Report 2009
108
SGX Listing Manual Requirements
3. Interested Person Transactions (Continued)
Aggregate value of all interested person transactions during the financial year (including transactions less than S$100,000) Excluding transactions conducted under Conducted under shareholders’ mandate shareholders’ mandate Name of Interested Person pursuant to Rule 920 pursuant to Rule 920US$’000 2009 2008 2009 2008
Purchases of goods and servicesChung Shun Copper Foil (Macao Commercial Offshore) Limited formerly known as Kingboard Copper Foil (Macao Commercial Offshore) Limited – – 25,543 44,527Chung Shun Laminates (Macao Commercial Offshore) Limited formerly known as Kingboard Laminates (Macao Commercial Offshore) Limited – – 56,651 44,287Elec & Eltek Corporate Services Limited 516 509 – –Heng Yang Kingboard Chemical Co., Ltd. – – 8,948 7,405Hong Kong Fibre Glass Company Limited – – 1,116 2,884Huizhou Chung Shun Chemical Co., Ltd. – – 225 346Jiangmen Glory Faith PCB Co. Ltd. – – 18 19Joyful Source Group Limited 1,798 1,507 – –Kingboard Investments Limited 356 775 – –Kingboard (Lian Zhou) Electronic Materials Ltd. – – – 14,135Techwise (Macao Commercial Offshore) Circuits Limited – – 31 –Top Faith PCB Co. Ltd. – – 1,682 51
2,670 2,791 94,214 113,654
Provision of goods and servicesChung Shun Laminates (Macao Commercial Offshore) Limited formerly known as Kingboard Laminates (Macao Commercial Offshore) Limited 1,254 259 30 –E & E Magnetic Products Limited – 7 – –Elec & Eltek Display Technology Limited 19 42 – –Express Electronics Ltd. – – 881 –Express Electronics (Suzhou) Co. Ltd. – – – 12Jiangmen Glory Faith PCB Co. Ltd. – – 3,781 4,687Techwise (Macao Commercial Offshore) Circuits Limited – – 773 332Top Faith PCB Co. Ltd. – – 833 573Shenzhen Wing Fung PCB Company Limited – – 71 124
1,273 308 6,369 5,728
Elec & Eltek International Company Limited
Annual Report 2009
109SGX Listing Manual Requirements
4. Shareholding Statistics as at 25 February 2010
Number of shares in issue : 178,887,062 (excluding treasury shares)
Class of Shares : Ordinary Shares
Voting Rights : One vote per share
Distribution of Shareholdings
No. of
Size of Shareholdings Shareholders % No. of Shares %
1 – 999 157 7.03 50,847 0.03
1,000 – 10,000 1,680 75.20 5,852,180 3.27
10,001 – 1,000,000 387 17.32 13,927,308 7.79
1,000,001 and above 10 0.45 159,056,727 88.91
Total 2,234 100.00 178,887,062 100.00
As at 25 February 2010, 18.21% of the Company’s total number of issued ordinary shares,
excluding treasury shares, was held in the hands of the public. Accordingly, the Company
confirms that Rule 723 of the Listing Manual has been complied with.
SUBSTANTIAL SHAREHOLDERS (HOLDING 5% AND ABOVE)(as shown in the Register of Substantial Shareholders)
No. of
Name of substantial shareholders shares held
Cheung Kwok Wing(1) 128,538,165
Hallgain Management Limited (“HML”)(1) 128,350,165
Kingboard Chemical Holdings Limited (“Kingboard”)(2) 128,350,165
Ease Ever Investments Limited (“Ease Ever”)(3) 90,741,550
Elec & Eltek International Holdings Limited (“EEIH”) 90,741,550
Elitelink Holdings Limited (“Elitelink”) 34,321,615
Cheah Cheng Hye(4) 16,069,800
To Hau Yin(4) 16,069,800
Hang Seng Bank Trustee International Limited (“HSBTIL”)(4) 16,069,800
Cheah Company Limited (“CCL”)(4) 16,069,800
Cheah Capital Management Limited (“CCML”)(4) 16,069,800
Value Partners Group Limited (“VPGL”)(4) 16,069,800
Value Partners Limited (“VPL”)(5) 16,069,800
Elec & Eltek International Company Limited
Annual Report 2009
110
SGX Listing Manual Requirements
4. Shareholding Statistics as at 25 February 2010 (Continued)
(1) HML’s deemed interest arises from its direct shareholding interest in Kingboard of 30.97% and Mr. Cheung Kwok Wing holds approximately 23% in HML.
(2) Kingboard’s deemed interest arises from its direct shareholding interest in Elitelink and Kingboard Investments Limited of 100%, direct shareholding interest of 11.59% in EEIH and deemed interest of 88.41% in EEIH by virtue of its shareholding interest in Ease Ever and Kingboard Investments Limited.
(3) Ease Ever’s deemed interest arises from its direct shareholding interest in EEIH of 77.34%.
(4) Cheah Cheng Hye and To Hau Yin are deemed interested in the shares held by the funds managed by VPL, by virtue of them being the founder and beneficiary respectively of a discretionary trust, The C H Cheah Family Trust, with HSBTIL as the trustee. HSBTIL owns 100% in CCL which in turn owns 100% in CCML which in turn owns 35.65% in VPGL which in turn owns 100% in VPL.
(5) VPL, a fund manager, is deemed interested by virtue of shares held directly by the funds under its management.
Twenty Largest Shareholders
No. Name No. of Shares %
1 Elec & Eltek International Holdings Limited 90,741,550 50.732 Elitelink Holdings Limited 34,321,615 19.193 Raffles Nominees Pte Ltd 8,298,720 4.644 HSBC (Singapore) Nominees Pte Ltd 7,308,866 4.095 Citibank Nominees Singapore Pte Ltd 6,960,800 3.896 DBS Nominees Pte Ltd 4,907,851 2.747 DBSN Services Pte Ltd 2,092,089 1.178 Merrill Lynch (S’pore) Pte Ltd 1,795,164 1.009 DBS Vickers Securities (S) Pte Ltd 1,594,196 0.8910 Li Muk Kam 1,035,876 0.5811 UOB Kay Hian Pte Ltd 567,040 0.3212 Phillip Securities Pte Ltd 387,768 0.2213 Heng Nguan Leng 322,800 0.1814 Mellford Pte Ltd 319,000 0.1815 Cosmic Insurance Corporation Limited – SIF 275,712 0.1516 Tok Ching Ka 270,000 0.1517 DB Nominees (S) Pte Ltd 265,000 0.1518 Kwan Choon Ying or Loke Kwan Ying 250,000 0.1419 Leap International Pte Ltd 240,000 0.1320 Tan Ah Chai 220,000 0.12
Total 162,174,047 90.66
The shareholding statistics shown above exclude 748,000 shares, representing 0.42% of the total number of issued ordinary shares excluding treasury shares, bought back by the Company and held as treasury shares as at 25 February 2010. The percentage of issued ordinary shares is calculated based on the number of issued ordinary shares of the Company as at 25 February 2010 excluding treasury shares.
Elec & Eltek International Company Limited
Annual Report 2009
111
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at the STI
Auditorium, 168 Robinson Road, Level 9 Capital Tower, Singapore 068912 on 5 April 2010, Monday
at 2:00 p.m. to transact the following ordinary and special businesses:
ORDINARY BUSINESSES:
1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the
financial year ended 31 December 2009 with the Auditors’ Report thereon.
2. To declare a one-tier tax exempt final dividend of United States 15.0 cents per share and a
one-tier tax exempt special dividend of United States 10.0 cents per share for the financial year
ended 31 December 2009.
3. To re-elect Mr. Li Muk Kam, retiring by rotation in accordance with Articles 95(2) and 95(4) of
the Company’s Articles of Association (the “Articles”), as Director of the Company.
4. To re-elect Mr. Philip Chan Sai Kit, retiring by rotation in accordance with Articles 95(2) and
95(4) of the Articles, as Director of the Company.
5. To re-elect Mr. Clement Sun, retiring by rotation in accordance with Articles 95(2) and 95(4) of
the Articles, as Director of the Company.
6. To re-elect Mr. Chang Wing Yiu, retiring by rotation in accordance with Articles 95(2) and 95(4)
of the Articles, as Director of the Company. [see Note (1) below]
7. To approve Directors’ fees of HK$120,000 for the financial year ending 31 December 2010. [see
Note (2) below]
8. To re-appoint Deloitte & Touche LLP as Auditors of the Company and authorise the Directors to
fix their remuneration.
Elec & Eltek International Company Limited
Annual Report 2009
112
Notice of Annual General Meeting
SPECIAL BUSINESSES:
9. To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or
without any modification:
9.1 Authority to issue shares pursuant to the exercise of share options granted under
the 2002 Elec & Eltek Employees’ Share Option Scheme and the 2008 Elec & Eltek
Employees’ Share Option Scheme (collectively the “Option Schemes”) [see Note (3)
below]
That approval be and is hereby given to the Directors or a Committee of the Directors of
the Company to allot and issue from time to time such number of new ordinary shares
in the capital of the Company as may be required to be issued pursuant to the exercise
of share options granted under the Option Schemes in accordance with the provisions
of the Option Schemes; PROVIDED ALWAYS that the aggregate number of new ordinary
shares to be issued pursuant to the Option Schemes shall not exceed 15% of the issued
shares in the capital of the Company, excluding treasury shares, from time to time.
9.2 Authority to issue new shares [see Note (4) below]
That pursuant to Section 161 of the Companies Act (Cap. 50, Singapore Statutes) and
Rule 806 of the Listing Manual of Singapore Exchange Securities Trading Limited (the
“SGX-ST”), authority be and is hereby given to the Directors to
(a) (i) issue shares in the capital of the Company (“shares”) whether by way of
rights, bonus or otherwise; and/or
(ii) make or grant offers, agreements or options (collectively “Instruments”) that
might or would require shares to be issued, including but not limited to the
creation and issue of (as well as adjustments to) warrants, debentures or
other instruments convertible into shares,
at any time and upon such terms and conditions and for such purposes and to
such persons as the Directors may in their absolute discretion deem fit; and
(b) issue shares in pursuance of any Instrument made or granted by the Directors
while this Resolution was in force, notwithstanding that the authority granted by
this Resolution may have ceased to be in force at the time of such issuance of
shares.
Elec & Eltek International Company Limited
Annual Report 2009
113Notice of Annual General Meeting
PROVIDED THAT
(1) the aggregate number of shares to be issued pursuant to this Resolution (including
shares to be issued in pursuance of Instruments made or granted pursuant to this
Resolution):
(i) by way of renounceable rights issues on a pro-rata basis to shareholders
of the Company (“Renounceable Rights Issues”) shall not exceed 100% of
the total number of issued shares in the capital of the Company excluding
treasury shares (as calculated in accordance with sub-paragraph (2)
below); and
(ii) otherwise than by way of Renounceable Rights Issues (“Other Share Issues”)
shall not exceed 50% of the total number of issued shares in the capital of
the Company excluding treasury shares (as calculated in accordance with
sub-paragraph (2) below), of which the aggregate number of shares to be
issued other than on a pro-rata basis to shareholders of the Company shall
not exceed 20% of the total number of issued shares in the capital of the
Company excluding treasury shares (as calculated in accordance with sub-
paragraph (2) below),
for the avoidance of doubt, the shares issued pursuant to the Renounceable
Rights Issues and Other Share Issues shall not, in aggregate, exceed 100% of the
total number of issued shares in the capital of the Company excluding treasury
shares (as calculated in accordance with sub-paragraph (2) below);
(2) (subject to such manner of calculation and adjustments as may be prescribed
by the SGX-ST) for the purpose of determining the aggregate number of shares
that may be issued under sub-paragraph (1) above, the percentage of issued
shares shall be based on the total number of issued shares in the capital of the
Company, excluding treasury shares, at the time this Resolution is passed, after
adjusting for:
(i) new shares arising from the conversion or exercise of any convertible
securities or share options or vesting of share awards which are outstanding
or subsisting at the time this Resolution is passed; and
(ii) any subsequent bonus issue, consolidation or subdivision of the shares;
(3) in exercising the authority conferred by this Resolution, the Company shall comply
with the provisions of the Listing Manual of the SGX-ST for the time being in force
(unless such compliance has been waived by the SGX-ST) and the Articles for the
time being; and
Elec & Eltek International Company Limited
Annual Report 2009
114
Notice of Annual General Meeting
(4) unless revoked or varied by the Company in general meeting, the authority
conferred by this Resolution shall continue in force until the conclusion of the
next annual general meeting of the Company or the date by which the next annual
general meeting of the Company is required by law or the Articles to be held,
whichever is the earlier; save for paragraph (1)(i) above which shall continue in
force until 31 December 2010 or such other date as may be prescribed by the
SGX-ST.
BY ORDER OF THE BOARD
CLAUDIA HENG NGUAN LENG
Company Secretary
Singapore
18 March 2010
Notes:
(1) Mr. Chang Wing Yiu will, upon re-election as Director, remain as member of the Employees’ Share Option
Scheme Committee of the Company.
(2) For the financial year ended 31 December 2009, the approved Directors’ fee was HK$300,000.
(3) Resolution 9.1, if passed, will empower the Directors of the Company to issue shares in the capital of the
Company pursuant to the exercise of share options granted under the Option Schemes, up to and not
exceeding in total 15% of the issued shares in the capital of the Company, excluding treasury shares,
from time to time.
(4) Resolution 9.2, if passed, will authorise the Directors of the Company to issue shares and Instruments
in the Company up to 50% of the Company’s total number of issued shares excluding treasury shares
(calculated as described in Resolution 9.2) with an aggregate sub-limit of 20% of the Company’s total
number of issued shares excluding treasury shares (calculated as described in Resolution 9.2) for any
issues not made on a pro-rata basis to shareholders of the Company.
(5) A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy to
attend and vote on his behalf. A proxy need not also be a member. The instrument appointing a proxy
must be deposited at the registered office of the Company at 80 Raffles Place, #33-00 UOB Plaza 1,
Singapore 048624, not less than 48 hours before the time of the meeting.
Total No. of Shares in No. of Shares
CDP Register
Register of Members
✄
ANNUAL GENERAL MEETINGProxy Form
Registered Office: 80 Raffles Place #33-00 UOB Plaza 1 Singapore 048624
(Please read notes overleaf carefully before completing this Form)
I/We
NRIC/Passport No./Company Registration No.
of
(Address)
being a member(s) of Elec & Eltek International Company Limited (the “Company”) hereby appoint:
Name Address NRIC/Passport No. No. of Shares Proportion of Shareholding (%)
and/or (delete as appropriate)(The next row should be completed only where it is desired to appoint two proxies or an alternate proxy)
as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and if necessary, to demand a poll at the Annual General Meeting (“AGM”) of the Company to be held at the STI Auditorium, 168 Robinson Road, Level 9 Capital Tower, Singapore 068912 on 5 April 2010, Monday, at 2:00 p.m., and at any adjournment thereof, for the purpose of considering and if thought fit, passing with or without modifications, the Resolutions as set out in the Notice convening the AGM, as hereunder indicated.
Please indicate with an “X” in the spaces provided below whether your wish your vote(s) to be cast for or against the respective Resolutions as set out in the Notice convening the AGM. In the absence of specific directions, the proxy/proxies may vote or abstain from voting in his/their discretion on any matter arising at the AGM.
Ordinary Resolutions
To be used on a show of hands
To be used in the event of a poll
For* Against* For** Against**
1 Adoption of the Directors’ Report and the Audited Accounts for the financial year ended 31 December 2009 with the Auditors’ Report thereon
2 Declaration of dividends
3 Re-election of Mr. Li Muk Kam as Director
4 Re-election of Mr. Philip Chan Sai Kit as Director
5 Re-election of Mr. Clement Sun as Director
6 Re-election of Mr. Chang Wing Yiu as Director
7 Approval of Directors’ fees for financial year ending 31 December 2010
8 Re-appointment of Auditors and authorisation of Directors to fix Auditors’ remuneration
9.1 Authority to allot and issue shares pursuant to employees’ share option schemes
9.2 Authority of Directors to issue new shares
* Please indicate your vote “For” or “Against”.
** If you wish to use all your votes “For” or “Against”, please indicate with an “X” within the box provided. Otherwise, please indicate number of votes.
Dated this day of 2010
Signature(s) of Member(s)/Common Seal
✄
IMPORTANT (PLEASE READ NOTES BELOW BEFORE COMPLETING THIS PROXY FORM)
Notes:
1. Please insert the total number of shares in the capital of the Company (“Shares”) held by you. If you have Shares entered against your name in the
Depository Register (as defined in Section 130A of the Companies Act (Cap. 50, Singapore Statutes) (the “Act”), you should insert that number of
Shares. If you have Shares registered in your name in the Register of Members of the Company, you should insert that number of Shares. If you
have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert
the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no
number of Shares is inserted, this proxy form will be deemed to relate to all the Shares held by you.
2. A member entitled to attend and vote at the AGM of the Company is entitled to appoint one or two proxies to attend and vote on his behalf. A proxy
need not be a member of the Company.
3. Where a member appoints two proxies, the appointment shall be invalid unless the member specifies the proportion of his shareholding (expressed as a
percentage of the whole) to be represented by each proxy.
4. This proxy form appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised in writing by the appointor.
Where the proxy form is executed by a corporation, it must be executed under its common seal or under the hand of any officer or attorney duly
authorised by the corporation.
5. Where a proxy form is signed on behalf of the appointor by an attorney, the power of attorney (or other authority) or a duly certified true copy thereof
must (failing previous registration with the Company) be lodged with the proxy form, failing which the proxy form shall be treated as invalid.
6. A corporation which is a member of the Company may authorise by resolution of its directors or other governing body, such person as it thinks fit to
act as its representative at the AGM in accordance with Section 179 of the Act. The representative attending the AGM must produce evidence of his
authority.
7. This proxy form duly executed must be deposited at the Company’s registered office at 80 Raffles Place #33-00, UOB Plaza 1, Singapore 048624 not
less than 48 hours before the time appointed for holding the AGM in order for the proxy or proxies to be entitled to attend and vote at the AGM.
8. The Company shall be entitled to reject this proxy form if it is incomplete, improperly completed, illegible or where the true intentions of the appointor
are not ascertainable from the instructions of the appointor specified in the proxy form. In addition, in the case of a member of the Company whose
Shares are entered against his name in the Depository Register, the Company may reject the proxy form deposited if such member is not shown to
have Shares entered against his name in the Depository Register 48 hours before the time appointed for holding the AGM, as certified by The Central
Depository (Pte) Limited to the Company.
9. The submission of a proxy form by a member of the Company does not preclude him from attending and voting in person at the AGM if he so wishes.