towards excellence and beyond - elec & eltek report 2008 elec & eltek international company...

ANN

UAL REPORT 2008

Elec & Eltek International Company Lim

ited

ANNUAL REPORT 2008

Towards Excellence and Beyond

www.eleceltek.com

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

26 Profi les of Board of Directors and Core Management

34 Report of the Directors

43 Independent Auditors’ Report

45 Consolidated Profi t and Loss Statement

46 Balance Sheets

48 Statements of Changes in Equity

50 Consolidated Cash Flow Statement

52 Notes to the Financial Statements

105 Statement of Directors

106 SGX Listing Manual Requirements

111 Notice of Annual General Meeting

Annual General Meeting – Proxy Form

Contents

Elec & Eltek International Company Limited

Annual Report 2008

02

Corporate Profi le

Elec & Eltek International Company Limited (“Elec & Eltek”), which was listed on the Mainboard of

Singapore Exchange in 1994, is principally engaged in the fabrication and distribution of double-

sided, multi-layer and high density interconnect (“HDI”) printed circuit boards (“PCB”).

The Group has an annual production capacity of over 56 million square feet, with 8 offices worldwide

and 16 plants in Asia – 1 in Hong Kong, 2 in Thailand and 13 in Mainland China. In addition to the

mass production of HDI, backplanes, high-end servers and up to 40-layer PCBs, Quick-Turn Around

(QTA) service with lead time as short as 3 days is also provided. The customer base encompasses

global market leaders in various electronics sectors with main focus on Computer & Computer

Peripherals, High-end Communication & Networking, Consumer Electronics and Automotive.

With over 36 years of experience in manufacturing PCB, Elec & Eltek nowadays has become the

largest PCB enterprise in China, together with other PCB manufacturing sites under the umbrella of

our parent company, Kingboard Chemical Holdings Limited. Thanks to the ongoing supports from

customers, the Group also ranked as one of the top ten independent PCB companies worldwide in

terms of sales revenue.

With particular positioning of its different production facilities, Elec & Eltek strives to provide

customers with one-stop solution. On the upstream, through vertical integration, the prepreg and

laminate supply from parent company has sharpened the competitive edge on quality, cost and

delivery.

In this era of keen competition and global economic uncertainty, Elec & Eltek is still running at the

forefront of the industry. Building on solid and strong business foundations, the Group is in a sound

and resilient position to weather the financial storm, and ready to grasp every new opportunity that

come along. The Group will continue to strive for superiority and further advancement in its products

and services and provide excellent values to all stakeholders.

Elec & Eltek’s mission is to be a leading PCB manufacturer that supplies high quality and high technology PCBs in mass volume at competitive prices with excellent services.


Annual Report 2008

03

Financial Highlights and Calendar31 December 2008

2008 2007

US$ million US$ million

Profit and Loss Account

Turnover 518 572

Profit before taxation 45 37

Profit after taxation and minority interests 43 35

Per Share

Net earnings (US cents) – Basic 23.83 19.39

Net earnings (US cents) – Diluted 23.83 19.27

Net tangible assets (US$) 1.95 1.96

Balance Sheet

Shareholders’ funds 340 342

Total assets 650 656

Financial Ratios

Current assets: Current liabilities (ratio) 1.18 1.06

Inventory turnover period (month) 1.10 1.47

Gearing ratio 0.25 0.29

2008 2007

Financial Calendar

Financial year results announced on 26 February 2009 27 February 2008

Annual Report and Accounts issued on 31 March 2009 4 April 2008

Annual General Meeting held on 16 April 2009 21 April 2008

Registers of Shareholders closed on 5:00 pm 23 April 2009 5:00 pm 25 April 2008

Dividend paid/payable on

Interim 29 August 2008 13 September 2007

Final 8 May 2009 7 May 2008


Annual Report 2008

04

Financial Highlights and Calendar31 December 2008

TURNOVER BY GEOGRAPHICAL LOCATIONS

Financial year 2008

Others (1%)

South East Asia

(20%)

Mainland

China

(including

Hong Kong)

(58%)

Other Asian

countries

(3%)

Europe

(13%)

North & Central

America

(5%)

Financial year 2007

Others (1%)

South East Asia

(20%)

Other Asian

countries

(4%)

Europe

(18%)

North & Central

America

(6%)

Mainland

China

(including

Hong Kong)

(51%)

TURNOVER BY LAYER COUNT

% TURNOVER CONTRIBUTION BY MANUFACTURING LOCATIONS

Financial year 2008

Microvia (3%)

8, 10 &

12-Layer

(16%)

14-Layer

& up

(14%)

Financial year 2007

Financial year 2008

Thailand

(12%)

Financial year 2007

2, 4 &

6-Layer

(67%)

Mainland

China

(including

Hong Kong)

(88%)

Microvia (4%)

8, 10 &

12-Layer

(16%)

14-Layer

& up

(10%)

2, 4 &

6-Layer

(70%)

Thailand

(14%)

Mainland

China

(including

Hong Kong)

(86%)


Annual Report 2008

05

Financial 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

02004 2005 2006 2007 2008

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

411.0464.6

515.8

572.3

517.9 47.249.8 48.0

51.0

57.859.6

34.8 34.9

42.0 41.9

27.6

46.3

31.9

47.2

42.1

56.5

36.734.8

36.7

42.6 509.3

253.8

553.9

274.4

613.7

315.2

656.5

341.8

649.7

339.9

Financial Year

2004 2005 2006 2007 2008

2004 2005 2006 2007 2008 2004 2005 2006 2007 2008

Financial Year

Total assets

Shareholders’ funds


Annual Report 2008

06

Production and Market Information

PRODUCTION CAPACITY AS AT 31 DECEMBER 2008

PCBs with

Mass 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

2009 WORLDWIDE PROJECTED PCB MARKET 2008 2009 2013

Projected World PCB Production USD Billion 48.1 40.2 57.7

Projected World Rigid PCB Production USD Billion 34.2 28.4 40.5

Regional Value Growth Forecast CAAGR (2008-2013) %

Projected PCB Production By Area M m2 269.9 244.0 315.3

Projected Rigid PCB Production By Area M m2 239.2 216.5 274.7

Regional Area Growth Forecast CAAGR (2008-2013) %

Americas $4.1 Bn

$3.7 Bn

7.3 M m2

0.9%

-2.1%Europe $2.8 Bn

$2.7 Bn

8.6 M m2

-0.4%

-0.7%$17.4 Bn

187.2 M m2

5.4%

3.9%

Asia (excl. Japan)$24.8 Bn Japan $8.5 Bn

$4.6 Bn

13.4 M m2

1.1%

-1.2%

Source: Prismark Partners LCC, The Printed Circuit Report,

Fourth Quarter, February 2009

CAAGR: Compounded Annual Average Growth Rate


Annual Report 2008

07

Five Years’ Financial Summary

2008 2007 2006 2005 2004

US$’000 US$’000 US$’000 US$’000 US$’000

Consolidated Results

Turnover 517,931 572,274 515,845 464,550 410,993

Profit before taxation 45,137 37,163 65,108 56,566 53,324

Taxation (2,626 ) (2,272 ) (6,826 ) (6,327 ) (4,376 )

Profit after taxation 42,511 34,891 58,282 50,239 48,948

Minority interests 117 (94 ) (1,747 ) (3,000 ) (2,627 )

Profit for the year 42,628 34,797 56,535 47,239 46,321

Financial Positions

Property, plant and equipment 379,905 357,299 356,158 313,586 294,951

Non-current deposits 1,664 3,825 1,557 4,715 5,587

Intangible assets – – 2 7 20

Investment in an associate 8,388 8,169 6,110 5,060 –

Investment properties 15,756 8,733 – – –

Deferred tax assets 1,446 1,351 1,245 1,496 1,592

Current assets 242,503 277,120 248,656 229,074 207,120

Total assets 649,662 656,497 613,728 553,938 509,270

Non-current liabilities 94,534 52,178 94,795 65,129 55,219

Current liabilities 205,652 252,827 193,473 200,083 186,537

Total liabilities 300,186 305,005 288,268 265,212 241,756

Net assets 349,476 351,492 325,460 288,726 267,514

Represented by:

Shareholders’ funds 339,870 341,815 315,243 274,391 253,757

Minority interests 9,606 9,677 10,217 14,335 13,757

349,476 351,492 325,460 288,726 267,514


Annual Report 2008

08

Corporate Information

BOARD OF DIRECTORS

Executive DirectorsMr. Chadwick Mok Cham Hung

Vice-Chairman

Mr. Li Muk Kam

Mr. Philip Chan Sai Kit

Mr. Clement Sun

Ms. Claudia Heng Nguan Leng

Mr. Li Chiu Cheuk

Mr. Chan Wai Leung

Non-executive DirectorsMr. Cheung Kwok Wing

Chairman

Mr. Chan Wing Kwan

Mr. Chang Wing Yiu

Independent Non-executive DirectorsDr. Philip Wong Yu Hong

Mr. Larry Lai Chong Tuck

Dr. Raymond Leung Hai Ming

AUDIT COMMITTEEMr. Larry Lai Chong Tuck (Chairman)

Dr. Philip Wong Yu Hong


NOMINATING COMMITTEEDr. Philip Wong Yu Hong (Chairman)



REMUNERATION COMMITTEEDr. Philip Wong Yu Hong (Chairman)



EMPLOYEES’ SHARE OPTION SCHEME COMMITTEEMr. Cheung Kwok Wing

Mr. Chan Wing Kwan

Mr. Chang Wing Yiu

SECRETARIESMs. Claudia Heng Nguan Leng

Ms. Marian Ho Wui Mee

REGISTERED OFFICE80 Raffles Place #33–00

UOB Plaza 1

Singapore 048624

Tel: 6225 2626

Fax: 6225 1838

PRINCIPAL OFFICE4 Leng Kee Road

#03-02 SiS Building

Singapore 159088

Tel: 6226 0488

Fax: 6220 2377

Website: www.eleceltek.com

SHARE REGISTRARBoardroom Corporate & Advisory

Services Pte. Ltd.

3 Church Street #08-01

Samsung Hub

Singapore 049483

STATUTORY AUDITORSDeloitte & Touche LLP

Public Accountants and

Certified Public Accountants

Partner: Mr. Kee Cheng Kong Michael

(appointed since the financial year ended

31 December 2007)

SOLICITORSRodyk & Davidson LLP

Chang See Hiang & Partners

PRINCIPAL BANKERSThe Hongkong and Shanghai

Banking Corporation Limited

Citibank, N.A.

DBS Bank Ltd

Bank of America, N.A.

Rabobank International

Standard Chartered Bank


Annual Report 2008

09

Structure of the Group31 December 2008

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 & Eltek

Company Limited

(95%)

Nanjing Elec & Eltek

Electronic Co., Ltd.

China (100%)

Pacifi c Insulating Material

(Thailand) Limited

Thailand (100%)

Kaiping Elec & Eltek

No.3 Company Limited

(95%)

Elec & Eltek Company

(Macao Commercial Offshore) Limited

Macao (100%)

Elec & Eltek Technology

Research & Marketing Pte. Ltd.

Singapore (100%)

Kaiping Elec & Eltek

No.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%)

Guangzhou Elec & Eltek

High Density Interconnect Technology

No. 1 Company Limited (98%)

Shenzhen Pacifi c

Insulating Material Co., Ltd.

(93.5%)

Major Subsidiaries Major Joint Ventures

Remarks: Percentages represent the Group’s effective shareholdings in the respective companies.


Annual Report 2008

10


Annual Report 2008

11

Chairman’s Letter

Dear Shareholders,

It gives me great pleasure to present you the 2008 Annual Report for the financial year ended

31 December 2008 (“CY2008”) of Elec & Eltek International Company Limited and its subsidiary

companies (the “Group”).

BUSINESS REVIEW

The financial performance of the Group for the financial year just ended reflects the difficult global

business environment as experienced by the Group in the last quarter of CY2008. The Group saw its

lowest bookings and recorded the lowest shipments from its customers in last two months of CY2008

following the spillover effect of the deepening financial crisis to the global economic activity.

As a result of the unprecedented rate of decline in the electronics demand worldwide, the Group’s

sales revenue for the fourth quarter of CY2008 declined by 41.5% to US$97.4 million over the

corresponding period of last financial year and by 31.0% compared to the September 2008 quarter.

Supported by the good performance of the past three financial quarters, the Group’s sales revenue

for CY2008 declined 9.5% to US$517.9 million from US$572.3 million in the financial year ended 31

December 2007 (“CY2007”). Shipment volume has declined by 16.2% on a year-on-year basis.

Sales revenue from the Automotive and Consumer Electronics sectors declined by 30.1% and

26.6% to US$40.9 million and US$73.1 million in CY2008 respectively as compared to CY2007.

Telecommunication sector also show a decline of 27.3%. However, sales revenue from the Computer

and Peripherals sector increased by 8.2% to US$248.7 million in CY2008 as the Group continued to

gain a strong foothold in the computer industry.

The proportion of sales from 2- to 6- layers printed circuit boards (“PCBs”) lowered to 66.6% in

CY2008 as compared to 69.9% a year ago whilst the proportion of 8-layer and above as well as

microvia PCBs, increased to 33.4% in CY2008 from 30.1% in CY2007. The Group’s fledging efforts in

penetrating the HDI product range help to stabilize the average selling price amidst the soften order

intake.

The lower revenue translated into lower gross profit of US$87.7 million in CY2008, a 4.8% decline

from CY2007. However, gross profit margins improved marginally from 16.1% in CY2007 to 16.9% in

CY2008. The improved margin was due mainly to changes in product mix and more effective control

of materials costs.

Share Passion Create Harmony


Annual Report 2008

12

Chairman’s Letter

In spite of the decrease in sales revenue, and

lower gross profit, the Group’s net profit after tax

climbed by US$7.6 million or 21.8% to US$42.5

million in CY2008, exhibiting our continued focus

on quality, increased productivity and costs

control.

The Group’s operations generated strong net

operating cash flow of approximately US$132.8

million in CY2008, enabling us to finance with our

own internal resources, the capital expenditure

of US$77.6 million and dividend payments of

US$40.6 million in the financial year just ended.

Overall, cash and cash equivalent increased by

US$37.1 million in CY2008 to US$68.7 million

as at 31 December 2008 and net gearing ratio

has further improved to 25.4% in CY2008 from

29.1% in CY2007. Our strong cash and liquidity

position have put us in a better position to

counter the tight credit market. Other aspects

of balance sheet remained solid in tandem with

ongoing working capital management.

In the opinion of the Directors, no i tem,

transaction or event of material or unusual nature

has occurred during the period from 1 January

2009 to the date of this report that would

materially affect the results of the Company and/

or the Group for CY2008.

FUTURE PROSPECTS

Rising unemployment in the midst of the global

economic crisis is expected to affect demand

for consumer electronics products, therefore,

orders visibility for the next few quarters remain

uncertain. This predicates a cautious approach

by businesses across sectors, as customers shall

continue to deal with excessive inventory and

manage high business costs. Under the current

challenging market conditions, the Group expects

further consolidation of PCB manufacturing

facilities globally as weaker competitors may exit

business altogether.


Annual Report 2008

13

Chairman’s Letter

In the recent weeks, we saw some orders pickup with shorter lead time requirements. We remain

cautious that this uptrend may be temporary with customers’ excessively downward inventory

adjustments in the previous quarter. Nevertheless, the Group will deploy more resources in sales and

marketing in order to increase our market share. Other than the aforesaid, preserving our cash and

liquidity position remain critical in preparing for early demand recovery. The management is confident

that our focus on these areas will gradually offset adverse impact of uncertainties in the world

economy.

As HDI technologies are finding their way into a wide full range of data communication, computer

and industrial equipment, the Group’s new HDI facilities in Kaiping is well equipped to serve existing

and new customers, particularly in the high value-added sectors. This new plant is likely to be fully

ramped up in next 12 months. The Group is ready to further invest in manufacturing capacity in HDI

PCBs as there are increasing applications for these products in the years ahead.

The Group will continue to review and fortify our extensive business, and further sharpen our

competitive edge when the opportunities arise. Barring unforeseen circumstances, the Group is

cautiously optimistic about the financial performance for the March 2009 quarter.

The Board of Directors is recommending a one-tier tax exempt final dividend of 10.5 US cents per

share, comprising a one-tier tax exempt final dividend of 5.0 US cents per share and a one-tier tax

exempt special dividend of 5.5 US cents per share which shall be subject to shareholders’ approval

at the forthcoming annual general meeting of the Company. This together with the one-tier tax exempt

interim dividend of 10.0 US cents per share represents 86.0% of the net earnings for CY2008.

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.

On behalf of the Board

Cheung Kwok WingChairman

26 February 2009


Annual Report 200814

Statement on Corporate Governance

INTRODUCTION

The Board of Directors (the “Board”) and management of Elec & Eltek International Company Limited

(the “Company”) continues 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 2008 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;

(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.


Annual Report 200815Statement on 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 the respective Board

Committees will report to the Board the outcome of the 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 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 [1] 4 – – –

Chan Wai Leung [1] 4 – – –

Chan Wing Kwan 4 – – –

Chang Wing Yiu 4 – – –

Philip Wong Yu Hong 3 3 – –

Larry Lai Chong Tuck 4 4 1 1

Raymond Leung Hai Ming [1] 4 4 1 1

[1] Appointed on 1 January 2008

The Board adopts an internal framework whereby a formal letter is sent to the newly appointed

director explaining their statutory duties and responsibilities as director. All newly appointed

directors shall 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 thirteen Directors as follows:

(i) seven Executive Directors;

(ii) three Non-executive Directors; and

(iii) three 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 Board 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 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 is responsible for ensuring the execution

of strategic goals and has since assumed the role and responsibilities of the Chief Executive Officer

(“CEO”) with the departure of the former CEO in February 2008.



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. Philip Wong Yu Hong (Chairman), Mr.

Larry Lai Chong Tuck and Dr. Raymond Leung Hai Ming, all of whom are Independent Non-executive

Directors.

The Nominating Committee is responsible for the following functions:

(i) evaluate the independence of the Directors on an annual basis and was satisfied that

notwithstanding that less than one-third of the current Board is made up of independent

Directors, the Board is able to exercise any judgment on corporate affairs objectively and

independently;

(ii) review and recommend to the Board, the retirement and re-election of Directors in accordance

with the Articles and the re-appointment of Directors in accordance with the Companies Act,

Chapter 50 of Singapore Statutes (the “Act”), at each annual general meeting;

(iii) evaluate 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, determines the selection

criteria and identifies candidates with the appropriate expertise for the position. The Nominating

Committee then nominates the most suitable candidates to the Board.




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 next annual

general meeting. The retiring Directors are eligible to offer themselves for re-election. Directors of or

over 70 years of age are required to be re-appointed every year at the annual general meeting under

Section 153(6) of the Act before they can continue to act as a Director. 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. Cheung Kwok Wing, Mr.

Chan Wing Kwan, Mr. Chadwick Mok Cham Hung and Ms. Claudia Heng Nguan Leng, retiring by

rotation pursuant to the Articles and the re-appointment of Dr. Philip Wong Yu Hong pursuant to

Section 153(6) of the Act, at the forthcoming Annual General Meeting. The Board has accepted the

Nominating Committee’s recommendation, and all the abovementioned Directors have 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 subsidiaries are set forth

on pages 26 to 30 and 35 to 37 respectively of this Annual Report. The date of initial appointment

and last re-election of each director, together with their directorships in listed companies are set out

below:

Date of initial Date of last Directorships in Name of director Appointment appointment re-election listed companies

Cheung Kwok Wing Non-executive/ 13 December 2004 13 October 2006 KBCHL

non-independent KBCFHL

Chan Wing Kwan Non-executive/ 13 December 2004 12 April 2007 KBCHL

non-independent KBCFHL

Chang Wing Yiu Non-executive/ 13 December 2004 12 April 2007 KBCHL

non-independent

Chadwick Mok Executive/ 13 December 2004 13 October 2006 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

Clement Sun Executive/ 15 January 2007 12 April 2007 Nil

non-independent

Claudia Heng Executive/ 17 July 1995 13 October 2006 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



Date of initial Date of last Directorships in Name of director Appointment appointment re-election listed companies

Philip Wong Yu Hong Non-executive/ 26 February 2005 21 April 2008 Hop Hing (Holdings) Ltd.

independent Asia Financial

Holdings Ltd.

Qin Jia Yuan Media

Services Co. Ltd.

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.

Continental 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.

The Nominating Committee has identified a set of performance criteria 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 Act 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.

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. Philip Wong Yu Hong (Chairman), Mr.

Larry Lai Chong Tuck and Dr. Raymond Leung Hai Ming, all of whom are Independent Non-executive

Directors.



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.

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 38 to 40 in the Report of the Directors and

pages 97 to 99 in Note 26 to the financial statements.

The 2002 Scheme had since been terminated in November 2007 following the expiration of the

maximum period of 5 years commencing on the adoption date. During the financial year, 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. Management will provide the

Board with appropriately detailed management accounts of the Group’s performance, position and

prospects.

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), Dr. Philip

Wong Yu Hong and Dr. Raymond Leung Hai Ming, all of whom are Independent Non-executive

Directors.

The Audit Committee has written terms of reference approved by the Board. 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 and the consolidated financial

statements of the Group;

(ii) recommended to the Board, subject to shareholders’ approval, the re-appointment of the

Company’s statutory auditors;

(iii) 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;

(iv) reviewed the Group’s interested person transactions;

(v) reviewed the quarterly and annual financial statements as well as the content of the results

announcements before their submission to the Board; and

(vi) reviewed the co-operation and assistance given by the management to the Group’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 prejudice the

independence and objectivity of the statutory auditors.

The Audit Committee has full access to and co-operation from the Company’s 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 and their recommendations are reported to the Audit Committee.

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.

Internal Audit

Principle 13: Independent internal audit function

The Group has an adequately resourced 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.

The internal audit function would report to 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.




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.

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

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.


Chadwick Mok Cham HungVice-Chairman

Chan Wing KwanDirector

26 February 2009


Annual Report 2008

26

Profi les 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 all activities in relation to the operations of the Kaiping Site and coordination with

Kingboard PCB Group.

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.


Annual Report 2008

27

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 the Guangzhou, 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 is 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.


Annual Report 2008

28


MR. CHAN WAI LEUNG

Mr. Chan Wai Leung is 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 had 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.

MR. CHAN WING KWAN

Mr. Chan Wing Kwan 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. 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.


Annual Report 2008

29


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.

DR. PHILIP WONG YU HONG

The Honorable Dr. Philip Wong Yu Hong was appointed the Independent Non-executive Director

of the Company on 26 February 2005. He serves as Chairman of the Nominating Committee and

the Remuneration Committee of the Company. He is also a member of the Audit Committee of the

Company.

He received his M.Sc. (Engineering) from University of California, USA in 1967, J.D. (Law) from

Southland University, USA in 1982 and Ph.D. (Engineering) from California Coast University, USA in

1987. Before his return to Hong Kong in 1971, he was a senior engineer in a leading computer firm

in the United States.

Dr. Wong was a Deputy of the National People’s Congress and a Member of the HKSAR Legislative

Council where he was elected the Chairman of the Public Accounts Committee. He is the Life

Honorary Chairman of the Chinese General Chamber of Commerce and a Member of the Hong Kong

Trade Development Council. Dr. Wong received the Gold Bauhinia Star Award from the HKSAR

Government in 2003.

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.

During his career as a banker, Mr. Lai has attended various professional and management training

conducted by leading international organizations and academic institutions.


Annual Report 2008

30


MR. LARRY LAI CHONG TUCK (Continued)

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 that spans investment banking, corporate banking, structured commodity finance,

international trade finance and operations. Mr. Lai was an active member of the business community.

He served in the EXCO of the Dutch Business Group in Vietnam and the Shanghai Singapore

Business Group in China during his career posting and today is still active in local community work.

DR. RAYMOND LEUNG HAI MING

Dr. Raymond Leung Hai Ming is appointed the Independent Non-executive Director of the Company

on 1 January 2008. He is also a member of the Audit Committee, Nominating Committee and the

Remuneration Committee of the Company.

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, Vice Governor of HKAARECT 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.

VICE PRESIDENT – BUSINESS DEVELOPMENT, AMERICA

Mr. Aaron Cheng Bo Tak has more than 23 years of experience in the PCB industry. He joined

the Elec & Eltek Group in April 2008 and in his current capacity as Vice President – Business

Development, America, he is responsible for the market research, liaison activities and business

development in the Amercian region.

Mr. Cheng holds a Master Degree in Business Administration from Preston University, U.S.A..


Annual Report 2008

31


VICE PRESIDENT – BUSINESS DEVELOPMENT, EUROPE

Mr. Simon Michael Geeson joined the Elec & Eltek Group since 1992. He had 8 years of experience

in the electronics industry working primarily in purchasing and material control before joining the

Elec & Eltek Group.

In his current capacity as Vice President – Business Development, Europe, he is responsible for the

market research, liaison activities and business development in the European region.

VICE PRESIDENT – BUSINESS DEVELOPMENT, NORTH ASIA

Mr. Jason Ho King Man joined the Elec & Eltek Group in 1995. Over the years Mr. Ho has worked in

the Sales and Marketing Department with contribution in various regions. Including his employment

with the Elec & Eltek Group, Mr. Ho has over 20 years of experience in PCB industry. He is currently

the Vice President – Business Development, North Asia, responsible for the market research, liaison

activities and business development in Japan and Korea.

Mr. Ho holds a Higher Diploma in Production and Industrial Engineering from The Hong Kong

Polytechnic University and a Master Degree in Engineering Business Management from the University

of Warwick.

VICE PRESIDENT – BUSINESS DEVELOPMENT, SOUTH ASIA AND PACIFIC

Ms. Sherran Chan King Chiu joined the Elec & Eltek Group since 1995 and has over 13 years of

experience in the electronics industry working primarily in marketing. In her current capacity as

Vice President – Business Development, South Asia and Pacific, she is responsible for the market

research, liaison activities and business development in the Southeast Asia markets.

Ms. Chan holds a Bachelor of Science Degree in Chemical Engineering from National Taiwan

University.

VICE PRESIDENT – QUALITY ASSURANCE

Mr. Oscar Cheung Yiu Wai has more than 25 years of relevant experience in the manufacturing

industry, 16 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.


Annual Report 2008

32


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 SOUTH REGION

Mr. Paul Barlow has extensive experience in the high-end PCB industry holding various senior

executive positions with key European PCB manufacturers located in the U.K. and Shanghai. He

joined the Elec & Eltek Group in August 2007 and currently he is the General Manager of Kaiping

South Region responsible for development projects and overseas market promotion projects.

Mr. Barlow graduated from the University of Lancaster, U.K. with a Degree of Doctor of Philosophy in

Physics.


Annual Report 2008

33


GENERAL MANAGER – NANJING PLANT

Mr. Chan Chi Hong joined the Elec & Eltek Group since 1983. He was the Manager – Products

Engineering since 2002 before taking up plant management function in 2006. In his current capacity

as General Manager – Nanjing Plant, Mr. Chan is responsible for the overall operational management

of the PCB plant in Nanjing.

Mr. Chan holds a Higher Diploma in Mechanical Engineering from The Hong Kong Polytechnic

University and a Master Degree in Business Administration from the Bulacan State University,

Republic of the Philippines.

GENERAL MANAGER – HONG KONG PLANT CUM ACTING VICE PRESIDENT – GROUP TECHNOLOGY

Ms. Condia Yu Yuk Ying joined the Elec & Eltek Group since 1984 and served in various positions

relating to production and engineering over the years. She is currently the General Manager – Hong

Kong Plant cum Acting Vice President – Group Technology. She is responsible for all the technology

advancement of our PCB products and the overall operational management of the PCB plant in Hong

Kong.

Ms. Yu holds a Bachelor of Science Degree from the University of British Columbia and a Master

Degree in Engineering Business Management from the University of Warwick. She is also a Chartered

Engineer of the Engineering Council and a member with the Institute of Engineering and Technology

in the United Kingdom.


Annual Report 2008

34

Report of the Directors

The directors present their report together with the audited consolidated financial statements of the

Group and balance sheet and statement of changes in equity of the Company for the financial year

ended 31 December 2008.

DIRECTORS

The directors of the Company in office as 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

Philip Wong Yu Hong

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 as 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.


Annual Report 2008

35


DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

Save as disclosed below, the directors of the Company who held office as at the end of the financial

year had no other 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 subsidiaries) 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”), either as

at the beginning of the financial year (or date of appointment, if later) or as at the end of the financial

year:

Shareholdings Shareholdings in which registered in name of or directors are deemedNames of directors beneficially held by directors to have an interest and companies in As at 31.12.2008 As at As at As at As atwhich interests are held and 21.1.2009 31.12.2007 21.1.2009 31.12.2008 31.12.2007

The Company(Ordinary shares)

Cheung Kwok Wing 60,000 60,000 128,278,165 127,987,165 126,782,165 @

Chadwick Mok Cham Hung 74,000 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 – – –

Sammy Leung Tin Po + – 232,000 – – –

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 – – – –

Chan Wing Kwan 973,200 973,200 – – –

Chang Wing Yiu 973,200 973,200 – – –

Sammy Leung Tin Po + – 960,000 – – –

At subscription price of US$2.375

Philip Wong Yu Hong 60,000 60,000 – – –

Larry Lai Chong Tuck 60,000 60,000 – – –

Ann Chiang Lai Wan +++ – 60,000 – – –


Annual Report 2008

36


DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (Continued)

Shareholdings Shareholdings in which registered in name of or directors are deemedNames of directors beneficially held by directors to have an interest and companies in As at As at As at As at As at As atwhich interests are held 21.1.2009 31.12.2008 31.12.2007 21.1.2009 31.12.2008 31.12.2007

Kingboard(Ordinary shares of

HK$0.10 each)

Cheung Kwok Wing 2,451,725 2,451,725 3,880,685 261,131,929 261,131,929 259,968,929 #

Chan Wing Kwan 1,320,250 945,250 731,000 60,000 60,000 60,000

Chang Wing Yiu 2,677,074 2,302,074 1,928,974 678,200 678,200 840,200

Chadwick Mok Cham Hung 1,510,000 1,510,000 960,000 – – –

Philip Chan Sai Kit 18,000 18,000 10,000 – – –

Chan Wai Leung++ – – – 500 500 –

Kingboard(Options to subscribe for

unissued ordinary shares

of HK$0.10 each)

Cheung Kwok Wing – – 210,600 – – –

Chan Wing Kwan 966,600 1,341,600 2,558,800 – – –

Chang Wing Yiu 859,800 1,234,800 3,175,800 – – –

Kingboard Laminates Holdings Limited

(fellow subsidiary)(Ordinary shares of

HK$0.10 each)

Cheung Kwok Wing 1,141,500 1,141,500 934,500 2,244,550,500 2,244,550,500 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 33,000 – – –

Philip Chan Sai Kit 27,500 27,500 27,500 25,000 25,000 35,000

Clement Sun 30,000 30,000 30,000 – – –

Claudia Heng Nguan Leng 21,000 21,000 21,000 760,250 760,250 768,250

Li Chiu Cheuk ++ – – – 20,000 20,000 –

Chan Wai Leung ++ 22,000 22,000 – – – –

Sammy Leung Tin Po + – – 30,000 – – –


Annual Report 2008

37


DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (Continued)

Shareholdings Shareholdings in which registered in name of or directors are deemedNames of directors beneficially held by directors to have an interest and companies in As at As at As at As at As at As atwhich interests are held 21.1.2009 31.12.2008 31.12.2007 21.1.2009 31.12.2008 31.12.2007

Kingboard Copper Foil Holdings Limited

(fellow subsidiary)(Ordinary shares of

US$0.10 each)

Cheung Kwok Wing – – – 462,059,000 459,972,000 449,002,000 ̂

@ 90,741,550 (2007: 90,741,550) shares are held by Elec & Eltek International Holdings Limited (“EEIH”).

34,321,615 (2007: 34,321,615) shares are held by Elitelink Holdings Limited (“Elitelink”). The balance of

2,924,000 (2007: 1,719,000) shares are held by Kingboard Investments Limited (“KBIL”). EEIH, Elitelink

and KBIL are wholly-owned subsidiaries of Kingboard. As at 21 January 2009, 90,741,550, 34,321,615

and 3,215,000 shares are held by EEIH, Elitelink and KBIL respectively.

+ Mr. Sammy Leung Tin Po resigned from his directorship on 1 February 2008.

++ Mr. Li Chiu Cheuk and Mr. Chan Wai Leung were appointed as executive directors on 1 January 2008.

+++ Ms. Ann Chiang Lai Wan resigned from her directorship on 1 January 2008.

# These shares are held by Hallgain Management Limited (“HML”). As at the balance sheet date, 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 2,175,000,000 (2007: 2,175,000,000) shares are held by Jamplan (BVI) Limited, 54,667,500 (2007:

61,582,000) shares are held by KBIL, 13,383,000 (2007: 6,468,500) shares are held by Kingboard

and 1,500,000 (2007: 1,500,000) shares are held by HML. Jamplan (BVI) Limited is a wholly-owned

subsidiary of Kingboard.

^ 449,002,000 (2007: 449,002,000) shares are held by Excel First Investments Limited (“Excel”),

10,970,000 (2007: nil) shares are held by Kingboard Laminates Limited (“KLL”). Both Excel and KLL are

wholly-owned subsidiaries of Kingboard. As at 21 January 2009, 449,002,000 and 13,057,000 shares

are held by Excel and KLL respectively.

By virtue of Section 7 of the Act, Mr. Cheung Kwok Wing is deemed to have interests in the

subsidiaries 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 2009.


Annual Report 2008

38


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 2002 Elec & Eltek Employee’s Share Option Scheme (the “2002 Scheme”) was approved

by the shareholders of the Company at an Extraordinary General Meeting held on 8 November

2002 and was adopted and took effect from 12 November 2002 upon fulfilment of all the

conditions precedent as set out in Rule 3 of the 2002 Scheme. The duration of the 2002

Scheme was five years and it had accordingly terminated in November 2007 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:

Cheung Kwok Wing

Chan Wing Kwan

Chang Wing Yiu

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 ordinary shares of the Company (“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

prices of the Shares on the Singapore Exchange Securities Trading Limited 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.


Annual Report 2008

39


SHARE OPTIONS (Continued)

(a) Options to take up unissued shares (Continued)

During the financial year, a new share option scheme, 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. No option

was granted by the Company pursuant to the 2008 Scheme during the financial year.

(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 as at Balance as at Subscription 1 January 31 December priceDate of grant 2008 Lapsed 2008 per share Exercisable period US$

24.6.2005 9,579,000 (1,198,200 ) 8,380,800 2.033 26.11.2006 to 24.5.2010

29.9.2005 180,000 (60,000 ) 120,000 2.375 5.9.2006 to 4.9.2010

12.12.2006 928,000 (95,000 ) 833,000 2.400 13.11.2008 to 12.11.2011

10,687,000 (1,353,200 ) 9,333,800

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.


Annual Report 2008

40


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 as at the end ofName 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 which had since been terminated in November 2007 without affecting the rights of holders of

any options granted and outstanding under the 2002 Scheme.


Annual Report 2008

41


AUDIT COMMITTEE

The Audit Committee of the Company is chaired by Mr. Larry Lai Chong Tuck, an independent non-

executive director, and includes Dr. Philip Wong Yu Hong and Dr. Raymond Leung Hai Ming, both of

whom are independent non-executive directors. The Audit Committee has met on a quarterly basis

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 annual audit plan of the Company’s statutory auditors and the results of their examination

of the financial statements of the Company and the consolidated financial statements of the

Group;

(b) the re-appointment of the Company’s statutory auditors;

(c) the internal audit plans and results of the internal audits and evaluation of the Group’s

systems of internal accounting controls and management’s responses to the internal auditors’

recommendations;

(d) the Group’s interested person transactions;

(e) the quarterly and annual financial statements as well as the content of the results

announcements before their submission to the directors of the Company; and

(f) the co-operation and assistance given by the management to the Group’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.

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 Group at the forthcoming AGM of the Company.


Annual Report 2008

42


AUDITORS

The auditors, Deloitte & Touche LLP, have expressed their willingness to accept re-appointment.




26 February 2009


Annual Report 2008

43

Independent Auditors’ Report

TO THE MEMBERS OF ELEC & ELTEK INTERNATIONAL COMPANY LIMITED AND ITS SUBSIDIARIES

We have audited the accompanying financial statements of Elec & Eltek International Company

Limited (the “Company”) and its subsidiaries (the “Group”) which comprise the balance sheets of

the Group and the Company as at 31 December 2008, the profit and loss statement, statement of

changes in equity and cash flow statement 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 104.

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 Singapore Companies Act, Cap. 50 (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 accounts

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.


Annual Report 2008

44

Independent Auditors’ Report

Opinion

In our opinion,

(a) the consolidated financial statements of the Group and the balance sheet and statement of

changes in equity of the Company are properly drawn up in accordance with the provisions of

the 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 2008 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

subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in

accordance with the provisions of the Act.

Deloitte & Touche LLPPublic Accountants and Certified Public Accountants

Singapore

Michael Kee Cheng KongPartner

26 February 2009


Annual Report 2008

45

Consolidated Profit and Loss StatementFor the year ended 31 December 2008

THE GROUP NOTES 2008 2007

US$’000 US$’000

Revenue 517,931 572,274

Cost of sales (430,231 ) (480,174 )

Gross profit 87,700 92,100

Interest income 1,332 234

Distribution and selling costs (13,839 ) (17,508 )

Administrative expenses (27,677 ) (28,931 )

Other operating income (expenses) 891 (2,651 )

Finance costs 6 (4,820 ) (7,507 )

Share of profits of an associate 1,550 1,426

Profit before taxation 45,137 37,163

Income tax expense 7 (2,626 ) (2,272 )

Profit for the year 8 42,511 34,891

Attributable to:

Equity holders of the Company 42,628 34,797

Minority interests (117 ) 94

42,511 34,891

United States United States

cents cents

Earnings per share: 10

– basic 23.83 19.39

– diluted 23.83 19.27

See accompanying notes to financial statements


Annual Report 2008

46

Balance SheetsAs at 31 December 2008

THE GROUP THE COMPANY NOTES 2008 2007 2008 2007

US$’000 US$’000 US$’000 US$’000

ASSETS

Current assets Cash and bank balances 11 68,672 26,478 36 37

Trade receivables 12 110,513 152,432 – –

Bills receivables 4,061 4,265 – –

Other receivables and deposits 13 19,675 19,346 3 6

Amounts due from subsidiary

companies 14 – – 106,973 117,448

Inventories 15 39,582 58,978 – –

242,503 261,499 107,012 117,491

Assets classified as held for sale 27 – 15,621 – –

242,503 277,120 107,012 117,491

Non-current assets Property, plant and equipment 16 379,905 357,299 26 11

Deposits for acquisition of plant

and equipment 1,664 3,825 – –

Investment properties 17 15,756 8,733 – –

Intangible assets 18 – – – –

Subsidiary companies 19 – – 22,671 24,571

Interest in an associate 20 8,388 8,169 – –

Deferred tax assets 24 1,446 1,351 – –

407,159 379,377 22,697 24,582

Total assets 649,662 656,497 129,709 142,073


Annual Report 2008

47

Balance Sheets

THE GROUP THE COMPANY NOTES 2008 2007 2008 2007

US$’000 US$’000 US$’000 US$’000

LIABILITIES AND EQUITY

Current liabilities Bank overdrafts and loans 21 65,063 83,223 – –

Trade payables 22 88,250 119,233 – –

Bills payables 12,957 2,981 – –

Other payables 23 38,620 32,654 304 757

Amounts due to subsidiary

companies 14 – – 2,031 1,366

Provision for taxation 762 2,189 – 1

205,652 240,280 2,335 2,124

Liabilities associated with assets

classified as held for sale 27 – 12,547 – –

205,652 252,827 2,335 2,124

Non-current liabilities Bank loans 21 92,536 50,521 – –

Deferred tax liabilities 24 1,998 1,657 – –

94,534 52,178 – –

Capital and reserves Share capital 25 98,656 98,656 98,656 98,656

Treasury shares (1,356 ) (896 ) (1,356 ) (896 )

Reserves 242,570 244,055 30,074 42,189

Equity attributable to equity

holders of the Company 339,870 341,815 127,374 139,949

Minority interests 9,606 9,677 – –

349,476 351,492 127,374 139,949

Total liabilities and equity 649,662 656,497 129,709 142,073



Annual Report 2008

48

Statements of Changes in EquityFor the year ended 31 December 2008

Attributable to equity holders of the Company Foreign currency Share Share Treasury Capital Statutory Revaluation Other Revenue translation option Minority Total capital shares reserve reserve reserve reserve reserve 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 GROUPBalance at 1 January 2007 97,069 – 2,597 2,234 – 166 217,591 (5,671 ) 1,257 315,243 10,217 325,460

Profit for the financial year – – – – – – 34,797 – – 34,797 94 34,891Foreign currency translation – – – – – – – 23,801 – 23,801 430 24,231

Total recognised income for the financial year – – – – – – 34,797 23,801 – 58,598 524 59,122

Shares issued pursuant to the exercise of share options 1,587 – – – – – – – – 1,587 – 1,587Purchase of treasury shares – (896 ) – – – – – – – (896 ) – (896 )Transfer from revenue reserve to statutory reserve – – – 463 – – (463 ) – – – – –Transfer to capital reserve upon exercise of share options – – 105 – – – – – (105 ) – – –Transfer to revenue reserve upon lapse of share options – – – – – – 68 – (68 ) – – –Grant of share options to employees (Note 26) – – – – – – – – 570 570 – 570Arising from revaluation of property, plant and equipment – – – – 844 – – – – 844 – 844Capital injection from minority shareholders – – – – – – – – – – 1,511 1,511Dividends paid (Note 9) – in respect of previous financial period – – – – – – (19,760 ) – – (19,760 ) (2,575 ) (22,335 ) – in respect of current financial year – – – – – – (14,371 ) – – (14,371 ) – (14,371 )

1,587 (896 ) 105 463 844 – (34,526 ) – 397 (32,026 ) (1,064 ) (33,090 )

Balance at 31 December 2007 98,656 (896 ) 2,702 2,697 844 166 217,862 18,130 1,654 341,815 9,677 351,492

Profit (loss) for the financial year – – – – – – 42,628 – – 42,628 (117 ) 42,511Foreign currency translation – – – – – – – (4,827 ) – (4,827 ) 432 (4,395 )

Total recognised income (expenses) for the financial year – – – – – – 42,628 (4,827 ) – 37,801 315 38,116

Purchase of treasury shares – (460 ) – – – – – – – (460 ) – (460 )Transfer from revenue reserve to statutory reserve – – – 909 – – (909 ) – – – – –Transfer to revenue reserve upon lapse of share options – – – – – – 251 – (251 ) – – –Grant of share options to employees (Note 26) – – – – – – – – 361 361 – 361Arising from revaluation of property, plant and equipment – – – – 603 – – – – 603 – 603Dividends 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 )

– (460 ) – 909 603 – (40,908 ) – 110 (39,746 ) (386 ) (40,132 )

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


Annual Report 2008

49

Statements of Changes in Equity

Share Share Treasury Revenue option Total capital shares reserve reserve equity US$’000 US$’000 US$’000 US$’000 US$’000

THE COMPANYBalance at 1 January 2007 97,069 – 61,053 612 158,734

Shares issued pursuant to

the exercise of share options 1,587 – – – 1,587

Purchase of treasury shares – (896 ) – – (896 )

Grant of share options to

employees (Note 26) – – – 232 232

Profit for the financial year – – 14,423 – 14,423

Dividends paid (Note 9)

– in respect of previous

financial period – – (19,760 ) – (19,760 )

– in respect of current

financial year – – (14,371 ) – (14,371 )

Balance at 31 December 2007 98,656 (896 ) 41,345 844 139,949

Purchase of treasury shares – (460 ) – – (460 )

Grant of share options to

employees (Note 26) – – – 146 146

Transfer to revenue reserve

upon lapse of share options – – 11 (11 ) –

Profit for the financial year – – 27,989 – 27,989

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

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 and the amounts transferred from share option reserve upon

the exercise of share options.



Annual Report 2008

50

Consolidated Cash Flow StatementFor the year ended 31 December 2008

NOTES 2008 2007

US$’000 US$’000

OPERATING ACTIVITIESProfit before taxation 45,137 37,163

Adjustments for:

Allowance for doubtful debts 1,749 3,783

Finance costs 4,820 7,507

Amortisation of intangible assets – 2

Depreciation of property, plant and equipment 47,989 46,055

Gain on disposal of a subsidiary 27 (590 ) –

Loss on disposal of property, plant and equipment – 805

Loss on fair value change of investment properties 4 –

(Reversal of) Allowance for inventory obsolescence (1,191 ) 2,154

Share-based payment expense 361 570

Interest income (1,332 ) (234 )

Share of profits of an associate (1,550 ) (1,426 )

Operating income before reinvestment in

working capital 95,397 96,379

Decrease in inventories 20,587 6,417

Decrease (Increase) in trade and other receivables 40,045 (23,524 )

(Decrease) Increase in trade and other payables (16,044 ) 29,094

Net cash generated from operations 139,985 108,366

Interest income received 1,332 234

Interest paid (4,820 ) (7,507 )

Income taxes paid (3,738 ) (2,089 )

NET CASH FROM OPERATING ACTIVITIES 132,759 99,004

INVESTING ACTIVITIESProceeds from disposal of property,

plant and equipment 371 333

Purchase of property, plant and equipment (77,609 ) (47,000 )

Decrease (Increase) in deposits paid for acquisition

of property, plant and equipment 2,161 (2,268 )

Disposal of a subsidiary 27 (469 ) –

Dividend received from an associate 682 –

Proceeds received in advance related to

assets held for sale – 8,308

Acquisition of equity interest in an associate – (441 )

Payment of consideration for acquisition of equity

interest in a subsidiary company in prior year – (3,692 )

NET CASH USED IN INVESTING ACTIVITIES (74,864 ) (44,760 )


Annual Report 2008

51

Consolidated Cash Flow Statement

NOTES 2008 2007

US$’000 US$’000

FINANCING ACTIVITIESProceeds from bank borrowings 108,227 136,046

Repayment of bank borrowings (84,299 ) (152,941 )

Proceeds from share issue pursuant to

the exercise of share options – 1,587

Payment for share buy-back (460 ) (896 )

Capital injection from minority shareholders – 1,511

Dividends paid by the Company (40,250 ) (34,131 )

Dividends paid by subsidiary companies to

minority shareholders (386 ) (2,575 )

NET CASH USED IN FINANCING ACTIVITIES (17,168 ) (51,399 )

NET INCREASE IN CASH AND CASH EQUIVALENTS 40,727 2,845

CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 31,539 24,072

EFFECT OF FOREIGN EXCHANGE RATE CHANGES, NET (3,596 ) 4,622

CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 68,670 31,539

CASH AND CASH EQUIVALENTS CONSIST OF

Fixed deposits 11 17,941 943

Cash at bank and on hand 11 50,731 25,535

68,672 26,478

Cash and bank balances classified as held for sale 27 – 5,136

Bank overdrafts – unsecured 21 (2 ) (75 )

68,670 31,539



Annual Report 2008

52

Notes to the Financial StatementsFor the year ended 31 December 2008

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. Details of the principal activities of the

subsidiaries are disclosed in Note 19. There have been no significant changes in the nature of

these activities during the financial year.

The consolidated financial statements of the Group and balance sheet and statement of

changes in equity of the Company for the year ended 31 December 2008 were authorised for

issuance by the Board of Directors on 26 February 2009.


Annual Report 2008

53

Notes to the Financial Statements

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 Singapore Companies Act 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 2008. The adoption of these new/revised FRSs and

INT FRS 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.

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 1 Presentation of Financial Statements (Revised)

FRS 23 Borrowing Costs (Revised)

FRS 108 Operating Segments

INT FRS 113 Customer Loyalty Programmes

Consequential amendments were also made to various standards as a result of these new/

revised standards.

The 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 except for the following:

FRS 1 – Presentation of Financial Statements (Revised)FRS 1(Revised) will be effective for annual periods beginning on or after 1 January 2009, and

will change the basis for presentation and structure of the financial statements. It does not

change the recognition, measurement or disclosure of specific transactions and other events

required by other FRSs.

FRS 108 – Operating SegmentsFRS 108 will be effective for annual periods beginning on or after 1 January 2009 and

supersedes FRS 14 – Segment Reporting. 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 management in order to allocate resources to the segment and to assess

its performance. In contrast, FRS 14 requires 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 impact of this FRS is still to be determined. As

this is relating to disclosure, it will not have any impact on the financial position or financial

performance of the Group.


Annual Report 2008

54


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basis of consolidationThe consolidated financial statements incorporate the financial statements of the Company

and entities (including special purpose entities) controlled by the Company (its subsidiaries).

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 subsidiaries acquired or disposed of during the period are included in the

consolidated profit and loss statement 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 subsidiaries to bring

their accounting policies in line with those used by other members of the Group.

All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Minority interests in the net assets of consolidated subsidiaries 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 subsidiaries and associates are carried

at cost less any impairment in net recoverable value that has been recognised in the profit and

loss statement.

Business combinationsThe acquisition of subsidiaries 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, except for

non-current assets (or disposal groups) that are classified as held for sale in accordance with

FRS 105 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised

and measured at fair value less costs to sell.

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 the profit and loss statement.

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.


Annual Report 2008

55



Financial instrumentsFinancial assets and financial liabilities are recognised on the Group’s balance sheet 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

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 each balance sheet date.

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 the allowance account. Changes in the carrying amount of the allowance

account are recognised in profit and loss statement.


Annual Report 2008

56



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.


Annual Report 2008

57



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 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.

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 accumulated amortisation in accordance with FRS 18

Revenue.

Derecognition of financial liabilities

The Group derecognises financial liabilities when, and only when, the Group’s obligations are

discharged, cancelled or expired.

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. Benefits received and receivable as an incentive to enter

into an operating lease are also spread on a straight-line basis over the lease term.

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.


Annual Report 2008

58



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 of assets, other than freehold land and

construction-in-progress, 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

No depreciation is provided on freehold land.

Fully depreciated assets are retained in the financial statements until they are no longer in use.

The estimated useful lives, residual values and depreciation method are reviewed at each

period 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 the profit and loss statement.

Non-current assets held for saleNon-current assets and disposal groups are classified as held for sale if their carrying amount

will be recovered through a sale transaction rather than through continuing use. This condition

is regarded as met only when the sale is highly probable and the asset (or disposal group) is

available for immediate sale in its present condition. Management must be committed to the

sale, which should be expected to qualify for recognition as a completed sale within one year

from the date of classification.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower

of the assets’ previous carrying amount and fair value less costs to sell.


Annual Report 2008

59



Investment propertiesInvestment 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 the profit and loss statement for the period in

which they arise.

Intangible assets

Technical know-howTechnical know-how is technical knowledge acquired from third parties and stated at purchase

cost less accumulated amortisation and any accumulated impairment losses.

The intangibles with finite useful lives are amortised on a straight-line basis over their estimated

useful lives of over 5 years. The estimated useful life and amortisation method are reviewed at

the end of each annual reporting period, with the effect of any changes in estimate accounted

for on a prospective basis.

Impairment of tangible and intangible assetsAt each balance sheet date, the Group reviews the carrying amounts of its tangible and

intangible assets 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 the profit and loss

statement.

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 the profit and loss

statement.


Annual Report 2008

60



AssociatesAn associate is an entity over which the Group has significant influence and that is neither a

subsidiary 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 associates 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, investments in associates are carried

in the consolidated balance sheet 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.

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 the profit and loss

statement.

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 balance sheet date, 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.


Annual Report 2008

61



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

(excluding the effect of non market-based vesting conditions) 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 and adjusted

for the effect of non market-based vesting conditions. At each balance sheet date, the Group

revises the estimate of the number of equity instruments expected to vest. The impact of the

revision of the original estimates, if any, is recognised over the remaining vesting period 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 behavioral considerations.

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 are at the discretion of the respective 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;


Annual Report 2008

62



Revenue recognition (Continued)

• 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.

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 the profit and loss statement in the period in which

they are incurred.

Retirement benefit costsPayments to defined contribution retirement benefit plans are charged as an 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 balance sheet date.


Annual Report 2008

63



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 profit and loss statement because it excludes items of income or

expense that are taxable or deductible in other periods 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 subsidiaries operate by the balance sheet date.

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.

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 each balance sheet date and reduced

to the extent that it is no longer probable that sufficient taxable profits will be available to allow

all or part of the 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 balance sheet date.

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 directly to equity, in which case the tax is also

recognised directly in equity, 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.


Annual Report 2008

64



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 balance sheet 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 each balance sheet date, monetary items denominated in foreign

currencies are retranslated at the rates prevailing on the balance sheet date. 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.

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 directly in equity. For such non-monetary items, any

exchange component of that gain or loss is also recognised directly in equity.

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 on the balance sheet date. 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 classified as equity and

transferred to the Group’s foreign currency translation reserve. Such translation differences are

recognised in profit or loss in the period in which the foreign operation is disposed of.

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) are taken to the foreign currency translation reserve.

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.


Annual Report 2008

65


3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Critical judgements in applying the Group’s accounting policiesIn 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.

Key sources of estimation uncertaintyThe key assumptions concerning the future and other key sources of estimation uncertainty

at the balance sheet date, that have a significant risk of causing a material adjustment to the

carrying amounts of assets and liabilities within the next financial year are discussed below:

(i) Depreciation of property, plant and 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 2008 was US$379,905,000 (2007: US$357,299,000).

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 propertiesThe fair value of each investment property is individually determined at each balance

sheet date 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 cashflow

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.


Annual Report 2008

66


3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)

Key sources of estimation uncertainty (Continued)

(iii) 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

2008 was US$762,000 (2007: US$2,189,000). The Group’s deferred tax assets and

deferred tax liabilities at 31 December 2008 were US$1,446,000 (2007: US$1,351,000)

and US$1,998,000 (2007: US$1,657,000), respectively.

(iv) Allowance for doubtful debtsThe policy for allowance 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 2008 amounted to US$10,189,000 (2007:

US$9,491,000). 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 amount of the trade receivables is

disclosed on Note 12.

(v) Allowance for inventory obsolescenceThe management of the Group reviews an aging analysis at each balance sheet date,

and makes allowance for inventory obsolescence for items that are identified to be

obsolete and slow-moving. The allowance for inventories as at 31 December 2008

amounted to US$4,861,000 (2007: US$5,728,000). 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 is disclosed in Note

15.


Annual Report 2008

67


4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT

Categories of financial instrumentsThe following table sets out the financial instruments as at the balance sheet date:

THE GROUP THE COMPANY 2008 2007 2008 2007

US$’000 US$’000 US$’000 US$’000

Financial assets Loans and receivables (including

cash and bank balances) 201,853 207,085 107,010 117,491

Financial liabilities Amortised cost 282,278 270,694 2,031 1,419

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 subsidiaries 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.


Annual Report 2008

68


4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Continued)

Foreign exchange risk management (Continued)

The carrying amounts of monetary assets and monetary liabilities at the reporting date that are

not denominated in the functional currencies of group entities are as follows:

THE GROUP THE COMPANY Liabilities Assets Liabilities Assets 2008 2007 2008 2007 2008 2007 2008 2007

US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

USD 1,015 11,706 9,332 11,895 – – – –

HKD 102,830 33,924 21,920 3,607 – 126 2,156 14,788

RMB 58,898 – 34,231 – – – – –

SGD 197 242 30 34 119 179 102 658

GBP 39 109 26 69 – – – –

EUR 4,678 284 8,381 7,811 – – – –

JPY 10,665 20 4 318 – – – –

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 2008 2007

US$’000 US$’000

Profit or lossUnited States Dollars (1,557 ) (213 )

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 denominated in Chinese Renminbi at year end.


Annual Report 2008

69



Foreign exchange risk management (Continued)

Under the Linked Exchange Rate System, 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 21.

Interest rate sensitivityThe sensitivity analyses below have been determined based on the exposure to interest rates

for both derivatives and non-derivative instruments at the balance sheet date 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 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 2008 would decrease/ increase

by US$795,000 (2007: decrease/increase by US$743,000). This is mainly attributable to the

Group’s exposure to interest rates on its variable rate borrowings.

Credit riskCredit 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 balance sheet. 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.


Annual Report 2008

70



Liquidity riskThe 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 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 effective On demand Within Total Total interest rate or within 6 months After undiscounted carrying p.a. 6 months to 1 year 1 year amount amount % US$’000 US$’000 US$’000 US$’000 US$’000

THE GROUP

2008

Bank overdrafts

and loans 3.38 36,703 29,380 95,678 161,761 157,599

Trade and

other payables – 122,511 2,168 – 124,679 124,679

159,214 31,548 95,678 286,440 282,278

2007

Bank overdrafts

and loans 5.23 69,445 15,328 53,163 137,936 133,819

Trade and

other payables – 136,143 732 – 136,875 136,875

205,588 16,060 53,163 274,811 270,694


Annual Report 2008

71



Liquidity risk analysis (Continued)

Non-derivative financial liabilities (Continued)

Weighted

average

effective On demand Within Total Total

interest rate or within 6 months After undiscounted carrying

p.a. 6 months to 1 year 1 year amount amount

% US$’000 US$’000 US$’000 US$’000 US$’000

THE COMPANY

2008

Amount due to subsidiary

companies – 2,031 – – 2,031 2,031

2007

Other payables – 53 – – 53 53

Amount due to subsidiary

companies – 1,366 – – 1,366 1,366

1,419 – – 1,419 1,419

Non-derivative financial assetsThe following table details 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.


Annual Report 2008

72



Liquidity risk analysis (Continued)

Non-derivative financial assets (Continued)

Weighted average effective On demand Within Total Total interest rate or within 6 months After undiscounted carrying p.a. 6 months to 1 year 1 year amount amount % US$’000 US$’000 US$’000 US$’000 US$’000

THE GROUP

2008

Cash and bank balances 1.90 68,998 – – 68,998 68,672

Trade and other receivables – 130,300 2,881 – 133,181 133,181

199,298 2,881 – 202,179 201,853

2007

Cash and bank balances 1.02 31,695 – – 31,695 31,614

Trade and other receivables – 175,190 281 – 175,471 175,471

206,885 281 – 207,166 207,085

THE COMPANY

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

2007

Cash and bank balances – 37 – – 37 37

Trade and other receivables – 6 – – 6 6

Amount due from subsidiary

companies – 117,448 – – 117,448 117,448

117,491 – – 117,491 117,491


Annual Report 2008

73



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, fixed

deposits with banks, 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 debt, cash and cash equivalents and equity

attributable to equity holders of the Company, comprising issued capital, reserves and retained

earnings.

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 subsidiaries, 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.


Annual Report 2008

74


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 2008 2007

US$’000 US$’000

Income Sales to related companies 5,777 4,411

Rental income from a related company – 85

Management fee income from a related company 259 –

Expenses Purchases from related companies 113,706 124,467

Purchases from a related party 220 179

Consultation fees paid to related parties 72 395

Construction fee paid to a related party 105 1,918

Management fee paid to related companies 2,739 3,144

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.

Total compensation paid to Company’s directors and key management executives, as well as

fees paid to the Company’s directors and directors of subsidiaries are as follows:

THE GROUP 2008 2007

US$’000 US$’000

Directors Salaries, bonuses and other costs 1,620 2,127

Provident fund and other defined contributions 58 54

Share-based payments 192 241

1,870 2,422

Key management executives (excluding executive directors) Salaries, bonuses and other costs 1,734 1,956

Provident fund and other defined contributions 48 73

Share-based payments 32 73

1,814 2,102


Annual Report 2008

75


6. FINANCE COSTS

THE GROUP 2008 2007

US$’000 US$’000

Interest on bank loans 4,796 7,405

Interest on bank overdrafts 24 102

4,820 7,507

7. INCOME TAX EXPENSE

THE GROUP 2008 2007

US$’000 US$’000

Current:

Singapore income tax

Current income taxation 5 –

Foreign income tax

Current income taxation 2,306 2,422

2,311 2,422

Deferred tax 315 (150 )

2,626 2,272

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 18% (2007: 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 till 2011 with effect from the date the operating income is first earned.


Annual Report 2008

76


7. INCOME TAX EXPENSE (Continued)

The average effective tax rate based on the income tax expense varied from the domestic tax

rates applicable to the profit in the country concerned as a result of the following differences:

THE GROUP 2008 2007

% %

Tax at Singapore income tax rate 18.0 18.0

Lower statutory tax rates and tax incentives in

other countries (16.7 ) (15.3 )

Tax benefits not recognised 8.7 6.0

Adjust in respect of current tax of previous year – (3.5 )

Others (4.2 ) 0.9

Effective tax rate 5.8 6.1

8. PROFIT FOR THE YEAR

THE GROUP 2008 2007

US$’000 US$’000

Profit for the year has been arrived at after charging

(crediting):

Directors’ emoluments

– Remuneration 1,581 2,089

– Fees 39 38

– Contributions to defined contribution plans 58 54

Staff costs (excluding directors’ emoluments)

– Salaries and employees benefits 62,128 59,159

– Contributions to defined contribution plans 2,814 2,990

Depreciation of property, plant and equipment 47,989 46,055

Statutory auditor’s emoluments

– Audit fees paid to auditor 331 357

– Non-audit fees paid to auditor 158 132

Amortisation of intangible assets – 2

Share-based payment expense 361 570

Gain on disposal of a subsidiary (590 ) –

Loss on disposal of property, plant and equipment – 805

Loss on fair value change of investment properties 4 –

Allowance for doubtful debts 1,749 3,783

(Reversal of) Allowance for inventory obsolescence (1,191 ) 2,154

Loss on foreign exchange 1,116 1,704


Annual Report 2008

77


9. DIVIDENDS

The amount and the rates of dividends paid are:

THE GROUP AND THE COMPANY 2008 2007

US$’000 US$’000

In respect of previous financial year/period

Ordinary dividend:

– Final one-tier tax exempt dividend United States

4.5 cents (2007: United States 5.0 cents)

per share 8,050 8,982

Special dividend:

– Final one-tier tax exempt dividend United States


per share 14,311 10,778

22,361 19,760

In respect of current financial year

Ordinary dividend:

– Interim one-tier tax exempt dividend United States


per share 17,889 14,371

The Directors have proposed a one-tier tax exempt final dividend of United States 5.0 cents

(2007: 4.5 cents) per share and a one-tier tax-exempt special dividend of United States 5.5

cents (2007: 8.0 cents) per share, totalling US$18,783,000 (2007: US$22,361,000) to be

payable in respect of the current financial year. This dividend will be recorded as a liability on

the balance sheets of the Company and of the Group upon approval by the shareholders of the

Company at the forthcoming Annual General Meeting of the Company.


Annual Report 2008

78


10. EARNINGS PER SHARE

The calculation of the basic and diluted earning per share attributable to shareholders of the

Company is based on the following:

THE GROUP 2008 2007

Basic Diluted Basic Diluted

US$’000 US$’000 US$’000 US$’000

Profit attributable to equity

holders of the Company 42,628 42,628 34,797 34,797

2008 2007

Number of shares Number of shares

’000 ’000 ’000 ’000

Weighted average number of

ordinary shares (for

computing basic earnings

per share) 178,911 178,911 179,498 179,498

Adjustment for assumed

conversion of share options – – – 1,112

Adjusted weighted average

number of ordinary shares

(for computing diluted

earnings per share) 178,911 178,911 179,498 180,610

Earnings per share (US cents) 23.83 23.83 19.39 19.27

No diluted earnings per share has been presented in 2008 because the subscription price of

the Company’s outstanding share options was higher than the average market price for 2008.


Annual Report 2008

79


11. CASH AND BANK BALANCES


US$’000 US$’000 US$’000 US$’000

Fixed deposits 17,941 943 – –

Cash at bank and on hand 50,731 25,535 36 37

68,672 26,478 36 37

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 1.90% (2007: 1.02%) per

annum and for a tenure of less than three months.

The Group and the Company’s cash and bank balances that are not denominated in the

functional currencies of the respective entities are as follows:


US$’000 US$’000 US$’000 US$’000

Denominated in:

Euro 6,832 1,123 – –

Hong Kong Dollars 20,667 1,227 – –

Chinese Renminbi 12,506 – – –

Singapore Dollars 27 28 27 25

United States Dollars 6,039 2,468 – –

12. TRADE RECEIVABLES

THE GROUP 2008 2007

US$’000 US$’000

Third parties 107,479 151,141

Related companies 3,034 1,291

110,513 152,432

An allowance has been made for estimated irrecoverable amounts from the sales of goods to

third parties of US$10,189,000 (2007: US$9,491,000). This allowance has been determined

by reference to past default experience and assessment of recoverability by management.


Annual Report 2008

80


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 over due 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$41.0 million (2007: US$25.9 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 78 days (2007: 97 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 management believes that there is no further credit provision

required in excess of the allowance for doubtful debts.

Included in the allowance for doubtful debts are specific trade receivables with a balance

of US$4.3 million (2007: US$4.3 million) for which the customers have been placed under

liquidation. The impairment recognition represents the difference between the carrying amount

of the specific trade receivable and present value of expected liquidation proceeds.

Movement in the allowance for doubtful debts:

THE GROUP 2008 2007

US$’000 US$’000

Balance at beginning of the year 9,491 5,705

Currency realignment 28 3

Amounts written off during the year (1,079 ) –

Increase in allowance recognised in profit and

loss statement 1,749 3,783

Balance at end of the year 10,189 9,491


Annual Report 2008

81


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 2008 2007

US$’000 US$’000

Denominated in:

Chinese Renminbi 4,881 –

Hong Kong Dollars 1,218 1,906

Euro 1,181 3,843

13. OTHER RECEIVABLES AND DEPOSITS


US$’000 US$’000 US$’000 US$’000

Deposits 483 459 – –

Prepaid expenses 1,068 942 2 6

Tax refundable 14,295 14,393 – –

Others 3,829 3,552 1 –

19,675 19,346 3 6

The Group’s other receivables that are not denominated in the functional currencies of the



US$’000 US$’000 US$’000 US$’000

Denominated in:

Euro 367 2,845 – –

Hong Kong Dollars 34 473 – –

Japanese Yen – 314 – –

Chinese Renminbi 16,567 – – –

Singapore Dollars – – 3 6

United States Dollars – 7 – –


Annual Report 2008

82


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 (to) subsidiary companies that are not denominated in the

functional currencies are as follows:

THE COMPANY 2008 2007

US$’000 US$’000

Amount due from subsidiary companies

Denominated in:


Singapore Dollars 72 627

Amount due to subsidiary companies

Denominated in:

Hong Kong Dollars – 126

15. INVENTORIES

THE GROUP 2008 2007

US$’000 US$’000

Raw materials 14,263 18,195

Work-in-progress 12,713 26,484

Finished goods 12,606 14,299

39,582 58,978

The cost of inventories recognised as an expense of US$430.2 million (2007: US$480.2

million) includes US$1.2 million in respect of reversal of allowance for inventory obsolescence

(2007: US$2.2 million in respect of write-downs of inventory to net realisable value).

The reversal of the allowance for inventory obsolescence was related to the progressive

consumption of slow moving inventories provided in the previous financial years.


Annual Report 2008

83


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 GROUPCost

At 1 January 2007 7,783 6,414 24,344 83,261 42,517 13,241 440,380 2,525 5,358 625,823

Currency realignment 315 260 725 4,572 2,172 728 25,036 133 278 34,219

Reclassifications – – – 3,262 1,804 63 26 – (5,155 ) –

Additions – – 65 13,735 1,910 301 16,642 364 13,983 47,000

Disposals – – – (20 ) (654 ) (2,552 ) (15,041 ) (342 ) – (18,609 )

Revaluation – – – 844 – – – – – 844

Transfer to investment

properties – – – (8,733 ) – – – – – (8,733 )

Transfer to assets held

for sale – – (2,062 ) – – – – – (8,053 ) (10,115 )

At 31 December 2007 8,098 6,674 23,072 96,921 47,749 11,781 467,043 2,680 6,411 670,429

Currency 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 77,609

Disposals – – – – (54 ) (354 ) (8,807 ) (203 ) – (9,418 )

Revaluation – – – 603 – – – – – 603

Transfer 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 15,481 730,250

Accumulated

Depreciation

At 1 January 2007 – 4,612 3,771 13,366 21,431 10,586 214,134 1,765 – 269,665

Currency realignment – 188 74 714 1,073 576 12,151 105 – 14,881

Charge for the financial

year – 348 453 1,872 3,600 859 38,664 259 – 46,055

Disposals – – – (2 ) (642 ) (2,547 ) (14,042 ) (238 ) – (17,471 )

At 31 December 2007 – 5,148 4,298 15,950 25,462 9,474 250,907 1,891 – 313,130

Currency 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 – 47,989

Disposals – – – – (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 – 350,345

Carrying Amount

At 31 December 2008 7,787 1,160 18,279 73,646 23,360 1,673 237,919 600 15,481 379,905

At 31 December 2007 8,098 1,526 18,774 80,971 22,287 2,307 216,136 789 6,411 357,299


Annual Report 2008

84


16. PROPERTY, PLANT AND EQUIPMENT (Continued)

Furniture and Office fixtures equipment Total US$’000 US$’000 US$’000

THE COMPANYCost

At 1 January 2007 20 120 140

Additions – 7 7

Disposals – (8 ) (8 )

At 31 December 2007 20 119 139

Additions 13 10 23

Disposals (8 ) (41 ) (49 )

At 31 December 2008 25 88 113

Accumulated Depreciation

At 1 January 2007 15 111 126

Charge for the financial year 4 6 10

Disposals – (8 ) (8 )

At 31 December 2007 19 109 128

Charge for the financial year 3 5 8

Disposals (8 ) (41 ) (49 )

At 31 December 2008 14 73 87

Carrying Amount

At 31 December 2008 11 15 26

At 31 December 2007 1 10 11


Annual Report 2008

85



Details of the freehold and leasehold properties held by the Group as at 31 December 2008 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

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


Annual Report 2008

86



Description and location Gross area Tenure Use (sq. m.)

Leasehold: (Continued)

(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 13,764 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$591,000 (2007: US$346,000) of interest 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 3.34% (2007: 5.20%)

per annum.

17. INVESTMENT PROPERTIES

THE GROUP 2008 2007

US$’000 US$’000

At fair value

Balance at beginning of year 8,733 –

Loss on fair value change include in profit and

loss statement (4 ) –

Transfer from property, plant and equipment 7,027 8,733

Balance at end of the year 15,756 8,733


Annual Report 2008

87


17. INVESTMENT PROPERTIES (Continued)

Upon transfer from property, plant and equipment, the investment properties were carried at

their fair values and the increase in carrying amount at the date of transfer was recognised in

equity as revaluation reserve.

The fair values of the Group’s investment properties at 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, and 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 freehold interests. The property rental

income from one of the Group’s investment properties which is leased out under operating

leases, amounted to US$1,773,150 (2007: US$92,850).

18. INTANGIBLE ASSETS

THE GROUP US$’000

Cost

At 1 January 2007, 31 December 2007 and 31 December 2008 516

Accumulated Amortisation

At 1 January 2007 514

Charge for the financial year 2

At 31 December 2007 and 31 December 2008 516

Carrying Amount

At 31 December 2008 –

At 31 December 2007 –


Annual Report 2008

88


19. SUBSIDIARY COMPANIES

THE COMPANY 2008 2007

US$’000 US$’000

Unquoted equity shares, at cost 22,186 22,186

Recognition of financial guarantee provided

to subsidiaries 485 2,385

22,671 24,571

The Company issued financial guarantees to banks for credit facilities of its subsidiaries

and recorded a deemed financial guarantee fee income in accordance with the provisions

of FRS 39 – Financial Instruments: Recognition and measurements. The deemed income

was amortised over the period of the guarantee. The guarantee fee was not charged by the

Company to the subsidiaries. The full amount of the guarantee fee, including the unamortised

portion, is deemed to be additional investment in the subsidiaries.

Details of the subsidiary companies at 31 December 2008 are as follows:

Proportion of Country of ownership incorporation interest andName of subsidiary and operation voting power held Principal activities 2008 2007

% %

Principal subsidiary companies

^ Elec & Eltek (Guangzhou) The PRC 98.0 98.0 Manufacturing and

Electronic Company Limited distribution of

依利安達(廣州)電子有限公司 printed circuit

boards (“PCBs”)

^ 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


Annual Report 2008

89


19. SUBSIDIARY COMPANIES (Continued)


% %

Principal subsidiary companies (Continued)

^ 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



開平依利安達電子第三有限公司



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

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


Annual Report 2008

90


19. SUBSIDIARY COMPANIES (Continued)


% %

Principal subsidiary companies (Continued)

* 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 Enrst & Young – 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.


Annual Report 2008

91


20. INTEREST IN AN ASSOCIATE

THE GROUP 2008 2007

US$’000 US$’000

Cost of investment in an associate 5,441 5,441

Share of post-acquisition reserves 2,947 2,728

Carrying amount of investment 8,388 8,169

In 2007, US$441,000 capital injection was paid.

Proportion of Country of ownership interestName incorporation Principal activities and voting power held 2008 2007

Held through a subsidiary

United Hill Group Limited British Virgin Investment holding 49% 49%

Islands

Summarised financial information of the associate is set out below:

2008 2007

US$’000 US$’000

Total assets 40,175 34,731

Total liabilities (23,056 ) (18,060 )

Net assets 17,119 16,671

Revenue 11,539 9,377

Profit for the year 3,163 2,910

Group’s share of profits of associate 1,550 1,426


Annual Report 2008

92


21. BANK OVERDRAFTS AND LOANS

THE GROUP 2008 2007

US$’000 US$’000

Unsecured:

USD bank loans – 27,400

HKD bank loans 155,004 106,269

USD bank overdrafts 2 75

Trust receipts 2,593 –

157,599 133,744

Comprising amounts following due:

– within one year 65,063 83,223

– more than one year 92,536 50,521

157,599 133,744

The effective interest rate of bank overdrafts is 5.40% (2007: 6.04%) per annum.

The Group’s unsecured bank loans are repayable in quarterly instalments commencing from

2006 and ending in 2013 and bear interest at weighted effective rates of 3.37% (2007: 5.22%)

per annum. The interest rates of these floating rate loans repriced at 0.5% to 1.55% (2007:

0.5% to 1.25%) per annum over 1, 2 or 3 months Singapore Interbank Offer Rate (“SIBOR”)

or Hong Kong Interbank Offer Rate (“HIBOR”).

The above credit facilities are provided under:

(a) corporate guarantees from the Company;

(b) a letter of undertaking from the Company 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.

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.


Annual Report 2008

93


22. TRADE PAYABLES

THE GROUP 2008 2007

US$’000 US$’000

Third parties 56,682 80,057

Related companies 31,568 39,176

88,250 119,233

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


THE GROUP 2008 2007

US$’000 US$’000

Denominated in:


Chinese Renminbi 46,238 –

Euro 239 269

Japanese Yen 90 20

United States Dollars 979 7,725

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.


Annual Report 2008

94


23. OTHER PAYABLES


US$’000 US$’000 US$’000 US$’000

Accrued expenses 15,148 17,993 119 180

Financial guarantee contracts – – 185 524

Other payables 23,472 14,661 – 53

38,620 32,654 304 757

The Group and the Company’s other payables that are not denominated in the functional

currencies of the respective entities are as follows:


US$’000 US$’000 US$’000 US$’000

Denominated in:

Chinese Renminbi 12,660 5 – –

Euro 4,053 – – –

Hong Kong Dollars 3,142 2,554 – –

Japanese Yen 940 – – –

Singapore Dollars 174 235 119 179

United States Dollars 36 1,881 – –

24. DEFERRED TAXATION

The following 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 2008 2007

US$’000 US$’000

Deferred tax assets 1,446 1,351

Deferred tax liabilities (1,998 ) (1,657 )


Annual Report 2008

95


24. DEFERRED TAXATION (Continued)

Deferred tax assets

Decelerated tax depreciation Others Total US$’000 US$’000 US$’000

THE GROUPAt 1 January 2007 1,124 121 1,245

Currency realignment 73 – 73

(Charge) Credit to profit and loss

statement for the year (15 ) 48 33

At 31 December 2007 and 1 January 2008 1,182 169 1,351


(Charge) Credit to profit and loss

statement for the year (13 ) 26 13

At 31 December 2008 1,251 195 1,446

Deferred tax liabilities

Accelerated tax Undistributed depreciation earnings Total US$’000 US$’000 US$’000

THE GROUPAt 1 January 2007 (1,780 ) – (1,780 )


Credit to profit and loss statement

for the year 117 – 117

At 31 December 2007 and 1 January 2008 (1,657 ) – (1,657 )

Currency realignment (13 ) – (13 )

Credit (Charge) to profit and loss

statement for the year 258 (586 ) (328 )

At 31 December 2008 (1,412 ) (586 ) (1,998 )

At the balance sheet date, the Group has unutilised tax losses of US$29.03 million (2007:

US$15.84 million) available for offset against future profits. No deferred tax asset has been

recognised (2007: US$ Nil) due to the unpredictability of future profit streams.


Annual Report 2008

96


25. SHARE CAPITAL

THE GROUP AND THE COMPANY 2008 2007

No. of Shares US$’000 No. of shares US$’000

Issued and fully paid:

At beginning of financial year 179,148,062 97,760 178,854,462 97,069

Issue pursuant to the exercise

of share options – – 780,600 1,587

179,148,062 97,760 179,635,062 98,656

Purchase of treasury shares (261,000 ) (460 ) (487,000 ) (896 )

At end of financial year 178,887,062 97,300 179,148,062 97,760

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 no par value. The

new shares issued in 2007 rank pari passu to existing ordinary shares.

The Company acquired 261,000 (2007: 487,000) shares of its own shares through on market

purchases on the Singapore Exchange Securities Trading Limited during the financial year.

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 (2007:

US$896,000) and this was deducted against shareholders’ equity.

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 outstanding options granted to directors and

employees of the Group and associates of controlling shareholders to subscribe for unissued

shares totalling 9,333,800 (2007: 10,687,000) ordinary shares as described in the report of

the directors.


Annual Report 2008

97


26. SHARE-BASED PAYMENTS

The Company has granted share options to eligible employees under the 2002 Elec & Eltek

Employees’ Share Option Scheme (the “2002 Scheme”) which was adopted from 12 November

2002. The 2002 Scheme was terminated in November 2007, at the expiry of its duration of 5

years, without affecting the rights of holders of any options granted and outstanding under the

2002 Scheme.

During the financial year, a new share option scheme, 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. No option

was granted by the Company pursuant to the 2008 Scheme during the financial year.

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 equal 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 may be exercised after the first anniversary of the date of

grant and expiring on the fifth anniversary of the date of grant. Options granted at a discount to

the Exercise Price may only be exercised after the second anniversary 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 in both years.


Annual Report 2008

98


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 SubscriptionDate 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

Information with respect to the movement of share options of the Company during the last

financial year is as follows:

Balance Balance as at as at 1 January 31 December SubscriptionDate of grant 2007 Lapsed Exercised 2007 price Expiry date US$

24.6.2005 10,706,400 (346,800 ) (780,600 ) 9,579,000 2.033 24.5.2010

29.9.2005 180,000 – – 180,000 2.375 4.9.2010

12.12.2006 1,020,000 (92,000 ) – 928,000 2.400 12.11.2011

11,906,400 (438,800 ) (780,600 ) 10,687,000

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.


Annual Report 2008

99


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 behavioral considerations.

As at balance sheet date, the total exercisable share options were 9,333,800 (2007:

10,687,000).

There was no options exercised during the year. In 2007, the weighted average exercise price

was US$2.033 and the weighted share price at the date of exercise for the share options

exercised was US$2.68. The share options outstanding at the end of year have a weighted

average contracted age of 2.5 years (2007: 3.5 years).

The Group and the Company recognised total expenses of US$361,000 (2007: US$570,000)

related to equity-settled share-based payment transactions during the year.


Annual Report 2008

100


27. DISPOSAL OF A SUBSIDIARY/ASSETS AND LIABILITIES HELD FOR SALE

On 30 October 2007, the Company entered into an agreement to dispose of its entire equity

interest in Elec & Eltek Electronic (Kunshan) Company Limited (“E&E Kunshan”) to a subsidiary

of its ultimate holding company. Such disposal was completed on 4 May 2008 on which date

the control of E&E Kunshan was passed to the subsidiary of its ultimate holding company. The

assets and liabilities of E&E Kunshan had been classified as held for sale on 31 December

2007.

The net assets of E&E Kunshan at the date of disposal and as at 31 December 2007 were as

follows:

4 May 31 December

2008 2007

US$’000 US$’000

Carrying values of net assets:

Non-current asset

Property, plant and equipment 10,153 10,115

Current assets

Other receivables 370 370

Bank balances and cash 469 5,136

Total current assets 839 5,506

Total assets 10,992 15,621

Current liabilities

Trade and other payables (7,918 ) (12,547 )

Total current liabilities (7,918 ) (12,547 )

3,074 3,074

Assignment of intra-group debts 4,644Gain on disposal 590

Total consideration 8,308

Satisfied by:

Cash received in 2007 8,308

Net cash outflow arising on disposal (469 )

The disposal of E&E Kunshan had no significant impact on the Group’s results and cashflows

in prior year and the period up to date of disposal.


Annual Report 2008

101


28. 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 Company and the

subsidiary companies 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 the profit and loss statement of US$2,872,000 (2007:

US$3,044,000) represents contributions payable to these plans by the Group at rates specified

in the rules of the plans. The amounts were paid over subsequent to the balance sheet date.

29. CONTINGENT LIABILITIES


US$’000 US$’000 US$’000 US$’000

Bank guarantees given to third

parties (unsecured) 779 793 – –

Corporate guarantees given by the

Company to secure bank credit

facilities granted to subsidiary

companies (unsecured) – – 348,268 272,377

The Group’s subsidiary, 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, 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 recovering the long overdue trade receivables of approximately RMB1.0 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.


Annual Report 2008

102


30. CAPITAL COMMITMENTS

THE GROUP 2008 2007

US$’000 US$’000

Capital expenditure not provided for in the

financial statements:

Commitments for capital contributions in

subsidiary companies 17,925 17,697

Commitments in respect of contracts placed for

plant expansion 12,968 26,629

30,893 44,326

31. OPERATING LEASES ARRANGEMENT

The Group as lessee

THE GROUP 2008 2007

US$’000 US$’000

Minimum lease payments under operating leases

recognised as an expense in the current year 781 628

At the balance sheet date, the Group had outstanding commitments under non-cancellable

operating leases, when fall due as follows:

THE GROUP 2008 2007

US$’000 US$’000

Within one year 361 430

In two to five years 272 341

Total 633 771

Operating lease payments represent rental payable by the Group of certain of its office

properties and leases are negotiated for an average of 2 years.


Annual Report 2008

103


31. OPERATING LEASES ARRANGEMENT (Continued)

The Group as lessorThe Group rents outs one of its investment properties in the People’s Republic of China under

operating leases. Property rental income earned during the year was US$1,773,150 (2007:

US$92,850). This property has committed tenant for the next four years.

At the balance sheet date, the Group has contracted with tenant for the following future

minimum lease payments:

THE GROUP 2008 2007

US$’000 US$’000

Within one year 1,513 1,309

In the second to fifth years inclusive 4,390 5,456

5,903 6,765

32. INFORMATION BY SEGMENT ON GROUP’S OPERATIONS

The Group operates principally in one business segment, namely, the manufacture and

distribution of PCBs. All the Group’s productive assets are employed in Asia with plants located

in Hong Kong, Thailand and the PRC. The analysis of the Group’s revenue, results, assets

and liabilities are set out in the consolidated profit and loss account and consolidated balance

sheet.

Revenue by geographical areaThe sale of goods of the Group by geographical area segments, which is based upon the

shipment locations, are provided below:

THE GROUP 2008 2007

US$’000 US$’000

Asia

The People’s Republic of China (including Hong Kong) 297,531 291,300

South East Asia 100,631 114,793

Others 15,108 21,973

413,270 428,066

Europe 68,966 104,331

North and Central America 28,438 35,011

Rest of the World 7,257 4,866

517,931 572,274


Annual Report 2008

104


32. INFORMATION BY SEGMENT ON GROUP’S OPERATIONS (Continued)

Assets and capital expenditure by geographical areaThe following table showing the carrying amount of segment assets and capital expenditure by

geographical area (based on location of assets):

The People’s Republic of China (including Hong Kong and Macao) Thailand Others Total US$’000 US$’000 US$’000 US$’000

31 December 2008

Segment assets 580,184 60,669 421 641,274

Investment in an associate – – 8,388 8,388

Total assets 649,662

Capital expenditure:

Property, plant and equipment 77,010 525 74 77,609

31 December 2007

Segment assets 580,359 67,284 685 648,328

Investment in an associate – – 8,169 8,169

Total assets 656,497

Capital expenditure:

Property, plant and equipment 46,326 547 127 47,000


Annual Report 2008

105

Statement of Directors

In the opinion of the directors, the consolidated financial statements of the Group and the balance

sheet and statement of changes in equity of the Company as set out on page 45 to 104 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 2008 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.




26 February 2009


Annual Report 2008

106

SGX Listing Manual Requirements

1. Directors’ Remuneration

The following information relates to remuneration of directors of Elec & Eltek International

Company Limited.

Number of Directors in remuneration bands

Group 2008 2007

S$500,000 (US$353,600 equivalent and above) – 3

S$250,000 to S$499,999

(US$176,800 to US$353,600 equivalent) 5 2

Below S$250,000 (US$176,800 equivalent) 5 3

Total 10 8

The number of directors disclosed above 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 subsidiaries.

Summary of Directors’ remuneration (in percentage terms) for the financial year ended 31 December 2008

OtherName of Director Salary Bonus Fees # Benefits Total * % % % % %

Chadwick Mok Cham Hung – – – – –

Sammy Leung Tin Po

(resigned on 1 February 2008) 98 – – 2 100

Li Muk Kam 78 18 – 4 100

Philip Chan Sai Kit 76 21 – 3 100

Clement Sun 73 23 – 4 100

Claudia Heng Nguan Leng 73 15 – 12 100

Li Chiu Cheuk 73 24 – 3 100

Chan Wai Leung 87 9 – 4 100

Cheung Kwok Wing – – – – –

Chan Wing Kwan – – – – –

Chang Wing Yiu – – – – –

Philip Wong Yu Hong – – 100 – 100

Larry Lai Chong Tuck – – 100 – 100

Raymond Leung Hai Ming – – 100 – 100

# subject to approval by the shareholders at each annual general meeting.

* excluding share options which are disclosed in the Report of the Directors.


Annual Report 2008

107


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$199,214 (US$140,884 equivalent) to

S$415,012 (US$293,497 equivalent) for the financial year ended 31 December 2008.

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 2008 are as follows:

Aggregate value of all interested person transactions during the financial year (including transactions less than S$100,000) Excluding transactions conducted under Conducted under shareholders’ mandate shareholders’ mandate Name of Interested Person pursuant to Rule 920 pursuant to Rule 920US$’000 2008 2007 2008 2007

Sale of plant and equipment Techwise (Macao Commercial Offshore)

Circuits Limited – 161 – –

– 161 – –

Sale of subsidiaryTop Faith PCB (Kunshan) Co. Ltd. – 8,308 – –

– 8,308 – –


Annual Report 2008

108


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 2008 2007 2008 2007

Purchases of goods and servicesElec & Eltek Corporate Services Limited 509 372 – –

Elec & Eltek Display Technology

(Qingyuan) Company Limited – 118 – –

Heng Yang Kingboard Chemical Co., Ltd. – – 7,405 5,648

Hong Kong Fibre Glass Company Limited – – 2,884 5,976

Huizhou Chung Shun Chemical Co., Ltd. – – 346 –

Jiangmen Glory Faith PCB Co. Ltd. – – 19 –

Joyful Source Group Limited 1,507 2,416 – –

Kingboard Copper Foil (Macao

Commercial Offshore) Limited – – 44,527 51,784

Kingboard Investments Limited 775 410 – –

Kingboard Laminates (Macao

Commercial Offshore) Limited – – 44,287 50,313

Kingboard (Lian Zhou) Electronic

Materials Ltd. – – 14,135 10,209

Techwise (Macao Commercial Offshore)

Circuits Limited – – – 75

Techwise Circuits Co. Ltd. – 6 – –

Top Faith PCB Co. Ltd. – – 51 284

2,791 3,322 113,654 124,289

Provision of goods and servicesElec & Eltek Display Technology Limited 42 45 – –

E & E Magnetic Products Limited 7 13 – –

Express Electronics (Suzhou) Co. Ltd. – – 12 –

Jiangmen Glory Faith PCB Co. Ltd. – 3 4,687 2,819

Kingboard Laminates (Macao

Commercial Offshore) Limited 259 – – –

Smark Foundate (H.K.) Ltd. – 1 – –

Techwise (Macao Commercial Offshore)

Circuits Limited – 7 332 1,230

Top Faith PCB Co. Ltd. – 1 573 2

Topsearch Printed Circuits (H.K.) Ltd. – 10 – –

Shenzhen Wing Fung PCB Company

Limited – 1 124 118

308 81 5,728 4,169


Annual Report 2008

109


4. Shareholding Statistics as at 3 March 2009

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. ofSize of Shareholdings Shareholders % No. of Shares %

1 – 999 147 6.50 46,660 0.03

1,000 – 10,000 1,714 75.84 5,918,475 3.31

10,001 – 1,000,000 388 17.17 13,238,924 7.40

1,000,001 and above 11 0.49 159,683,003 89.26

Total 2,260 100.00 178,887,062 100.00

As at 3 March 2009, 18.37% 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

Hallgain Management Limited (“HML”)(1) 128,278,165

Kingboard Chemical Holdings Limited (“Kingboard”)(2) 128,278,165

Cheung Kwok Wing(1) 128,338,165

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


Annual Report 2008

110


4. Shareholding Statistics as at 3 March 2009 (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, 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 virture 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 50.73

2 Elitelink Holdings Limited 34,321,615 19.19

3 HSBC (Singapore) Nominees Pte Ltd 12,412,466 6.94

4 Raffles Nominees Pte Ltd 4,828,760 2.70

5 DBS Nominees Pte Ltd 4,207,243 2.35

6 Citibank Nominees Singapore Pte Ltd 3,336,800 1.87

7 CLSA Singapore Pte Ltd 3,218,600 1.80

8 DBSN Services Pte Ltd 2,317,089 1.30

9 Merrill Lynch (S’pore) Pte Ltd 1,817,808 1.02

10 DBS Vickers Securities (S) Pte Ltd 1,445,196 0.81

11 Li Muk Kam 1,035,876 0.58

12 UOB Kay Hian Pte Ltd 615,040 0.34

13 Phillip Securities Pte Ltd 370,698 0.21

14 Heng Nguan Leng 322,800 0.18

15 Cosmic Insurance Corporation Limited – SIF 275,712 0.15

16 Tan Her Lian 257,000 0.14

17 Tok Ching Ka 250,000 0.14

18 Leap International Pte Ltd 240,000 0.13

19 Huashin Investments Pte Ltd 185,000 0.10

20 Tan Ah Chai 180,000 0.10

Total 162,379,253 90.78

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 3 March 2009. The percentage of issued ordinary shares is

calculated based on the number of issued ordinary shares of the Company as at 3 March 2009

excluding treasury shares.


Annual Report 2008

111

Notice of Annual General Meeting

NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at the Hullet

Room, Level 4 Raffles City Convention Centre – Fairmont Singapore, 80 Bras Basah Road, Singapore

189560 on 16 April 2009, Thursday 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 2008 with the Auditors’ Report thereon.

2. To declare a one-tier tax exempt final dividend of 5.0 United States cents per share and a one-

tier tax exempt special dividend of 5.5 United States cents per share for the financial year

ended 31 December 2008.

3. To re-elect Mr. Cheung Kwok Wing, 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. [see Note (1) below]

4. To re-elect Mr. Chan Wing Kwan, retiring by rotation in accordance with Articles 95(2) and

95(4) of the Articles, as Director of the Company. [see Note (1) below]

5. To re-elect Mr. Chadwick Mok Cham Hung, retiring by rotation in accordance with Articles

95(2) and 95(4) of the Articles, as Director of the Company.

6. To re-elect Ms. Claudia Heng Nguan Leng, retiring by rotation in accordance with Articles 95(2)

and 95(4) of the Articles, as Director of the Company.

7. To re-appoint Dr. Philip Wong Yu Hong, pursuant to Section 153(6) of the Companies Act,

Chapter 50 of Singapore Statutes (the “Act”), as Director of the Company to hold office until

the conclusion of the next annual general meeting of the Company. [see Note (2) below]

8. To approve Directors’ fees of HK$300,000 for the financial year ending 31 December 2009.

[see Note (3) below]

9. To re-appoint Deloitte & Touche LLP as Auditors of the Company and authorise the Directors to

fix their remuneration.


Annual Report 2008

112


SPECIAL BUSINESSES:

10. To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or

without any modification:

10.1 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 (4)

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.

10.2 Authority to issue new shares [see Note (5) below]

That pursuant to Section 161 of the Act 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.


Annual Report 2008

113


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


Annual Report 2008

114


(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 to be held, whichever is the

earlier.

BY ORDER OF THE BOARD

CLAUDIA HENG NGUAN LENGCompany Secretary

Singapore

31 March 2009

Notes:

(1) Mr. Cheung Kwok Wing and Mr. Chan Wing Kwan will, upon re-election as Directors, remain as members

of the Employees’ Share Option Scheme Committee of the Company.

(2) Dr. Philip Wong Yu Hong will, upon re-election as a Director, remain as a member and as the Chairman of

the Remuneration Committee and the Nominating Committee, and as a member of the Audit Committee

of the Company.

(3) For the financial year ended 31 December 2008, the approved Directors’ fee was also HK$300,000.

(4) Resolution 10.1, 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.

(5) Resolution 10.2, 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 10.2) with an aggregate sub-limit of 20% of the Company’s total

number of issued shares excluding treasury shares (calculated as described in Resolution 10.2) for any

issues not made on a pro-rata basis to shareholders of the Company.

(6) 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.

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. ofShares

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 Hullet Room, Level 4 Raffles City Convention Centre – Fairmont Singapore, 80 Bras Basah Road, Singapore 189560 on 16 April 2009, Thursday, 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 will vote or abstain from voting as he/they may think fit on any matter arising at the AGM.)

Ordinary Resolutions

To be used ona show of hands

To be used inthe 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 2008 with the Auditors’ Report thereon

2 Declaration of dividends

3 Re-election of Mr. Cheung Kwok Wing as Director

4 Re-election of Mr. Chan Wing Kwan as Director

5 Re-election of Mr. Chadwick Mok Cham Hung as Director

6 Re-election of Ms. Claudia Heng Nguan Leng as Director

7 Re-appointment of Dr. Philip Wong Yu Hong as Director

8 Approval of Directors’ fees for financial year ending 31 December 2009

9 Re-appointment of Auditors and authorisation of Directors to fix Auditors’ remuneration

10.1 Authority to allot and issue shares pursuant to employees’ share option schemes

10.2 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 2009

Signature(s) of Member(s)/Common Seal

Total No. of Shares in No. of Shares

CDP Register

Register of Members

✄

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, Chapter 50 of Singapore) (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 appointer 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 meeting 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 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.

✄

ANN

UAL REPORT 2008

Elec & Eltek International Company Lim

ited

ANNUAL REPORT 2008

Towards Excellence and Beyond

www.eleceltek.com

towards excellence and beyond - elec & eltek report 2008 elec & eltek international company...

Documents