Keep on Innovating Heading for Success - Elec & Eltek REPORT 2009 Elec & Eltek International Company...

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Elec & Eltek In

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www.eleceltek.com

Keep on Innovating Heading for Success

ANNUAL REPORT 2009

2 Corporate Profi le

3 Financial Highlights and Calendar

6 Production and Market Information

7 Five Years’ Financial Summary

8 Corporate Information

9 Structure of the Group

11 Chairman’s Letter

14 Statement on Corporate Governance

27 Profi les of Board of Directors and Core Management

33 Report of the Directors

42 Statement of Directors

43 Independent Auditors’ Report

45 Consolidated Income Statement

46 Consolidated Statement of Comprehensive Income

47 Statements of Financial Position

49 Statements of Changes in Equity

51 Consolidated Statement of Cash Flows

53 Notes to the Financial Statements

106 SGX Listing Manual Requirements

111 Notice of Annual General Meeting

Annual General Meeting – Proxy Form

Contents

Elec & Eltek International Company Limited

Annual Report 2009

02

Corporate Profi le

Established for more than 37 years, Elec & Eltek International Company Limited (“Elec & Eltek”) has

been listed on the Mainboard of Singapore Exchange since 1994. In 2004, Elec & Eltek was acquired

by Kingboard Chemical Holdings Limited, the world’s largest laminate manufacturer. Together with

other printed circuit boards (“PCB”) manufacturing sites under the umbrella of our parent company,

Elec & Eltek is currently the largest PCB enterprise in China and ranks No.7 in the world in terms of

sales revenue in 2008.

Besides engaging in the mass fabrication and distribution of high density interconnect (HDI),

backplanes, high-end servers and up to 40-layer rigid PCB, Elec & Eltek also offers quick-turn around

(QTA) service with only 3 days ex-factory time.

With annual production capacity of over 56 million square feet, Elec & Eltek today has 7 offices

worldwide, 16 plants across Asia – 1 in Hong Kong, 2 in Thailand and 13 in Mainland China, and

professional workforce of over 11,000 employees. Our customers include global leaders in different

electronics sectors with main focus on Computer & Computer Peripherals, High-end Communication

& Networking, Consumer Electronics and Automotive.

In addition to obtain various accreditations from customers, Elec & Eltek also received affirmation

from international organization. To recognize and credit our outstanding performance within the PCB

industry, Frost & Sullivan – a global growth consulting company established for more than 40 years,

has presented us the 2009 Asia Industrial Technologies Award as the PCB Company of the Year.

Being a prime leader in the PCB industry, Elec & Eltek is in a stable and healthy financial position

to weather any business volatility. To retain and sharpen our competitive edge, we are committed to

invest continuously in state-of-the-art equipment and new technology. We will also continue to explore

new business opportunities while at the same time delivering premium values to all stakeholders.

Elec & Eltek’s mission is to be a leading PCB manufacturer that supplies high quality and high

technology PCB in mass volume at competitive prices with excellent services.


Annual Report 2009

03

Financial Highlights and Calendar31 December 2009

2009 2008

US$ million US$ million

Income Statement

Turnover 435 518

Profit before taxation 49 45

Profit after taxation and minority interests 46 43

Per Share

Net earnings (US cents) – Basic 25.53 23.83

Net earnings (US cents) – Diluted 25.53 23.83

Net tangible assets (US$) 2.11 1.95

Financial Position

Shareholders’ funds 368 340

Total assets 615 650

Financial Ratios

Current assets: Current liabilities (ratio) 1.43 1.18

Inventory turnover period (month) 1.36 1.10

Gearing ratio 0.15 0.25

2009 2008

Financial Calendar

Financial year results announced on 25 February 2010 26 February 2009

Annual Report and Accounts issued on 18 March 2010 31 March 2009

Annual General Meeting held on 5 April 2010 16 April 2009

Registers of Shareholders closed on 5:00 pm 9 April 2010 5:00 pm 23 April 2009

Dividend paid/payable on

Interim N/A 29 August 2008

Final 21 April 2010 8 May 2009


Annual Report 2009

04

Financial Highlights and Calendar31 December 2009

TURNOVER BY GEOGRAPHICAL LOCATIONS

TURNOVER BY LAYER COUNT

Financial year 2009

HDI (6.2%)

8-Layer

& above

(25.6%)

Financial year 2008

2- to 6-Layer

(68.2%)

HDI (2.9%)

8-Layer

& above

(30.5%)

2- to 6-Layer

(66.6%)

Financial year 2009

Others (0.8%)

South East Asia

(21.5%)

Mainland

China

(including

Hong Kong)

(61.1%)

Other Asian

countries

(1.1%)

Europe

(8.8%)

North & Central

America

(6.7%)

Financial year 2008

Others (1.4%)

South East Asia

(19.4%)

Other Asian

countries

(2.9%)

Europe

(13.3%)

North & Central

America

(5.5%)

Mainland

China

(including

Hong Kong)

(57.5%)


Annual Report 2009

05Financial Highlights and Calendar

US$ Million

700

600

500

400

300

200

100

0

US$ Million

60

50

40

30

20

10

0

TURNOVER

EARNINGS & DIVIDEND PAYOUT TREND

PROFIT TREND

COMPARE TOTAL ASSETS WITHSHAREHOLDERS’ FUNDS

US$ Million

700

600

500

400

300

200

100

0

US$ Million

60

50

40

30

20

10

02005 2006 2007 2008 2009

Financial Year

Profit after taxation & minority interests

(excluding exceptional items)

Profit after taxation but before minority interests

(excluding exceptional items)

Financial Year

Dividend payout

Profi t after taxation & minority interests

464.6

515.8

572.3

517.9

434.6

48.051.0

57.859.6

34.8 34.9

42.0 41.9

45.7 45.9

31.9

47.2

42.1

56.5

36.734.8

36.7

42.644.7 45.7 553.9

274.4

613.7

315.2

656.5

341.8

649.7

339.9

615.5

368.1

Financial Year

2005 2006 2007 2008 2009

2005 2006 2007 2008 2009 2005 2006 2007 2008 2009

Financial Year

Total assets

Shareholders’ funds


Annual Report 2009

06

Production and Market Information

PRODUCTION CAPACITY AS AT 31 DECEMBER 2009

PCBs withMass Lamination

Pathumthani1 Plant

PCB Raw Materials

Shenzhen1 Plant

PCB Raw Materials

Kaiping1 Plant

PCBs with Mass Lamination

Nanjing1 Plant


Huangpu4 Plants


Kaiping6 Plants


Hong Kong1 Plant

PCB Raw Materials

Rojana1 Plant

Thailand11.5 million sq.ft. (21%)

Mainland China and Hong Kong44.5 million sq.ft. (79%)

Current Total PCB Production Capacity56.0 million sq.ft. per annum

2010 WORLDWIDE PROJECTED PCB MARKET 2009 2010 2014

Projected World PCB Production USD Billion 40.6 44.3 52.5

Projected World Rigid PCB Production USD Billion 28.1 30.5 35.9

Regional Rigid PCB Value Growth Forecast CAAGR (2009-2014) %

Projected PCB Production By Area M m2 232.6 249.4 312.0

Projected Rigid PCB Production By Area M m2 203.7 216.6 268.2

Regional Rigid PCB Area Growth Forecast CAAGR (2009-2014) %

America $3.6 Bn

$3.3 Bn

4.5 M m2

-1.3%

-3.5%Europe $1.8 Bn

$1.7 Bn

4.5 M m2

0.6%

-1.9%$21.2 Bn

197.2 M m2

7.6%

6.4%

Asia (excl. Japan)$30.6 Bn Japan $8.4 Bn

$4.3 Bn

10.4 M m2

-2.9%

-4.8%

CAAGR: Compounded Annual Average Growth Rate

Source: Prismark Partners LLC, The Printed Circuit Report,

Fourth Quarter, February 2010


Annual Report 2009

07

Five Years’ Financial Summary

2009 2008 2007 2006 2005

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

Consolidated Results

Turnover 434,565 517,931 572,274 515,845 464,550

Profit before taxation 49,317 45,137 37,163 65,108 56,566

Taxation (3,419 ) (2,626 ) (2,272 ) (6,826 ) (6,327 )

Profit after taxation 45,898 42,511 34,891 58,282 50,239

Minority interests (221 ) 117 (94 ) (1,747 ) (3,000 )

Profit for the year 45,677 42,628 34,797 56,535 47,239

Financial Positions

Property, plant and equipment 347,115 379,905 357,299 356,158 313,586

Non-current deposits 1,253 1,664 3,825 1,557 4,715

Intangible assets – – – 2 7

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

Investment properties 19,262 15,756 8,733 – –

Deferred tax assets 1,437 1,446 1,351 1,245 1,496

Current assets 246,424 242,503 277,120 248,656 229,074

Total assets 615,491 649,662 656,497 613,728 553,938

Non-current liabilities 66,336 94,534 52,178 94,795 65,129

Current liabilities 171,826 205,652 252,827 193,473 200,083

Total liabilities 238,162 300,186 305,005 288,268 265,212

Net assets 377,329 349,476 351,492 325,460 288,726

Represented by:

Shareholders’ funds 368,065 339,870 341,815 315,243 274,391

Minority interests 9,264 9,606 9,677 10,217 14,335

377,329 349,476 351,492 325,460 288,726


Annual Report 2009

08

Corporate Information

BOARD OF DIRECTORS

Executive DirectorsMr. Chadwick Mok Cham Hung Vice-ChairmanMr. Li Muk KamMr. Philip Chan Sai KitMr. Clement SunMs. Claudia Heng Nguan LengMr. Li Chiu CheukMr. Chan Wai Leung

Non-executive DirectorsMr. Cheung Kwok Wing ChairmanMr. Chan Wing KwanMr. Chang Wing Yiu

Independent Non-executive DirectorsMr. Larry Lai Chong TuckDr. Raymond Leung Hai MingDr. Philip Wong Yu Hong (retired on 1 January 2010)

AUDIT COMMITTEEMr. Larry Lai Chong Tuck (Chairman)Dr. Raymond Leung Hai MingMr. Chan Wing Kwan (appointed on 1 January 2010)Dr. Philip Wong Yu Hong (retired on 1 January 2010)

NOMINATING COMMITTEEDr. Philip Wong Yu Hong (Chairman) (retired on 1 January 2010)Dr. Raymond Leung Hai Ming (Chairman)Mr. Larry Lai Chong TuckMr. Chan Wing Kwan (appointed on 1 January 2010)

REMUNERATION COMMITTEEDr. Philip Wong Yu Hong (Chairman) (retired on 1 January 2010)Dr. Raymond Leung Hai Ming (Chairman)Mr. Larry Lai Chong TuckMr. Chan Wing Kwan (appointed on 1 January 2010)

EMPLOYEES’ SHARE OPTION SCHEME COMMITTEEMr. Cheung Kwok WingMr. Chan Wing KwanMr. Chang Wing Yiu

SECRETARIESMs. Claudia Heng Nguan LengMs. Marian Ho Wui Mee

REGISTERED OFFICE80 Raffles Place #33–00UOB Plaza 1Singapore 048624Tel: 6225 2626Fax: 6225 1838

PRINCIPAL OFFICE4 Leng Kee Road#03-02 SiS BuildingSingapore 159088Tel: 6226 0488Fax: 6220 2377Website: www.eleceltek.com

SHARE REGISTRARBoardroom Corporate & Advisory Services Pte. Ltd.50 Raffles Place #32-01Singapore Land TowerSingapore 048623

STATUTORY AUDITORSDeloitte & Touche LLPPublic Accountants and Certified Public AccountantsPartner: Mr. Kee Cheng Kong Michael (appointed since the financial year ended 31 December 2007)

SOLICITORSRodyk & Davidson LLPChang See Hiang & Partners

PRINCIPAL BANKERSThe Hongkong and Shanghai Banking Corporation LimitedStandard Chartered BankHang Seng Bank LimitedCitibank, N.A.DBS Bank LtdBank of America, N.A.


Annual Report 2009

09

Structure of the Group31 December 2009

The People’s Republic of China (“China”)/Hong Kong /Macao

Elec & Eltek International Company Limited Singapore

Investment Holdings

Overseas China

Kaiping Pacifi c Insulating Material Company Limited

China (100%)

Elec & Eltek (Thailand) Limited

Thailand (100%)

Kai Ping Elec & EltekCompany Limited (95%)

Nanjing Elec & Eltek Electronic Co., Ltd.

China (100%)

Pacific Insulating Material (Thailand) Limited

Thailand (100%)

Kaiping Elec & EltekNo.3 Company Limited (95%)

Elec & Eltek Company(Macao Commercial Offshore) Limited

Macao (100%)

Elec & Eltek TechnologyResearch & Marketing Pte. Ltd.

Singapore (100%)

Kaiping Elec & EltekNo.5 Company Limited (95%)

Elec & Eltek Multilayer PCB Limited

Hong Kong (100%)

Elec & Eltek (Guangzhou)Electronic Company Limited (98%)

Guangzhou Elec & Eltek Microvia Technology Limited (98%)

Major Subsidiaries Major Joint Ventures

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

Shenzhen Pacific Insulating Material Co., Ltd. (93.5%)


Annual Report 2009

10


Annual Report 2009

11

Chairman’s Letter

Share Passion Create Harmony

Dear Shareholders,

It gives me great pleasure to present you the 2009 Annual Report for the financial year ended 31

December 2009 (“CY2009”) of Elec & Eltek International Company Limited (the “Company”) and its

subsidiary companies (the “Group”).

BUSINESS REVIEW

The Group concluded CY2009 with satisfactory performance in the fourth quarter in which we again

delivered growth in margins, profit and earnings. Fourth quarter net profit after tax was US$18.0

million compared with US$5.1 million in the fourth quarter of financial year ended 31 December

2008 (“CY2008”), represent an increase of 254.0% on the back of 30.6% increase in sales revenue

to US$127.2 million from US$97.4 million in the same period last year.

Sales revenue for CY2009 reduced by US$83.3 million or 16.1% to US$434.6 million compared

with US$517.9 million in CY2008. In spite of weaker performance in first quarter, net profit after

tax for CY2009 increased by 8.0% to US$45.9 million from US$42.5 million in the year-ago period,

as a result of excellent execution and a strong team spirit to weather through the adverse economic

conditions.

The encouraging performance was driven by strengthening demand in nearly all of our served markets

in the fourth quarter and the Group’s strong commitment on continuous technological development

and customers focus. Our ongoing efforts focused on improving yields and operational costs in a

proactive and dynamic manner helped to further strengthen the Group’s financial performance.

The proportion of sales from 2- to 6- layers and High Density Interconnect (“HDI”) printed circuits

boards (“PCBs”) increased to 68.2% and 6.2% in CY2009 as compared to 66.6% and 2.9%

respectively in the last financial year whilst the proportion of 8-layer and above PCBs accounted for

25.6% in CY2009.

Our focus on operating leverage and prudence working capital management enabled the Group to

further expand margins and generate strong cash flow. The Group ended CY2009 with US$60.0

million of cash on hand and generated positive cash flow of US$58.9 million. Net gearing ratio has

further improved to 15.2% as at year end from 23.3% as at 30 September 2009. Accordingly, the

Group is able to propose a high dividend payout ratio and well positioned to take advantage of any

prospective growth opportunities as supported by its strong balance sheet.


Annual Report 2009

12

Chairman’s Letter

In the opinion of the Directors, no factor has

arisen during the period from 31 December 2009

to the date of this report that would materially

affect the results of the Company and/or the

Group for the year.

FUTURE PROSPECTS

Although overall economic conditions remain less

than certain, we have seen both an improvement

in demand levels, as well as stabilization of

demand patterns in our served markets. In

anticipation of increased corporate spending,

order momentum after December festival has

been steady. All of our manufacturing facilities

are operating near full capacity.

With more balanced PCB supply and demand in

the region, we expect critical raw material prices,

such as fibre glass, copper foils, and copper

clad laminates to trend further upward, and as

a result, PCB selling prices should be able to

hold well and even move slightly upwards in the

coming quarters. This, together with anticipated

higher business proportion on HDI in the new

financial year, would further improve our blended

average selling prices.

The Group’s significant actions undertaken in

2009 to enhance our competitive advantage

and build sustainable financial strength have

created a solid base for future performance. Our

dedicated new Kaiping HDI centre is in stage

of mass volume ramp up. It is expected a few

of the high value-added customers will start to

contribute positively to the Group’s HDI business

in the new financial year 2010.


Annual Report 2009

13Chairman’s Letter

To ensure we are well positioned to exploit business opportunities as the electronics sector turns

around, the Group will cautiously evaluate the business opportunities available from both existing

customers and newly-developed customers, especially in the HDI business sector, and will launch

another expansion plan when the right market opportunities warrant. We are moving forward with

investments in support of previously announced capacity expansion on conventional PCBs. The

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

edge from time to time.

The Board of Directors is recommending a one-tier tax exempt final dividend of 25.0 US cents per

share, comprising a one-tier tax exempt final dividend of 15.0 US cents per share and a one-tier tax

exempt special dividend of 10.0 US cents per share which shall be subject to shareholders’ approval

at the forthcoming annual general meeting of the Company. This represents 97.9% of the net

earnings for CY2009.

I would like to thank my fellow Directors for their commitment to the Company during the financial

year under review. We bid farewell to Dr. Philip Wong Yu Hong, an Independent Non-executive

Director of the Company, who retired from his directorship on 1 January 2010. Dr. Wong has made

solid contributions to the Board over his tenure of service.

At the close of the challenging year, we want to acknowledge the resolve and commitment of our

employees around the world who came through this period of change with their hardwork and

dedication.

Not least of all, we thank our many loyal customers, suppliers, shareholders and business associates

for their continued support over the years.

Cheung Kwok Wing

Chairman

25 February 2010


Annual Report 2009

14

Statement on Corporate Governance

INTRODUCTION

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

(the “Company”) continue to be committed to complying with the Code of Corporate Governance 2005

(the “2005 Code”) issued by the Corporate Governance Committee so as to promote greater corporate

transparency and protection of shareholders’ interests.

This Statement describes the corporate governance practices of the Company during the financial

year ended 31 December 2009 with reference to the 2005 Code. The Board is pleased to confirm

that the Company has generally adhered to the principles and guidelines as set out in the 2005

Code, save for Guideline 2.1 (There should be strong and independent element on the Board, with

independent directors making up at least one-third of the Board), the reason for which deviation is

explained below.

BOARD MATTERS

Board’s Conduct of Its Affairs

Principle 1: Effective board to lead and control the company

The Board oversees the business of the Company and every Director is expected to exercise objective

judgment on the Company’s affairs and to always consider the interests of the Company and its

subsidiary companies (the “Group”). The Board reviews and discusses reports by management on the

performance, plans and prospects of the Group.

In addition to general oversight of management, the Board also performs a number of specific

functions, including:

(i) reviewing, approving and monitoring fundamental financial and business strategies and major

corporate actions;

(ii) approving major acquisitions or disposals, corporate or financial restructuring, issuance of

shares and other equity or debt instruments, payment of dividends and other distribution to

shareholders;

(iii) assessing risks facing the Group and reviewing and implementing appropriate measures to

manage such risks;

(iv) selecting and evaluating the performance and compensation of key management executives;

(v) approving nominations to the Board;


Annual Report 2009

15Statement on Corporate Governance

(vi) reviewing and endorsing the recommended framework of remuneration for the Board and key

management executives by the Remuneration Committee; and

(vii) assuming overall responsibility for corporate governance.

To give effect to the discharge of its responsibilities, the Board has established four Board

Committees, namely, the Nominating Committee, the Remuneration Committee, the Employees’

Share Option Scheme Committee and the Audit Committee. These committees have written mandates

and operating procedures which are reviewed periodically. The Chairman of each Board Committee

will report to the Board the outcome of the respective Board Committee meetings.

The Board conducts scheduled meetings on a quarterly basis to coincide with the announcement of

the Group’s quarterly and year end results and as warranted by particular circumstances. The Articles

of Association of the Company (the “Articles”) provides for directors to convene meetings by means of

telephone conference or other methods of simultaneous communication by electronic or telegraphic

means. The number of Board meetings and Board Committee meetings held from the date of the last

annual report to the date of this annual report, as well as the attendance of each Board member at

these meetings are disclosed below:

Board Committee

Audit Nominating Remuneration

Board Committee Committee Committee

Total number of meetings held 4 4 1 1

Cheung Kwok Wing 4 – – –

Chadwick Mok Cham Hung 4 – – –

Li Muk Kam 4 – – –

Philip Chan Sai Kit 4 – – –

Clement Sun 4 – – –

Claudia Heng Nguan Leng 4 – – –

Li Chiu Cheuk 4 – – –

Chan Wai Leung 4 – – –

Chan Wing Kwan[1] 4 1 1 1

Chang Wing Yiu 4 – – –

Larry Lai Chong Tuck 4 4 1 1

Raymond Leung Hai Ming 4 3 1 1

Philip Wong Yu Hong[2] 3 3 – –

[1] Appointed as member of Audit Committee, Nominating Committee and Remuneration Committee with effect

from 1 January 2010.

[2] Retired on 1 January 2010


Annual Report 2009

16


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

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

receive an orientation kit comprising, but not limited to, the Articles, directors’ code of professional

conduct, directors’ duties on notification, internal code for securities transactions, code of corporate

governance and other relevant materials.

Board Composition and Guidance

Principle 2: Strong and independent element on the board

Presently, the Board comprises twelve Directors as follows:

(i) seven Executive Directors;

(ii) three Non-executive Directors; and

(iii) two Independent Non-executive Directors.

The Board considers that the present Board size and the number of Board Committees facilitate

effective decision making and are appropriate for the nature and scope of the Group’s operation. The

Board will continuously examine its size, and composition with a view to ensure effective decision-

making be made from time to time.

The Board examines the independence of its Directors based on the criterion of independence

defined in the 2005 Code. An independent Director is one who has no relationship with the Company,

its related companies or its officers that could interfere, or be reasonably perceived to interfere with

the exercise of the Director’s independent business judgment with a view to the best interests of the

Company.

Chairman and Chief Executive Officer

Principle 3: Chairman and Chief Executive Officer to be separate persons to ensure appropriate balance of power, increased accountability and greater capacity of the board for independent decision making

The Chairman and the Vice-Chairman, who assumes the role and responsibility of the Chief Executive

Officer, bear responsibility for the workings of the Board and ensure the integrity and effectiveness of

the governance process of the Board. Whilst the Chairman sets the strategic direction for the Board,

the Vice-Chairman manages the business of the Group and ensures the execution of the Board’s

decisions.


Annual Report 2009


Board Membership

Principle 4: Formal and transparent process for the appointment of new directors to the board

The Board endeavours to ensure that there is an appropriate mix of core competencies and collective

expertise to provide the necessary knowledge and objective judgment to meet its responsibilities.

The Board benefits from the depth and breath of expertise each Director possesses, collectively

providing core competencies in finance, industry, business and management.

Nominating Committee

The current Nominating Committee members comprise Dr. Raymond Leung Hai Ming (Chairman)

and Mr. Larry Lai Chong Tuck who are Independent Non-executive Directors, and Mr. Chan Wing

Kwan who is a Non-executive Director.

The Nominating Committee is responsible for the following functions:

(i) evaluating the independence of the Directors on an annual basis and be satisfied that

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

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

independently;

(ii) reviewing and recommending to the Board, the retirement and re-election of Directors in

accordance with the Articles at each annual general meeting;

(iii) evaluating the Board’s performance as a whole as well as contribution of each Director to the

effectiveness of the Board; and

(iv) where a Director has multiple board representations, to assess if such Director is able to and

has been adequately carrying out his duties as a Director of the Company.

Where it is considered that the Board would benefit from the services of a new director with particular

skills, the Nominating Committee would, in consultation with the Board, determine the selection

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

Committee then nominates the most suitable candidates to the Board. Upon appointment, a formal

letter of appointment shall be provided to the appointed director indicating the director’s scope of

duty as well as the functions of the Board.


Annual Report 2009

18


In accordance with the 2005 Code and the Articles, each Director is required to retire at least once

every three years by rotation and all newly appointed Directors are required to retire at the next annual

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

Committee (save that a member shall abstain from recommendation in respect of their own re-

appointment) has recommended to the Board, the re-appointment of four Directors, Mr. Li Muk Kam,

Mr. Philip Chan Sai Kit, Mr. Clement Sun and Mr. Chang Wing Yiu, retiring by rotation pursuant to

the Articles at the forthcoming Annual General Meeting. The Board has accepted the Nominating

Committee’s recommendation, and all the abovementioned Directors, having accepted the Company’s

invitation for re-election, will be offering themselves for re-election at the forthcoming Annual General

Meeting.

The profiles of the Directors and their shareholding in the Company and its subsidiary companies

are set forth on pages 27 to 31 and 34 to 36 respectively of this Annual Report. The date of initial

appointment and last re-election of each director, together with his directorship (if any) in other listed

companies are set out below:

Date of initial Date of last Directorships in

Name of director Appointment appointment re-election other listed companies

Cheung Kwok Wing Non-executive/ 13 December 2004 16 April 2009 KBCHL

non-independent KBCFHL

Chan Wing Kwan Non-executive/ 13 December 2004 16 April 2009 KBCHL

non-independent KBCFHL

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

non-independent

Chadwick Mok Executive/ 13 December 2004 16 April 2009 KBCHL

Cham Hung non-independent

Li Muk Kam Executive/ 18 January 2005 12 April 2007 Nil

non-independent

Philip Chan Sai Kit Executive/ 18 January 2005 21 April 2008 Nil

non-independent


Annual Report 2009


Date of initial Date of last Directorships in

Name of director Appointment appointment re-election other listed companies

Clement Sun Executive/ 15 January 2007 12 April 2007 Nil

non-independent

Claudia Heng Executive/ 17 July 1995 16 April 2009 Nil

Nguan Leng non-independent

Li Chiu Cheuk Executive/ 1 January 2008 21 April 2008 Nil

non-independent

Chan Wai Leung Executive/ 1 January 2008 21 April 2008 Nil

non-independent

Larry Lai Chong Tuck Non-executive/ 26 February 2005 21 April 2008 Nil

independent

Raymond Leung Non-executive/ 1 January 2008 21 April 2008 China State Construction

Hai Ming independent International Holdings Ltd.

KBCHL – Kingboard Chemical Holdings Limited

KBCFHL – Kingboard Copper Foil Holdings Limited

Board Performance

Principle 5: Formal assessment of the effectiveness of the board as a whole and the contribution by each director to the effectiveness of the board

The Board uses its best efforts to ensure that each Director appointed to the Board possesses the

background and expertise in technology, business, finance and management skills critical to the

Group’s business to enable the Board to make sound and well-considered decisions.


Annual Report 2009

20


The Nominating Committee has identified a set of performance criteria, which has also been

approved by the Board, that is linked to long term shareholders’ value, to be used for evaluating

the effectiveness of the Board as well as the performance of each Director. The set of performance

criteria includes qualitative and quantitative factors, but is not limited to the performance of

principal functions and fiduciary duties, level of participation at meetings, guidance provided to the

management and attendance records. Other performance criteria that may be used include return

on assets, return on equity, return on investment and the comparison of the Company’s share price

performance against appropriate indices of the Singapore Exchange Securities Trading Limited

(“SGX-ST”).

Access to Information

Principle 6: Board members to have complete, adequate and timely information

The management provides the Board and its various Board Committees with adequate and timely

information and reports prior to their respective meetings and on an on-going basis.

Directors have separate and independent access to the Company’s senior management and the

company secretaries for additional information. In addition, should Directors, whether as a group or

individually, need independent professional advice relating to the Company’s affairs, the management

will, upon direction by the Board, appoint a professional advisor selected by the Group or the

individual Director, to render the advice. The cost of such professional advice will be borne by the

Company.

At least one of the company secretaries will attend Board meetings, particularly the meetings for

reviewing the draft announcements of the Group’s quarterly and full year results, and is responsible

for ensuring that Board procedures are followed. Together with the management, the company

secretaries are responsible for ensuring compliance with the Companies Act (Cap. 50, Singapore

Statutes) and all other SGX-ST rules and regulations applicable to the Company.

The Articles provide that the appointment and removal of the company secretaries are subject to the

approval of the Board.


Annual Report 2009


REMUNERATION MATTERS

Principle 7: Formal and transparent procedure for developing policy on executive remuneration and for fixing remuneration packages of individual directors

Principle 8: Remuneration of directors should be adequate but not excessive

Principle 9: Disclosure on remuneration policy, level and mix of remuneration, and procedure for setting remuneration

Remuneration Committee

The current Remuneration Committee members comprise Dr. Raymond Leung Hai Ming (Chairman)

and Mr. Larry Lai Chong Tuck who are Independent Non-executive Directors, and Mr. Chan Wing

Kwan who is a Non-executive Director.

The Remuneration Committee will review and recommend remuneration policies and packages

for key management executives. The review will cover all aspects of remuneration, including but

not limited to, salaries, allowances, bonuses, share options and benefits-in-kind. In conducting its

review, the Remuneration Committee will give due regard to the financial and commercial health and

business needs of the Group. Where appropriate, external consultants will be appointed to assist the

Remuneration Committee in the review. The Remuneration Committee’s recommendations will be

submitted for endorsement by the entire Board.

The Remuneration Committee has a set of terms of reference defining its scope of authority, and is

responsible for the following functions:

(i) ensure the Remuneration Committee’s recommendations have been made in consultation with

the Chairman of the Board and submitted for endorsement by the entire Board; and

(ii) liaise with the Board in relation to the preparation of executive compensation for inclusion in

the Company’s Annual Report as required.

The Group’s remuneration policy is to provide compensation packages at rates which reward

successful performance and the enhancement of shareholder value and to attract, retain and

motivate the Directors and employees. Details of remuneration and benefits of Directors and top five

key management executives are disclosed in the section “SGX Listing Manual Requirements” on

pages 106 to 107.


Annual Report 2009

22


Employees’ Share Option Scheme Committee

The Employees’ Share Option Scheme Committee comprises Mr. Cheung Kwok Wing, Mr. Chan Wing

Kwan and Mr. Chang Wing Yiu, all of whom are Non-executive Directors.

The Employees’ Share Option Scheme Committee is authorised to administer the 2002 Elec & Eltek

Employees’ Share Option Scheme (the “2002 Scheme”), including but not limited to, offer and grant

of share options to eligible participants in accordance to the rules of the 2002 Scheme, to modify

and/or amend the 2002 Scheme from time to time; and to take such steps, to complete and do all

such acts and things and to enter into such transactions, arrangements and agreements as may be

necessary or expedient to give full effect to the 2002 Scheme.

Information on the 2002 Scheme are disclosed on pages 37 to 39 in the Report of the Directors and

pages 99 to 101 in Note 26 to the financial statements.

The 2002 Scheme had since been terminated in November 2007 upon its expiry without affecting

the rights of holders of any options granted and outstanding under the 2002 Scheme. A new share

option scheme, namely, the 2008 Elec & Eltek Employees’ Share Option Scheme was adopted by the

Company on 9 May 2008.

ACCOUNTABILITY AND AUDIT

Accountability

Principle 10: The Board should present a balanced and understandable assessment of the Company’s performance, position and prospects

The Board is responsible for providing a balanced and understandable assessment of the Company’s

performance, position and prospects, including interim and other price sensitive public reports

and reports to regulators (if required). In presenting the quarterly and annual financial statements

to shareholders, it is the aim of the Board to provide the shareholders with a balanced and

comprehensible assessment of the Group’s position and prospects. The management will provide the

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

prospects.


Annual Report 2009


Audit Committee

Principle 11: Establishment of Audit Committee with written terms of reference

The current Audit Committee members comprise Mr. Larry Lai Chong Tuck (Chairman) and Dr.

Raymond Leung Hai Ming who are Independent Non-executive Directors, and Mr. Chan Wing Kwan

who is a Non-executive Director.

The Audit Committee has written terms of reference defining its scope of authority. During the

financial year and up to the date of this report, the Audit Committee met with the management,

internal auditor and statutory auditors of the Company and performed, inter alia, the following

functions:

(i) reviewed the annual audit plan of the Company’s statutory auditors and the results of their

examination of the financial statements of the Company, the consolidated financial statements

of the Group and statutory auditors’ report on those financial statements before submission to

the Board;

(ii) reviewed the Group’s financial and operating results and accounting policies;

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

Company’s statutory auditors;

(iv) reviewed the internal audit plans, the results of internal audits and evaluation of the Group’s

systems of internal accounting controls, and the effectiveness of actions or policies taken by

management on the recommendations and observation;

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

(vi) reviewed the quarterly and annual announcements on the results and financial position of the

Company and the Group; and

(vii) reviewed the co-operation and assistance given by the management to the Company’s statutory

auditors.

In addition, the Audit Committee reviewed all non-audit services provided by the statutory auditors

during the financial year and is of the opinion that the provision of such services will not affect the

independence of the statutory auditors.


Annual Report 2009

24


The Audit Committee has full access to and co-operation from the management and the statutory and

internal auditors and has full discretion to invite any Director or executive officer to attend its meeting.

The statutory and internal auditors have unrestricted access to the Audit Committee.

The Company has adopted a whistleblower policy which allows the staff of the Group to raise

concerns, in confidence, about suspected improper conduct or incident in matters of financial

reporting, internal accounting controls, auditing and other matters or potential violations of the laws;

and for the independent investigation of such matters and appropriate follow-up action.

Internal Controls

Principle 12: Sound system of internal controls

The Group’s system of internal controls are designed to provide reasonable assurance that assets

are safeguarded, that proper accounting records are maintained, and that financial information used

within the business and for publication are reliable.

The statutory auditors, in the course of conducting their annual audit procedures on the statutory

financial statements, also reviewed the Group’s significant internal financial controls to the extent of

their scope as laid out in their audit plan. Any material non-compliance and internal financial control

weaknesses noted by the auditors are reported to the Audit Committee together with the auditors’

recommendations. The management would then take action to rectify the weaknesses highlighted.

The Audit Committee, in the course of their review of the reports presented by the internal auditors

and statutory auditors, also reviewed the effectiveness of the Group’s system of internal controls and

is satisfied that there are adequate internal controls to meet the needs of the Group in its current

business environment. As such, the Board is satisfied with the adequacy of the internal controls,

including financial, operational and compliance controls, and risk management systems.

Internal Audit

Principle 13: Independent internal audit function

The Group has an adequately resourced independent internal audit function to conduct regular review

of the systems of internal controls and to report independently the findings and recommendations of

any internal control weakness to the Audit Committee and to senior management for remedial action.


Annual Report 2009


The internal audit function would report to the Chairman of the Audit Committee and assist the Board

in monitoring and managing business risks and internal controls. The Audit Committee reviews

and approves the internal audit plan. Reports from the internal auditors containing the summary

of findings and recommendations are tabled and discussed at meetings of the Audit Committee

quarterly.

The Audit Committee has reviewed the internal audit function and is satisfied as to its adequacy.

COMMUNICATION WITH SHAREHOLDERS

Principle 14: Regular, effective and fair communication with shareholders

Principle 15: Greater shareholder participation at Annual General Meeting

The Board is mindful of its obligation to provide timely and fair disclosure of material information to

its shareholders. Financial results, annual reports, circulars and other announcements are released

through SGXNET, and annual reports and circulars are sent to all shareholders by post.

Price sensitive information is first publicly released, either before the Company meets with any group

of investors or investment analysts or simultaneously with such meetings, if necessary.

All materials on the Company’s quarterly financial results and other announcements are available on

the Company’s website.

Notices of shareholders’ meetings are advertised in the newspapers. Shareholders are encouraged

to communicate their views and ask questions regarding the Group and resolutions being proposed

during shareholders’ meetings.

At shareholders’ meetings, each distinct issue is proposed as a separate resolution.

Under the Articles, a shareholder of the Company is allowed to appoint one or two proxies to attend

and vote at all shareholders’ meetings on his/her behalf. The Articles currently do not allow a

shareholder to vote in absentia such as voting via mail, e-mail or facsimile due to security, integrity

and other pertinent issues.

The statutory auditors and the members of the Audit Committee, Nominating Committee and/or

Remuneration Committee are present at shareholders’ meetings to assist the Directors in addressing

any queries by shareholders.


Annual Report 2009

26


INTERESTED PERSON TRANSACTIONS

The Company has adopted an internal policy in respect of any transaction with interested persons and

has set out the procedures for review and approval of the Company’s interested person transactions.

For the current financial year, the amount of interested person transactions to be disclosed pursuant

to Rule 920(1)(a)(ii) of the Listing Manual of SGX-ST are disclosed in the section “SGX Listing Manual

Requirements” on pages 107 to 108.

INTERNAL CODE ON DEALING IN SECURITIES

In compliance with Rule 1207(18) of the Listing Manual, the Company has adopted an Internal Code

which prohibits dealings in the Company’s securities by directors and employees and their connected

persons one month before the release of the full year results and two weeks before the release of the

quarterly results and if they are in possession of unpublished price-sensitive information. Apart from

setting out the implications of insider trading, the Internal Code also provides a comprehensive system

of controls in monitoring the dealing in the Company’s securities by its employees, in particular, the

identification of the parties subject to the control system and the prompt reporting of such dealings by

the management to the Board.

On behalf of the Board

Chadwick Mok Cham Hung

Vice-Chairman

Chan Wing Kwan

Director

25 February 2010


Annual Report 2009

27

Profiles of Board of Directors and Core Management

MR. CHADWICK MOK CHAM HUNG

Mr. Chadwick Mok Cham Hung has been the Executive Director since 13 December 2004 and

became the Vice-Chairman of the Company on 18 January 2005. He is responsible for developing

overall business directions and management strategies of the Elec & Eltek Group. He is currently

assuming the role and responsibilities of the Chief Executive Officer.

Mr. Mok holds a MA in Electrical and Information Engineering from the University of Cambridge and

a MBA Degree with distinction from Imperial College, the University of London and has over 11 years’

experience in the financial services industry. Mr. Mok is an associate member of the Institute of

Chartered Accountants in England & Wales and a fellow member of Hong Kong Institute of Certified

Public Accountants.

Mr. Mok is the executive director of Kingboard Chemical Holdings Limited.

MR. LI MUK KAM

Mr. Li Muk Kam joined the Elec & Eltek Group in 1982 and served in various senior positions in

different operations such as manufacturing, marketing & sales and corporate strategy, finance &

administration. He was appointed the Executive Director of the Company on 18 January 2005 and is

responsible for sales and marketing development of HDI business.

Mr. Li holds a Higher Certificate in Mechanical Engineering from The Hong Kong Polytechnic

University and a Master Degree in Manufacturing Systems Engineering from the University of

Warwick.

MR. PHILIP CHAN SAI KIT

Mr. Philip Chan Sai Kit joined the Elec & Eltek Group in 1989 and served as the regional sales head

firstly responsible for the Europe and then America region. He was appointed the Executive Director

of the Company on 18 January 2005 and is responsible for all activities in relation to business

development, supply chain management and market research functions of the Elec & Eltek Group.

Mr. Chan holds a Bachelor Degree in Civil Engineering from Coventry (Lanchester) Polytechnic in the

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

the Philippines.


Annual Report 2009

28


MR. CLEMENT SUN

Mr. Clement Sun joined the Elec & Eltek Group in 1983 and served in various senior positions in

the manufacturing operations in Hong Kong and Mainland China. He was appointed the Executive

Director of the Company on 15 January 2007 and is responsible for all activities in relation to the

strategic business unit of Hong Kong, Shenzhen and Thailand manufacturing facilities of the Elec &

Eltek Group.

Mr. Sun holds a Diploma in Production and Industrial Engineering from The Hong Kong Polytechnic

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

Republic of the Philippines.

MS. CLAUDIA HENG NGUAN LENG

Ms. Claudia Heng Nguan Leng joined the Elec & Eltek Group in 1994 and has been the Executive

Director since July 1995. In her current capacity as Vice President - Group Finance, and Company

Secretary of the Company, she has the overall responsibility for the corporate financial affairs of the

Group, including treasury, tax planning and compliance functions. She also oversees the Group’s

information systems, human resource matters, legal and secretariat and investor relations functions.

Ms. Heng holds a Master in Business Administration from Manchester Business School and a Master

in Applied Finance from Macquarie University. She is a Fellow Certified Public Accountant of the

Institute of Certified Public Accountants in Singapore and a Fellow Certified Public Accountant of CPA

Australia. She is also a member of the Singapore Institute of Directors.

MR. LI CHIU CHEUK

Mr. Li Chiu Cheuk was appointed the Executive Director of the Company with effect from 1 January

2008. He is responsible for all activities in relation to the strategic business unit of the Guangzhou

manufacturing facilities of the Elec & Eltek Group.

Mr. Li joined the Elec & Eltek Group in 1986 and served in various senior positions in the

manufacturing operations in Hong Kong and Mainland China. Apart from his appointment as

Executive Director of the Company, he is also the General Manager - Guangzhou plants, responsible

for the overall operational management of the Guangzhou strategic business unit.

Mr. Li holds a Higher Diploma in Production & Industrial Engineering from The Hong Kong

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

University, Republic of the Philippines.


Annual Report 2009

29Profiles of Board of Directors and Core Management

MR. CHAN WAI LEUNG

Mr. Chan Wai Leung was appointed the Executive Director of the Company with effect from 1 January

2008. Mr. Chan is responsible for the overall management of the Elec & Eltek Group’s operation in

Kaiping site. Mr. Chan is the son of Mr. Chan Wing Kwan, Non-executive Director of the Company.

Prior to joining the Elec & Eltek Group, Mr. Chan has over 5 years’ working experience in group

procurement and corporate development.

Mr. Chan graduated in 1998 with a Bachelor of Applied Science in Engineering Science from the

University of Toronto and obtained a Master of Philosophy in Electronic Engineering from The Chinese

University of Hong Kong in 2004. After completing his undergraduate degree, Mr. Chan involved

himself in advanced electronic engineering design in Canada.

MR. CHEUNG KWOK WING

Mr. Cheung Kwok Wing has been the Non-executive Director since 13 December 2004 and was

appointed the Chairman of the Company on 3 February 2005. He is a member of the Employees’

Share Option Scheme Committee of the Company. Mr. Cheung is the brother-in-law of Mr. Chang

Wing Yiu, Non-executive Director of the Company.

Mr. Cheung won the Young Industrialist Award of Hong Kong 1993, which was organized by the

Federation of Hong Kong Industries and was described as “far-sighted, enterprising, and having

insight in the business”. In 2006, he won the Hong Kong Business Owner-Operator Award 2006,

which was organised by DHL and South China Morning Post. Mr. Cheung has over 13 years’

experience in the sales and distribution of electronic components including laminates prior to the

establishment of the Kingboard Group.

Mr. Cheung is the chairman, executive director and co-founder of Kingboard Chemical Holdings

Limited.


Annual Report 2009

30


MR. CHAN WING KWAN

Mr. Chan Wing Kwan has been the Non-executive Director of the Company since 13 December

2004. He was appointed as a new member of the Audit Committee, Remuneration Committee and

Nominating Committee of the Company with effect from 1 January 2010. He is also a member of the

Employees’ Share Option Scheme Committee of the Company. Mr. Chan is the father of Mr. Chan Wai

Leung, Executive Director of the Company.

Mr. Chan acquired a Degree of Doctor of Business Science from Pacific Western University, L.A..

Prior to the setting up of the Kingboard Group, Mr. Chan had over 22 years’ experience in the sales

and distribution of electronic components, industrial chemicals and printed circuit boards.

Mr. Chan is the managing director, executive director and co-founder of Kingboard Chemical Holdings

Limited.

MR. CHANG WING YIU

Mr. Chang Wing Yiu has been the Non-executive Director of the Company since 13 December 2004.

He is a member of the Employees’ Share Option Scheme Committee of the Company. Mr. Chang is

the brother-in-law of Mr. Cheung Kwok Wing, Non-executive Director and Chairman of the Company.

Mr. Chang graduated from The Hong Kong Polytechnic University with a Higher Diploma in Marine

Electronics. He has over 18 years’ experience in laminates production.

Mr. Chang is the executive director of Kingboard Chemical Holdings Limited.


Annual Report 2009

31Profiles of Board of Directors and Core Management

MR. LARRY LAI CHONG TUCK

Mr. Larry Lai Chong Tuck was appointed the Independent Non-executive Director of the Company

on 26 February 2005. He serves as Chairman of the Audit Committee of the Company. He is also a

member of the Nominating Committee and the Remuneration Committee of the Company.

Mr. Lai graduated with a Bachelor of Arts Degree from the National University of Singapore. He holds

also a Graduate Diploma in Financial Management and a Diploma in Counseling Psychology.

Mr. Lai presently manages his own business consulting firm, Asteri Consulting Private Limited. Prior

to this, he was a senior career expatriate banker with over 20 years of diverse international banking

expertise. Mr. Lai was an active member of the business community he operated in. He served in the

EXCO of the Dutch Business Group in Vietnam and the Shanghai Singapore Business Group in China

during his career posting. Today, he is still actively engaged in local community work particularly

within the educational and charity sectors.

DR. RAYMOND LEUNG HAI MING

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

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

Remuneration Committee of the Company. In addition, he was appointed to serve as Chairman of the

Nominating Committee and the Remuneration Committee of the Company with effect from 1 January

2010.

Dr. Leung is a qualified Fellow Engineer of the Institute of Civil Engineers, the American Society of

Civil Engineers (“ASCE(HK)”), The Hong Kong Institute of Engineers, Society of Builders, the Hong

Kong Institute of Construction Managers (“HKICM”), Senior Member of the Institute of Electricity

and Electronics Engineers, with a Doctor of Philosophy in Information Engineering from The Chinese

University of Hong Kong and a Master Degree in Construction Management from the University of

Toronto, Canada. He is a member to the Appeal Tribunal Panel of HKSAR Building Department, the

Past President of HKICM and Hong Kong Institute of Arbitrators, Founding President and Governor of

Hong Kong Mediation Centre and Founding President of ASCE(HK).

Dr. Leung is presently the Chief Executive Officer of C & L Holdings Ltd., whose business activities

comprise of Project Management, Direct Investment, Financial Services and China Business

Consultancy.


Annual Report 2009

32


VICE PRESIDENT – QUALITY ASSURANCE

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

industry, 17 years of which was with PCB industry. He joined the Elec & Eltek Group in April 2007 as

Vice President – Quality Assurance, responsible for the development of quality system, improvement

of quality performance and formulation of quality assurance directions for the Group.

Mr. Cheung holds a Master of Science Degree in Manufacturing Systems Engineering from the

University of Warwick.

CHIEF INTERNAL AUDIT OFFICER

Ms. Anna Cheung Po King first joined the Elec & Eltek Group in January 2003 as the Chief Financial

Officer. As part of strengthening the Group’s enterprise-wide risk management process, Ms. Cheung

was appointed as the Chief Internal Audit Officer from January 2005 and is fully responsible for

internal audit function of the Group.

Prior to joining the Elec & Eltek Group, Ms. Cheung had over 11 years of experience in financial

planning and general management in manufacturing and trading enterprises.

Ms. Cheung holds a Bachelor of Science Degree from the University of East Anglia in the U.K.. She

is an associate member with the Institute of Chartered Accountants of England & Wales and a fellow

member of Hong Kong Institute of Certified Public Accountants.

GENERAL MANAGER – THAILAND PLANT

Ms. Sumarn Jermsawasdipong joined the Elec & Eltek Group since 1990 as Accounting Manager.

Prior to joining the Elec & Eltek Group, she had over 9 years of experiences in Finance, Auditing and

Management in the electronics industry. Ms. Sumarn now serves as the General Manager – Thailand

plant, responsible for the overall operational management of the PCB plant in Thailand.

Ms. Sumarn holds a Bachelor Degree (1st Class Honour) in Accounting from Chulalongkorn

University and a Master Degree in Business Administration from Thammasart University. She is a

Certified Public Accountant of The Institute of Certified Accountants and Auditors of Thailand.

GENERAL MANAGER – KAIPING PLANT

Mr. Ng Hon Chung joined the Elec & Eltek Group since 1979. He has more than 30 years of

experience in PCB manufacturing and served in various senior positions in the manufacturing

operations in Hong Kong and Mainland China before taking up plant management function of Kaiping

plant. Currently Mr. Ng is the General Manager of Kaiping North Campus responsible for the overall

operational management of the PCB plant.

Mr. Ng holds a Master of Science Degree in Manufacturing Systems Engineering from the University

of Warwick.


Annual Report 2009

33

Report of the Directors

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

Group and statement of financial position and statement of changes in equity of the Company for the

financial year ended 31 December 2009.

DIRECTORS

The directors of the Company in office at the date of this Report are:

Cheung Kwok Wing


Li Muk Kam

Philip Chan Sai Kit

Clement Sun

Claudia Heng Nguan Leng

Li Chiu Cheuk

Chan Wai Leung

Chan Wing Kwan

Chang Wing Yiu

Larry Lai Chong Tuck

Raymond Leung Hai Ming

ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES

Except as disclosed in this Report, neither at the end of the financial year nor at any time during

the financial year did there subsist any arrangement whose object is to enable the directors of the

Company to acquire benefits by means of the acquisition of shares or debentures in the Company or

any other body corporate.


Annual Report 2009

34


DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The directors of the Company holding office at the end of the financial year had no interests in the

share capital and debentures of the Company, its ultimate holding company, Kingboard Chemical

Holdings Limited (“Kingboard”), and related corporations (other than wholly-owned subsidiary

companies) as recorded in the register of directors’ shareholdings kept by the Company under Section

164 of the Companies Act (Cap. 50, Singapore Statutes) (the “Act”) except as disclosed below:

Shareholdings Shareholdings in which

registered in name of or directors are deemed

Name of directors beneficially held by directors to have an interest

and companies in At 31.12.2009 At At At At

which interests are held and 21.1.2010 31.12.2008 21.1.2010 31.12.2009 31.12.2008

The Company

(Ordinary shares)

Cheung Kwok Wing 188,000 60,000 128,350,165 128,345,165 127,987,165 @

Chadwick Mok Cham Hung 147,000 74,000 – – –

Li Muk Kam 1,035,876 1,035,876 – – –

Philip Chan Sai Kit 156,481 156,481 – – –

Clement Sun 40,000 40,000 – – –

Claudia Heng Nguan Leng 322,800 322,800 – – –

The Company

(Options to subscribe for the

Company’s ordinary shares)

At subscription price of US$2.033

Cheung Kwok Wing 973,200 973,200 – – –

Chadwick Mok Cham Hung 973,200 973,200 – – –

Li Muk Kam 768,000 768,000 – – –


Clement Sun 240,000 240,000 – – –

Claudia Heng Nguan Leng 192,000 192,000 – – –

Li Chiu Cheuk 162,000 162,000 – – –

Chan Wing Kwan 973,200 973,200 – – –

Chang Wing Yiu 973,200 973,200 – – –

At subscription price of US$2.375

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

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


Annual Report 2009

35Report of the Directors

DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (Continued)






Kingboard

(Ordinary shares of

HK$0.10 each)

Cheung Kwok Wing 3,301,725 2,451,725 261,131,929 261,131,929 261,131,929 #

Chan Wing Kwan 1,020,250 945,250 60,000 60,000 60,000

Chang Wing Yiu 2,677,074 2,302,074 678,200 678,200 678,200

Chadwick Mok Cham Hung 1,810,000 1,510,000 – – –


Chan Wai Leung – – 500 500 500

Kingboard

(Options to subscribe for

unissued ordinary shares

of HK$0.10 each)

Chan Wing Kwan 966,600 1,341,600 – – –

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

Kingboard Laminates

Holdings Limited

(fellow subsidiary)

(Ordinary shares of

HK$0.10 each)

Cheung Kwok Wing 1,641,500 1,141,500 2,147,264,000 2,147,264,000 2,244,550,500 δ

Chan Wing Kwan – – 100,000 100,000 100,000

Chang Wing Yiu – – 100,000 100,000 100,000

Li Muk Kam 33,000 33,000 – – –

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

Clement Sun 30,000 30,000 – – –

Claudia Heng Nguan Leng 21,000 21,000 706,500 730,250 760,250

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

Chan Wai Leung 22,000 22,000 – – –


Annual Report 2009

36


DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (Continued)






Kingboard Copper Foil

Holdings Limited

(fellow subsidiary)

(Ordinary shares of

US$0.10 each)

Cheung Kwok Wing 1,000,000 – 465,975,000 465,975,000 459,972,000 ̂

@ 90,741,550 (2008: 90,741,550) shares are held by Elec & Eltek International Holdings Limited (“EEIH”).

34,321,615 (2008: 34,321,615) shares are held by Elitelink Holdings Limited (“Elitelink”). The balance of

3,282,000 (2008: 2,924,000) shares are held by Kingboard Investments Limited (“KBIL”). EEIH, Elitelink

and KBIL are wholly-owned subsidiary companies of Kingboard. As at 21 January 2010, 90,741,550,

34,321,615 and 3,287,000 shares are held by EEIH, Elitelink and KBIL respectively.

+ Dr. Philip Wong Yu Hong retired as independent non-executive director on 1 January 2010. As at 21

January 2010, 60,000 share options held by Dr. Philip Wong Yu Hong had lapsed.

# These shares are held by Hallgain Management Limited (“HML”). At the end of the reporting period, HML

holds approximately 30.97% interests in the issued share capital of Kingboard and in turn Mr. Cheung

Kwok Wing holds approximately 23% shareholding interests in HML.

δ 2,015,000,000 (2008: 2,175,000,000) shares are held by Jamplan (BVI) Limited, 115,006,500 (2008:

54,667,500) shares are held by KBIL, 15,757,500 (2008: 13,383,000) shares are held by Kingboard

and 1,500,000 (2008: 1,500,000) shares are held by HML. Jamplan (BVI) Limited is a wholly-owned

subsidiary company of Kingboard.

^ 449,002,000 (2008: 449,002,000) shares are held by Excel First Investments Limited (“Excel”),

16,553,000 (2008: 10,970,000) shares are held by Kingboard Laminates Limited (“KLL”) and 420,000

(2008: Nil) shares are held by KBIL. Both Excel and KLL are wholly-owned subsidiary companies of

Kingboard.

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

companies of the Company.

Save as disclosed above, there were no other changes in any of the above-mentioned interests

between the end of the financial year and 21 January 2010.


Annual Report 2009


DIRECTORS’ RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS

Since the beginning of the financial year, no director has received or become entitled to receive a

benefit which is required to be disclosed under Section 201(8) of the Act, by reason of a contract

made by the Company or a related corporation with the director or with a firm of which he is a

member, or with a company in which he has a substantial financial interest except for salaries,

bonuses and other benefits as disclosed in the financial statements. Certain directors received

remuneration from related corporations in their capacity as directors and/or executives of those

related corporations.

SHARE OPTIONS

(a) Options to take up unissued sharesThe 2008 Elec & Eltek Employee's Share Option Scheme (the “2008 Scheme”) was approved

by the shareholders of the Company at an Extraordinary General Meeting held on 21 April

2008 and was adopted by the Company on 9 May 2008 upon fulfilment of all the conditions

precedent as set out in Rule 2 of the 2008 Scheme. Since its adoption, no option has been

granted by the Company pursuant to the 2008 Scheme.

Under the 2008 Scheme, options granted to the directors and employees may, except in

certain special circumstances, be exercised at any time after the first or second anniversary

of the date of grant but no later than the expiry date. The options may be exercised in full or

in respect of 1,000 ordinary shares of the Company (“Shares”) or a multiple thereof, on the

payment of the aggregate exercise price. The exercise price is based on the average of the

last dealt prices for a Share on the Singapore Exchange Securities Trading Limited (“SGX-ST”)

for a period of five consecutive market days immediately preceding the date of grant. The

Employees' Share Option Scheme Committee may at its discretion fix the exercise price at a

discount not exceeding 20 percent to the above price.

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

Employees' Share Option Scheme (the “2002 Scheme”) which was terminated upon its expiry

without affecting the rights of holders of any options granted and outstanding under the 2002

Scheme. Particulars of the options granted under the 2002 Scheme are set out below in this

Report and in Note 26 to the financial statements.

The 2002 Scheme is administered by the Employee's Share Options Scheme Committee whose

members are:

Mr. Cheung Kwok Wing

Mr. Chan Wing Kwan

Mr. Chang Wing Yiu


Annual Report 2009

38


SHARE OPTIONS (Continued)

(a) Options to take up unissued shares (Continued)Under the 2002 Scheme, options granted to the directors and employees may, except in

certain special circumstances, be exercised at any time after one or two years from the date

of grant but no later than the expiry date. The options may be exercised in full or in respect of

1,000 Shares or a multiple thereof, on the payment of the aggregate subscription price. The

subscription price is based on the average of the last dealt price of the Shares on the SGX-ST

for the last five market days immediately preceding the date of grant. The Employees' Share

Option Scheme Committee may at its discretion fix the subscription price at a discount not

exceeding 20 percent to the above price.

(b) Unissued shares under option and options exercisedThe number of Shares available under the 2002 Scheme, subject to certain conditions being

satisfied, shall not exceed 15% of the issued share capital of the Company. The number of

outstanding share options under the 2002 Scheme is as follows:

Number of options to subscribe for ordinary shares

Balance at Balance at Subscription

1 January 31 December price

Date of grant 2009 Lapsed 2009 per share Exercisable period

US$

24.6.2005 8,380,800 (105,600 ) 8,275,200 2.033 26.11.2006 to 24.5.2010

29.9.2005 120,000 – 120,000 2.375 5.9.2006 to 4.9.2010

12.12.2006 833,000 (102,000 ) 731,000 2.400 13.11.2008 to 12.11.2011

9,333,800 (207,600 ) 9,126,200

There were no share options granted to full time employees of the Group during the financial year. A

total of 15,714,000 options were granted under the 2002 Scheme since the commencement of the

2002 Scheme to the expiry of the 2002 Scheme, to subscribe for unissued ordinary shares in the

Company.


Annual Report 2009


SHARE OPTIONS (Continued)

The information on directors of the Company participating in the 2002 Scheme is as follows:

Aggregate Aggregate Aggregate

options options options

granted since exercised since lapsed since

commencement commencement commencement Aggregate

Options of the of the of the options

granted 2002 Scheme 2002 Scheme 2002 Scheme outstanding

during the to the end of to the end of to the end of at the end of

Name of director financial year financial year financial year financial year financial year

Cheung Kwok Wing – 973,200 – – 973,200

Chadwick Mok Cham Hung – 973,200 – – 973,200

Li Muk Kam – 960,000 (192,000 ) – 768,000

Philip Chan Sai Kit – 960,000 (48,000 ) – 912,000

Clement Sun – 240,000 – – 240,000

Claudia Heng Nguan Leng – 240,000 (48,000 ) – 192,000

Li Chiu Cheuk – 162,000 – – 162,000

Chan Wing Kwan – 973,200 – – 973,200

Chang Wing Yiu – 973,200 – – 973,200

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

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

Save for (as disclosed above), Messrs. Cheung Kwok Wing, Chadwick Mok Cham Hung, Li Muk

Kam, Philip Chan Sai Kit, Chan Wing Kwan and Chang Wing Yiu, none of the participants under the

2002 Scheme have received more than 5% of the total number of options available under the 2002

Scheme.

Save as disclosed above, there have been no other options granted to the eligible employees, directors

and the Company’s substantial shareholders and their associates pursuant to the 2002 Scheme and

the 2008 Scheme.


Annual Report 2009

40


AUDIT COMMITTEE

The Audit Committee of the Company, comprising all non-executive directors, is chaired by Mr. Larry

Lai Chong Tuck, an independent non-executive director, and includes Dr. Raymond Leung Hai Ming,

an independent non-executive director, and Mr. Chan Wing Kwan, a non-executive director. The

Audit Committee has met four times since the last Annual General Meeting (“AGM”) and has reviewed

the following, where relevant, with the executive directors and statutory and internal auditors of the

Company:

(a) the audit plans and results of the internal auditors' examination and evaluation of the Group’s

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

recommendations;

(b) the Group’s financial and operating results and accounting policies;

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

of the financial statements of the Company, the consolidated financial statements of the Group

and statutory auditors' report on those financial statements before their submission to the

directors of the Company;

(d) the quarterly and annual announcements on the results and financial position of the Company

and the Group;

(e) the co-operation and assistance given by the management to the Company’s statutory auditors;

(f) the re-appointment of the statutory auditors of the Company; and

(g) the Group’s interested person transactions.

In addition, the Audit Committee reviewed all non-audit services provided by the statutory auditors

during the financial year and is of the opinion that the provision of such services will not affect the

independence of the statutory auditors.

The Audit Committee has full access to and has the co-operation of the management and has been

given the resources required for it to discharge its function properly. It also has full discretion to invite

any director and executive officer to attend its meetings. The statutory and internal auditors have

unrestricted access to the Audit Committee.

The Audit Committee has recommended to the directors the nomination of Deloitte & Touche LLP for

re-appointment as statutory auditors of the Company at the forthcoming AGM of the Company.


Annual Report 2009


AUDITORS

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



Vice-Chairman

Chan Wing Kwan

Director

25 February 2010


Annual Report 2009

42

Statement of Directors

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

of financial position and statement of changes in equity of the Company as set out on page 45 to 105

are drawn up so as to give a true and fair view of the state of affairs of the Group and the Company as

at 31 December 2009 and of the results, changes in equity and cash flows of the Group and changes

in equity of the Company for the year ended and at the date of this statement, there are reasonable

grounds to believe that the Company will be able to pay its debts when they fall due.



Vice-Chairman

Chan Wing Kwan

Director

25 February 2010


Annual Report 2009

43

Independent Auditors’ Report

TO THE MEMBERS OF ELEC & ELTEK INTERNATIONAL COMPANY LIMITED

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

Limited (the “Company”) and its subsidiary companies (the “Group”) which comprise the statements

of financial position of the Group and the Company as at 31 December 2009, and the income

statement, statement of comprehensive income, statement of changes in equity and statement of

cash flows of the Group and the statement of changes in equity of the Company for the year then

ended, and a summary of significant accounting policies and other explanatory notes as set out on

pages 45 to 105.

Management’s responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financial statements

in accordance with the provisions of the Companies Act (Cap. 50, Singapore Statutes) (the “Act”)

and Singapore Financial Reporting Standards. This responsibility includes: devising and maintaining

a system of internal accounting controls sufficient to provide a reasonable assurance that assets

are safeguarded against loss from unauthorised use or disposition; and transactions are properly

authorised and that they are recorded as necessary to permit the preparation of true and fair profit

and loss account and balance sheets and to maintain accountability of assets; selecting and applying

appropriate accounting policies; and making accounting estimates that are reasonable in the

circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We

conducted our audit in accordance with Singapore Standards on Auditing. Those standards require

that we comply with ethical requirements and plan and perform the audit to obtain reasonable

assurance whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures

in the financial statements. The procedures selected depend on the auditor’s judgement, including

the assessment of the risks of material misstatement of the financial statements, whether due to

fraud or error. In making those risk assessments, the auditor considers internal control relevant to

the entity’s preparation and fair presentation of the financial statements in order to design audit

procedures that are appropriate in the circumstances, but not for the purpose of expressing an

opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the

appropriateness of accounting policies used and the reasonableness of accounting estimates made

by management, as well as evaluating the overall presentation of the financial statements. We believe

that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit

opinion.


Annual Report 2009

44

Independent Auditors’ Report

Opinion

In our opinion,

(a) the consolidated financial statements of the Group and the statement of financial position and

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

provisions of the Act and Singapore Financial Reporting Standards so as to give a true and

fair view of the state of affairs of the Group and of the Company as at 31 December 2009 and

of the results, changes in equity and cash flows of the Group and changes in equity of the

Company for the year ended on that date; and

(b) the accounting and other records required by the Act to be kept by the Company and by

those subsidiary companies incorporated in Singapore of which we are the auditors have been

properly kept in accordance with the provisions of the Act.

Deloitte & Touche LLP

Public Accountants and Certified Public Accountants

Singapore

25 February 2010


Annual Report 2009

45

Consolidated Income StatementFor the year ended 31 December 2009

See accompanying notes to financial statements

THE GROUP

NOTES 2009 2008

US$’000 US$’000

Revenue 434,565 517,931

Cost of sales (351,757 ) (430,231 )

Gross profit 82,808 87,700

Interest income 339 1,332

Distribution and selling costs (10,443 ) (13,839 )

Administrative expenses (24,183 ) (27,677 )

Other operating income 828 891

Finance costs 6 (1,729 ) (4,820 )

Share of profits of an associate 1,697 1,550

Profit before taxation 49,317 45,137

Income tax expense 7 (3,419 ) (2,626 )

Profit for the year 8 45,898 42,511

Profit attributable to:

Owners of the Company 45,677 42,628

Minority interests 221 (117 )

45,898 42,511

United States United States

cents cents

Earnings per share: 10

– basic 25.53 23.83

– diluted 25.53 23.83


Annual Report 2009

46

Consolidated Statement of Comprehensive IncomeFor the year ended 31 December 2009


THE GROUP

2009 2008

US$’000 US$’000

Profit for the year 45,898 42,511

Other comprehensive income (expense):

Exchange differences on translation of

foreign operations 1,491 (4,395 )

Less: Reclassification adjustment for gain included in

profit or loss for disposal of an associate (1,202 ) –

289 (4,395 )

Revaluation of property 720 603

Other comprehensive income (expense) for the year 1,009 (3,792 )

Total comprehensive income for the year 46,907 38,719

Total comprehensive income attributable to:

Owners of the Company 46,795 38,404

Minority interests 112 315

46,907 38,719


Annual Report 2009

47

Statements of Financial PositionAs at 31 December 2009

THE GROUP THE COMPANY

NOTES 2009 2008 2009 2008

US$’000 US$’000 US$’000 US$’000

ASSETS

Current assets

Cash and bank balances 11 60,054 68,672 43 36

Trade receivables 12 130,243 110,513 – –

Bills receivables 6,367 4,061 – –

Other receivables 13 10,022 19,675 3 3

Amounts due from subsidiary

companies 14 – – 327,154 106,973

Inventories 15 39,738 39,582 – –

Total current assets 246,424 242,503 327,200 107,012

Non-current assets

Property, plant and equipment 16 347,115 379,905 17 26

Deposit for acquisition of plant

and equipment 1,253 1,664 – –

Investment properties 17 19,262 15,756 – –

Subsidiary companies 18 – – 23,071 22,671

Interest in an associate 19 – 8,388 – –

Deferred tax assets 23 1,437 1,446 – –

Total non-current assets 369,067 407,159 23,088 22,697

Total assets 615,491 649,662 350,288 129,709


Annual Report 2009

48

Statements of Financial PositionAs at 31 December 2009



NOTES 2009 2008 2009 2008

US$’000 US$’000 US$’000 US$’000

LIABILITIES AND EQUITY

Current liabilities

Bank overdrafts and loans 20 53,532 65,063 – –

Trade payables 21 84,573 88,250 – –

Bills payables 1,588 12,957 – –

Other payables 22 30,089 38,620 371 304

Amounts due to subsidiary

companies 14 – – 199,507 2,031

Provision for taxation 2,044 762 – –

Total current liabilities 171,826 205,652 199,878 2,335

Non-current liabilities

Bank loans 20 63,920 92,536 – –

Deferred tax liabilities 23 2,416 1,998 – –

Total non-current liabilities 66,336 94,534 – –

Capital, reserves and

minority interests

Share capital 24 98,656 98,656 98,656 98,656

Treasury shares 25 (1,356 ) (1,356 ) (1,356 ) (1,356 )

Reserves 270,765 242,570 53,110 30,074

Equity attributable to owners

of the Company 368,065 339,870 150,410 127,374

Minority interests 9,264 9,606 – –

377,329 349,476 150,410 127,374

Total liabilities and equity 615,491 649,662 350,288 129,709


Annual Report 2009

49

Statements of Changes in EquityFor the year ended 31 December 2009

Attributable to owners of the Company

Foreign

currency Share

Share Treasury Capital Statutory Revaluation Other Retained translation option Minority Total

capital shares reserve reserve reserve reserve earnings reserve reserve Total interests equity

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

(Note)

THE GROUP

Balance at 1 January 2008 98,656 (896 ) 2,702 2,697 844 166 217,862 18,130 1,654 341,815 9,677 351,492

Total comprehensive income (expense)

for the year – – – – 603 – 42,628 (4,827 ) – 38,404 315 38,719

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

Transfer from retained earnings

to statutory reserve – – – 909 – – (909 ) – – – – –

Transfer to retained earnings

upon lapse of share options – – – – – – 251 – (251 ) – – –

Amortization for the vesting period

(Share-based payments) (Note 26) – – – – – – – – 361 361 – 361

Dividends paid (Note 9)

– in respect of previous financial year – – – – – – (22,361 ) – – (22,361 ) (386 ) (22,747 )

– in respect of current financial year – – – – – – (17,889 ) – – (17,889 ) – (17,889 )

Balance at 31 December 2008 98,656 (1,356 ) 2,702 3,606 1,447 166 219,582 13,303 1,764 339,870 9,606 349,476

Total comprehensive income for the year – – – – 720 – 45,677 398 – 46,795 112 46,907

Transfer from retained earnings

to statutory reserve – – – 6 – – (6 ) – – – – –


upon lapse of share options – – – – – – 28 – (28 ) – – –

Amortization for the vesting period

(Share-based payments) (Note 26) – – – – – – – – 183 183 – 183


– in respect of previous financial year – – – – – – (18,783 ) – – (18,783 ) (454 ) (19,237 )

Balance at 31 December 2009 98,656 (1,356 ) 2,702 3,612 2,167 166 246,498 13,701 1,919 368,065 9,264 377,329

Note:

The capital reserve relates to amounts set aside by subsidiary companies operating in Thailand for declaration of

dividends as required under the laws of Thailand.


Annual Report 2009

50

Statements of Changes in EquityFor the year ended 31 December 2009


Share

Share Treasury Retained option Total

capital shares earnings reserve equity

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

THE COMPANY

Balance at 1 January 2008 98,656 (896 ) 41,345 844 139,949

Total comprehensive income

for the year – – 27,989 – 27,989

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

Amortization for the vesting

period (Share-based

payments) (Note 26) – – – 146 146


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


– in respect of previous

financial year – – (22,361 ) – (22,361 )

– in respect of current

financial year – – (17,889 ) – (17,889 )

Balance at 31 December 2008 98,656 (1,356 ) 29,095 979 127,374

Total comprehensive income

for the year – – 41,736 – 41,736

Amortization for the vesting

period (Share-based

payments) (Note 26) – – – 83 83


- in respect of previous

financial year – – (18,783 ) – (18,783 )

Balance at 31 December 2009 98,656 (1,356 ) 52,048 1,062 150,410


Annual Report 2009

51

Consolidated Statement of Cash FlowsFor the year ended 31 December 2009

2009 2008

US$’000 US$’000

OPERATING ACTIVITIES

Profit before taxation 49,317 45,137

Adjustments for:

Allowance for doubtful debts 152 1,749

Finance costs 1,729 4,820

Depreciation of property, plant and equipment 47,529 47,989

Gain on disposal of a subsidiary company – (590 )

Loss on disposal of property, plant and equipment 1,340 –

Loss on fair value change of investment properties 5 4

Reversal of allowance for inventory obsolescence (810 ) (1,191 )

Share-based payment expense 183 361

Interest income (339 ) (1,332 )

Share of profits of an associate (1,697 ) (1,550 )

Operating income before movements in

working capital 97,409 95,397

Decrease in inventories 654 20,587

(Increase) decrease in trade and other receivables (12,535 ) 40,045

Decrease in trade and other payables (23,577 ) (16,044)

Net cash generated from operations 61,951 139,985

Interest income received 339 1,332

Interest paid (1,729 ) (4,820)

Income taxes paid (1,696 ) (3,738)

NET CASH FROM OPERATING ACTIVITIES 58,865 132,759

INVESTING ACTIVITIES

Proceeds from disposal of property, plant and equipment 1,462 371

Purchase of property, plant and equipment (19,574 ) (77,609 )

Decrease in deposits paid for acquisition

of property, plant and equipment 411 2,161

Disposal of a subsidiary company – (469 )

Disposal of an associate 10,583 –

Dividend received from an associate 401 682

NET CASH USED IN INVESTING ACTIVITIES (6,717 ) (74,864 )


Annual Report 2009

52

Consolidated Statement of Cash FlowsFor the year ended 31 December 2009


NOTES 2009 2008

US$’000 US$’000

FINANCING ACTIVITIES

Proceeds from bank borrowings 35,318 108,227

Repayment of bank borrowings (75,463 ) (84,299 )

Payment for share buy-back – (460 )

Dividends paid by the Company (18,783 ) (40,250 )

Dividends paid by subsidiary companies to

minority shareholders (454 ) (386 )

NET CASH USED IN FINANCING ACTIVITIES (59,382 ) (17,168 )

NET (DECREASE) INCREASE IN CASH AND CASH

EQUIVALENTS (7,234 ) 40,727

CASH AND CASH EQUIVALENTS AT THE

BEGINNING OF THE YEAR 68,670 31,539

EFFECT OF FOREIGN EXCHANGE RATE CHANGES

ON THE BALANCES OF CASH HELD

IN FOREIGN CURRENCIES, NET (1,382 ) (3,596 )

CASH AND CASH EQUIVALENTS AT THE END

OF THE YEAR 60,054 68,670

CASH AND CASH EQUIVALENTS CONSIST OF

Fixed deposits 11 6,924 17,941

Cash at bank and on hand 11 53,130 50,731

60,054 68,672

Bank overdrafts – unsecured 20 – (2 )

60,054 68,670


Annual Report 2009

53

Notes to the Financial StatementsFor the year ended 31 December 2009

1. GENERAL

Elec & Eltek International Company Limited (Registration Number 199300005H) (the

“Company”) is a limited liability company incorporated and domiciled in Singapore. The

Company’s ultimate holding company is Kingboard Chemical Holdings Limited, incorporated

in Cayman Islands. Related companies in these financial statements refer to the ultimate

holding company and its subsidiary companies. Related parties in these financial statements

refer to entities with common directors or shareholders of the ultimate holding company and its

subsidiary companies.

The Company is listed on the Main Board of the Singapore Exchange Securities Trading

Limited. The financial statements are expressed in United States Dollars, which is the

functional currency of the Company.

The Company’s principal office is located at 4 Leng Kee Road, #03-02 SiS Building, Singapore

159088 and its registered office is located at 80 Raffles Place, #33-00 UOB Plaza 1, Singapore

048624.

The Group’s manufacturing operations are located in Hong Kong, Thailand and the People’s

Republic of China (“the PRC”).

The principal activity of the Company is investment holding. Its subsidiary companies are

primarily engaged in the fabrication and distribution of double-sided, multi-layer and high

density interconnect (“HDI”) printed circuit boards (“PCB”). Details of the principal activities of

the subsidiary companies are disclosed in Note 18. There have been no significant changes in

the nature of these activities during the financial year.

The consolidated financial statements of the Group and statement of financial position and

statement of changes in equity of the Company for the year ended 31 December 2009 were

authorised for issuance by the Board of Directors on 25 February 2010.


Annual Report 2009

54


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of accountingThe financial statements have been prepared in accordance with the historical cost basis,

except for the revaluation of certain non-current assets, and are drawn up in accordance with

the provisions of the Companies Act (Cap. 50, Singapore Statutes) and Singapore Financial

Reporting Standards (“FRS”).

Adoption of new and revised standards in the current financial yearIn the current financial year, the Group has adopted all the new and revised FRSs and

Interpretations of FRS (“INT FRS”) that are relevant to its operations and effective for annual

periods beginning on or after 1 January 2009. The adoption of these new/revised FRSs and INT

FRSs does not result in changes to the Group’s and Company’s accounting policies and has

no material effect on the amounts reported for the current or prior years, except as disclosed

below:

FRS 1 – Presentation of Financial Statements (Revised)FRS 1 (2008) has introduced terminology changes (including revised titles for the financial

statements) and changes in the format and content of the financial statements. In addition,

the revised Standard requires the presentation of a third statement of financial position at the

beginning of the earliest comparative period presented if the entity applies new accounting

policies retrospectively or makes retrospective restatements or reclassifies items in the financial

statements.

Amendments to FRS 107 Financial Instruments: Disclosures – Improving Disclosures about Financial InstrumentsThe amendments to FRS 107 expand the disclosures required in respect of fair value

measurements and liquidity risk. The Group has elected not to provide comparative information

for these expanded disclosures in the current year in accordance with the transitional reliefs

offered in these amendments.

FRS 108 – Operating SegmentsThe Group adopted FRS 108 with effect from 1 January 2009. FRS 108 requires operating

segments to be identified on the basis of internal reports about components of the Group that

are regularly reviewed by the chief operating decision maker in order to allocate resources

to the segment and to assess its performance. In contrast, the predecessor Standard (FRS

14 Segment Reporting) required an entity to identify two sets of segments (Business and

Geographical), using a risks and rewards approach, with the entity’s system of internal financial

reporting to key management personnel serving only as the starting point for the identification

of such segments. The adoption of FRS 108 did not result in any change to the segmental

disclosure as presented in the previous audited financial statements.


Annual Report 2009

55Notes to the Financial Statements

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basis of accounting (Continued)At the date of authorisation of these financial statements, the following FRSs, INT FRSs and

amendments to FRS that are relevant to the Group and the Company were issued but not

effective:

FRS 39 Recognition and Measurement – Eligible Hedged Items

FRS 39 Recognition and Measurement and INT FRS 109

Reassessment of Embedded Derivatives

– Amendments relating to Embedded Derivatives

FRS 28 Investment in Associates (Revised)

FRS 7 Amendments to Statement of Cash Flows

FRS 27 Consolidated and Separate Financial Statements (Revised)

FRS 103 Business Combinations (Revised)

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

revised standards.

FRS 27 (Revised) – Consolidated and Separate Financial Statements; and FRS 103 (Revised) Business CombinationsFRS 27 (Revised) is effective for annual periods beginning on or after 1 July 2009. FRS 103

(Revised) is effective for business combinations for which the acquisition date is on or after the

beginning of the first annual reporting period beginning on or after 1 July 2009.

Apart from matters of presentation, the principal amendments to FRS 27 that will impact the

Group concern the accounting treatment for transactions that result in changes in a parent’s

interest in a subsidiary company. It is likely that these amendments will significantly affect the

accounting for such transactions in future accounting periods, but the extent of such impact

will depend on the details of the transactions, which cannot be anticipated. The changes will

be adopted prospectively for transactions after the date of adoption of the revised Standard

and, therefore, no restatements will be required in respect of transactions prior to the date of

adoption.

Similarly, FRS 103 is concerned with accounting for business combination transactions. The

changes to the Standard are significant, but their impact can only be determined once the

details of future business combinations is known. The amendments to FRS 103 will be adopted

prospectively for transactions after the date of adoption of the revised Standard and, therefore,

no restatements will be required in respect of transactions prior to the date of adoption.


Annual Report 2009

56



Basis of accounting (Continued)FRS 28 (Revised) Investments in AssociatesIn FRS 28 (Revised), the principle adopted under FRS 27 (Revised) (see above) that a loss

of control is recognised as a disposal and re-acquisition of any retained interest at fair value

is extended by consequential amendment to FRS 28 (Revised); therefore, when significant

influence is lost, the investor measures any investment retained in the former associate at fair

value, with any consequential gain or loss recognised in profit or loss.

FRS 28 (Revised) will be adopted for periods beginning on or after 1 July 2009 and will be

applied prospectively in accordance with the relevant transitional provisions and, therefore, no

restatements will be required in respect of transactions prior to the date of adoption.

Amendments to FRS 7 Statement of Cash FlowsThe amendments (part of Improvements to FRSs issued in June 2009) specify that only

expenditures that result in a recognised asset in the statement of financial position can be

classified as investing activities in the statement of cash flows. Consequently, cash flows in

respect of development costs that do not meet any criteria in FRS 38 Intangible Assets for

capitalisation as part of an internally generated intangible asset (and, therefore, are recognised

in profit or loss as incurred) will be reclassified from investing to operating activities in the

statement of cash flows. The amendments to FRS 7 will be adopted for periods beginning on or

after 1 January 2010.

Management anticipates that the adoption of the above FRSs, INT FRSs and amendments to

FRS in future periods will not have a material impact on the financial statements of the Group

and of the Company in the period of their initial adoption.

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

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

companies). Control is achieved where the Company has the power to govern the financial and

operating policies of an entity so as to obtain benefits from its activities.

The results of subsidiary companies acquired or disposed of during the period are included in

the consolidated statement of comprehensive income from the effective date of acquisition or

up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiary companies to

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


Annual Report 2009



Basis of consolidation (Continued)All intra-group transactions, balances, income and expenses are eliminated on consolidation.

Minority interests in the net assets of consolidated subsidiary companies are identified

separately from the Group’s equity therein. Minority interests consist of the amount of those

interests at the date of the original business combination (see below) and the minority’s share

of changes in equity since the date of the combination. Losses applicable to the minority in

excess of the minority’s interest in the subsidiary’s equity are allocated against the interests of

the Group except to the extent that the minority has a binding obligation and is able to make an

additional investment to cover its share of those losses.

In the Company’s financial statements, investments in subsidiary companies and an associate

are carried at cost less any impairment in net recoverable value that has been recognised in

profit or loss.

Business combinationsThe acquisition of subsidiary companies is accounted for using the purchase method. The

cost of the acquisition is measured at the aggregate of the fair values, at the date of exchange,

of assets given, liabilities incurred or assumed, and equity instruments issued by the Group

in exchange for control of the acquiree, plus any costs directly attributable to the business

combination. The acquiree’s identifiable assets, liabilities and contingent liabilities that

meet the conditions for recognition under FRS 103 are recognised at their fair values at the

acquisition date.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being

the excess of the cost of the business combination over the Group’s interest in the net fair value

of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment,

the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and

contingent liabilities exceeds the cost of the business combination, the excess is recognised

immediately in profit or loss.

The interest of minority shareholders in the acquiree is initially measured at the minority’s

proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.


Annual Report 2009

58



Financial instrumentsFinancial assets and financial liabilities are recognised on the Group’s statements of financial

position when the Group becomes a party to the contractual provisions of the instrument.

Effective interest methodThe effective interest method is a method of calculating the amortised cost of a financial

instrument and of allocating interest income or expense over the relevant period. The effective

interest rate is the rate that exactly discounts estimated future cash receipts or payments

(including all fees on points paid or received that form an integral part of the effective

interest rate, transaction costs and other premiums or discounts) through the expected life

of the financial instrument, or where appropriate, a shorter period. Income and expense are

recognised on an effective interest basis for debt instruments.

Financial assets

Investments are recognised and derecognised on a trade date basis where the purchase or sale

of an investment is under a contract whose terms require delivery of the investment within the

timeframe established by the market concerned, and are initially measured at fair value, net of

transaction costs, except for those financial assets classified as at fair value through profit or

loss which are initially measured at fair value.

Other financial assets are classified as “loans and receivables”.

Loans and receivablesTrade receivables, bill receivables and other receivables that have fixed or determinable

payments that are not quoted in an active market are classified as “loans and receivables”.

Loans and receivables are measured at amortised cost using the effective interest method less

impairment. Interest is recognised by applying the effective interest method, except for short-

term receivables when the recognition of interest would be immaterial.

Impairment of financial assetsFinancial assets are assessed for indicators of impairment at the end of each reporting period.

Financial assets are impaired where there is objective evidence that, as a result of one or more

events that occurred after the initial recognition of the financial asset, the estimated future cash

flows of the investment have been impacted.

For financial assets carried at amortised cost, the amount of the impairment is the difference

between the asset’s carrying amount and the present value of estimated future cash flows,

discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all

financial assets with the exception of trade receivables where the carrying amount is reduced

through the use of an allowance account. When a trade receivable is uncollectible, it is written

off against the allowance account. Subsequent recoveries of amounts previously written off

are credited against that allowance account. Changes in the carrying amount of the allowance

account are recognised in profit or loss.


Annual Report 2009



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 2009

60



Financial instruments (Continued)

Financial liabilities and equity instruments (Continued)

Financial liabilitiesTrade and other payables and bill payables are initially measured at fair value, net of

transaction costs, and are subsequently measured at amortised cost, using the effective

interest rate method, with interest expense recognised on an effective yield basis.

Interest-bearing bank loans and overdrafts are initially measured at fair value, and are

subsequently measured at amortised cost, using the effective interest method. Any difference

between the proceeds (net of transaction costs) and the settlement or redemption of borrowings

is recognised over the term of the borrowings in accordance with the Group’s accounting policy

for borrowing costs (see below).

Financial guarantee contract liabilities are measured initially at their fair values and

subsequently at the higher of the amount of obligation under the contract recognised as a

provision in accordance with FRS 37 Provisions, Contingent Liabilities and Contingent Assets

and the amount initially recognised less cumulated amortization in accordance with FRS 18

Revenue.

Derecognition of financial liabilitiesThe Group derecognises financial liabilities when, and only when, the Group’s obligations are

discharged, cancelled or they expire.

LeasesLeases are classified as finance leases whenever the terms of the lease transfer substantially

all the risks and rewards of ownership to the lessee. All other leases are classified as operating

leases.

The Group as lesseeRentals payable under operating leases are charged to profit or loss on a straight-line basis

over the term of the relevant lease unless another systematic basis is more representative of

the time pattern in which economic benefits from the leased asset are consumed. Contingent

rentals arising under operating leases are recognised as an expense in the period in which they

are incurred.

In the event that lease incentives are received to enter into operating leases, such incentives

are recognised as a liability. The aggregate benefit of incentives is recognised as a reduction

of rental expense on a straight-line basis, except where another systematic basis is more

representative of the time pattern in which economic benefits from the leased asset are

consumed.


Annual Report 2009



InventoriesInventories are stated at the lower of cost and net realisable value. Cost comprises direct

materials and, where applicable, direct labour costs and those overheads that have been

incurred in bringing the inventories to their present location and condition. Cost is calculated

using the first-in, first-out method. Net realisable value represents the estimated selling price

less all estimated costs of completion and costs to be incurred in marketing, selling and

distribution.

Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulated depreciation and any

accumulated impairment losses.

Construction-in-progress are stated at cost. No depreciation is provided until the construction is

completed and the asset are available for use.

Depreciation is charged so as to write off the cost or valuation of assets, other than freehold

land and properties under construction, over their estimated useful lives, using the straight-line

method, on the following bases:

Freehold buildings 20 years

Leasehold land and buildings 50 – 75 years

Leasehold improvements lower of 10 years or lease terms

Furniture and fixtures 5 years

Plant and equipment 5 – 10 years

Motor vehicles and yacht 5 – 7 years

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

end, with the effect of any changes in estimate accounted for on a prospective basis.

The gain or loss arising on disposal or retirement of an item of property, plant and equipment is

determined as the difference between the sales proceeds and the carrying amounts of the asset

and is recognised in profit or loss.

Investment propertyInvestment property, which is property held to earn rentals and/or for capital appreciation, is

measured initially at its cost, including transaction costs. Subsequent to initial recognition,

investment property is measured at fair value. Gains or losses arising from changes in the fair

value of investment property are included in profit or loss for the period in which they arise.


Annual Report 2009

62



Impairment of tangible and intangible assetsAt the end of each reporting period, the Group reviews the carrying amounts of its tangible and

intangible assets, where applicable, to determine whether there is any indication that those

assets have suffered an impairment loss. If any such indication exists, the recoverable amount

of the asset is estimated in order to determine the extent of the impairment loss (if any). Where

it is not possible to estimate the recoverable amount of an individual asset, the Group estimates

the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing

value in use, the estimated future cash flows are discounted to their present value using a pre-

tax discount rate that reflects current market assessments of the time value of money and the

risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than

its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its

recoverable amount. An impairment loss is recognised immediately in profit or loss.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-

generating unit) is increased to the revised estimate of its recoverable amount, but so that

the increased carrying amount does not exceed the carrying amount that would have been

determined had no impairment loss been recognised for the asset (cash-generating unit) in

prior years. A reversal of an impairment loss is recognised immediately in profit or loss.

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

a subsidiary company nor an interest in a joint venture. Significant influence is the power to

participate in the financial and operating policy decisions of the investee but is not control or

joint control over those policies.

The results and assets and liabilities of an associate are incorporated in these financial

statements using the equity method of accounting, except when the investment is classified as

held for sale, in which case it is accounted for under FRS 105 Non-current Assets Held for Sale

and Discontinued Operations. Under the equity method, investment in an associate is carried

in the consolidated statements of financial position at cost as adjusted for post-acquisition

changes in the Group’s share of the net assets of the associate, less any impairment in the

value of individual investments. Losses of an associate in excess of the Group’s interest in that

associate (which includes any long-term interests that, in substance, form part of the Group’s

net investment in the associate) are not recognised, unless the Group has incurred legal or

constructive obligation or made payments on behalf of the associate.


Annual Report 2009



Associate (Continued)Any excess of the cost of acquisition over the Group’s share of the net fair value of the

identifiable assets, liabilities and contingent liabilities of the associate recognised at the date

of acquisition is recognised as goodwill. The goodwill is included within the carrying amount

of the investment and is assessed for impairment as part of the investment. Any excess of the

Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities

over the cost of acquisition, after reassessment, is recognised immediately in profit or loss.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated

to the extent of the Group’s interest in the relevant associate.

ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a

result of a past event, it is probable that the Group will be required to settle the obligation, and

a reliable estimate can be made of the amount of the obligation.

The amount recognised as a provision is the best estimate of the consideration required to

settle the present obligation at the end of the reporting period, taking into account the risks and

uncertainties surrounding the obligation. Where a provision is measured using the cash flows

estimated to settle the present obligation, its carrying amount is the present value of those cash

flows.

When some or all of the economic benefits required to settle a provision are expected to be

recovered from a third party, the receivable is recognised as an asset if it is virtually certain that

reimbursement will be received and the amount of the receivable can be measured reliably.

Share-based paymentsThe Group issues equity-settled share-based payment to certain employees.

Equity-settled share-based payments are measured at fair value of the equity instruments at

the date of grant. Details regarding the determination of the fair value of equity-settled share-

based transactions are set out in Note 26. The fair value determined at the grant date of the

equity-settled share-based payments is expensed on a straight-line basis over the vesting

period, based on the Group’s estimate of the number of equity instruments that will eventually

vest. At the end of each reporting period, the Group revises its estimate of the number of equity

instruments expected to vest. The impact of the revision of the original estimates, if any, is

recognised in profit or loss such that the cumulative expense reflects the revised estimate, with

a corresponding adjustment to the equity-settled employee benefits reserve.

The policy described above is applied to all equity-settled share-based payments that were

granted after 22 November 2002 that vested after 1 January 2005. No amount has been

recognised in the financial statements in respect of other equity-settled share-based payments.

Fair value is measured using the Trinomial Lattice model. The expected life used in the model

has been adjusted, based on management’s best estimate, for the effects of non-transferability,

exercise restrictions and behavioural considerations.


Annual Report 2009

64



Statutory reserveThe People’s Republic of China’s laws and regulations require Sino-foreign cooperative joint

ventures to provide for certain statutory reserves, mainly reserve fund and enterprise expansion

fund, which are appropriated from net income as reported in the statutory financial statements.

The use of these reserves is at the discretion of the entities’ board of directors. The reserve

fund can only be used, upon approval by the relevant authority, to offset accumulated losses

or increase capital. The enterprise expansion fund can only be used to increase capital upon

approval by the relevant authority.

Revenue recognitionRevenue is measured at the fair value of the consideration received or receivable. Revenue is

reduced for estimated customer returns, rebates and other similar allowances.

Revenue from the sale of manufactured goods is recognised when all the following conditions

are satisfied:

• the Group has transferred to the buyer the significant risks and rewards of ownership of

the goods;

• the Group retains neither continuing managerial involvement to the degree usually

associated with ownership nor effective control over the goods sold;

• the amount of revenue can be measured reliably;

• it is probable that the economic benefits associated with the transaction will flow to the

entity; and

• the costs incurred or to be incurred in respect of the transaction can be measured

reliably.

Interest income is accrued on a time basis, by reference to the principal outstanding and at the

effective interest rate applicable.

Dividend income from investments is recognised when the shareholders’ rights to receive

payment have been established.


Annual Report 2009



Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of qualifying

assets, which are assets that necessarily take a substantial period of time to get ready for their

intended use or sale, are added to the cost of those assets, until such time as the assets are

substantially ready for their intended use or sale. Investment income earned on the temporary

investment of specific borrowings pending their expenditure on qualifying assets is deducted

from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in profit or loss in the period in which they are

incurred.

Retirement benefit costsPayments to defined contribution retirement benefit plans are charged as expenses as they

fall due. Payments made to state-managed retirement benefit schemes, such as the Singapore

Central Provident Fund, state-sponsored retirement benefit scheme in the PRC and Mandatory

Provident Fund in Hong Kong, are dealt with as payments to defined contribution plans where

the Group’s obligations under the plans are equivalent to those arising in a defined contribution

retirement benefit plan.

Employee leave entitlementEmployee entitlements to annual leave are recognised when they accrue to employees. A

provision is made for the estimated liability for annual leave as a result of services rendered by

employees up to the end of the reporting period.

Income taxIncome tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from

profit as reported in the income statement because it excludes items of income or expense that

are taxable or deductible in other years and it further excludes items that are not taxable or tax

deductible. The Group’s liability for current tax is calculated using tax rates (and tax laws) that

have been enacted or substantively enacted in countries where the Company and its subsidiary

companies operate by the end of the reporting period.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities

in the financial statements and the corresponding tax bases used in the computation of taxable

profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities

are generally recognised for all taxable temporary differences and deferred tax assets are

recognised to the extent that it is probable that taxable profits will be available against which

deductible temporary differences can be utilised. Such assets and liabilities are not recognised

if the temporary difference arises from goodwill or from the initial recognition (other than in a

business combination) of other assets and liabilities in a transaction that affects neither the

taxable profit nor the accounting profit.


Annual Report 2009

66



Income tax (Continued)Deferred tax liabilities are recognised for taxable temporary differences arising on investments

in subsidiary companies and associates, except where the Group is able to control the reversal

of the temporary difference and it is probable that the temporary difference will not reverse in

the foreseeable future.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and

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

to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the

liability is settled or the asset realised based on the tax rates (and tax laws) that have been

enacted or substantively enacted by the end of the reporting period.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off

current tax assets against current tax liabilities and when they relate to income taxes levied by

the same taxation authority and the Group intends to settle its current tax assets and liabilities

on a net basis.

Current and deferred tax are recognised as an expense or income in profit or loss, except

when they relate to items credited or debited outside profit or loss, in which case the tax is also

recognised outside profit or loss, or where they arise from the initial accounting for a business

combination. In the case of a business combination, the tax effect is taken into account in

calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of

the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.

Foreign currency transactions and translationThe individual financial statements of each group entity are measured and presented in the

currency of the primary economic environment in which the entity operates (its functional

currency). The consolidated financial statements of the Group and the statements of financial

position of the Company are presented in United States Dollars, which is the functional

currency of the Company, and the presentation currency for the consolidated financial

statements.

In preparing the financial statements of the individual entities, transactions in currencies other

than the entity’s functional currency are recorded at the rates of exchange prevailing on the

date of the transaction. At the end of each reporting period, monetary items denominated in

foreign currencies are retranslated at the rates prevailing at the end of the reporting period.

Non-monetary items carried at fair value that are denominated in foreign currencies are

retranslated at the rates prevailing on the date when the fair value was determined. Non-

monetary items that are measured in terms of historical cost in a foreign currency are not

retranslated.


Annual Report 2009



Foreign currency transactions and translation (Continued)Exchange differences arising on the settlement of monetary items, and on retranslation of

monetary items are included in profit or loss for the period. Exchange differences arising on

the retranslation of non-monetary items carried at fair value are included in profit or loss for the

period except for differences arising on the retranslation of non-monetary items in respect of

which gains and losses are recognised in other comprehensive income. For such non-monetary

items, any exchange component of that gain or loss is also recognised in other comprehensive

income.

For the purpose of presenting consolidated financial statements, the assets and liabilities of

the Group’s foreign operations (including comparatives) are expressed in United States Dollars

using exchange rates prevailing at the end of the reporting period. Income and expense items

(including comparatives) are translated at the average exchange rates for the period, unless

exchange rates fluctuated significantly during that period, in which case the exchange rates

at the dates of the transactions are used. Exchange differences arising, if any, are recognised

in other comprehensive income and accumulated in a separate component of equity. On the

disposal of a foreign operation, the cumulative amount of the exchange differences relating to

that foreign operation accumulated in a separate component of equity, shall be reclassified

from equity to profit or loss (as a reclassification adjustment) when the gain or loss on disposal is

recognised.

On consolidation, exchange differences arising from the translation of the net investment in

foreign entities (including monetary items that, in substance, form part of the net investment

in foreign entities), and of borrowings and other currency instruments designated as hedges of

such investments, are recognised in other comprehensive income and accumulated in foreign

currency translation reserve (attributed to minority interest, as appropriate).

Cash and cash equivalentsCash and cash equivalents comprise cash on hand and demand deposits, bank overdrafts and

other short-term highly liquid investments that are readily convertible to a known amount of

cash and are subject to an insignificant risk of changes in value.


Annual Report 2009

68


3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

In the application of the Group’s accounting policies, which are described in Note 2,

management is required to make judgements, estimates and assumptions about the carrying

amounts of assets and liabilities that are not readily apparent from other sources. The estimates

and associated assumptions are based on historical experience and other factors that are

considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions

to accounting estimates are recognised in the period in which the estimate is revised if the

revision affects only that period, or in the period of the revision and future periods if the revision

affects both current and future periods.

Critical judgements in applying the entity’s accounting policiesApart from those involving estimations (see below), management is of the opinion that there is

no instance of application of judgements that are expected to have a significant effect on the

amounts recognised in the financial statements.

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

at the end of the reporting period, that have a significant risk of causing a material adjustment

to the carrying amounts of assets and liabilities within the next financial year, are discussed

below:

(i) Depreciation of property, plant and equipmentProperty, plant and equipment are depreciated on a straight-line basis over their

estimated useful lives. Management estimates the useful lives of property, plant and

equipment to be within 5 to 75 years. The carrying amount of the Group’s property, plant

and equipment at 31 December 2009 was US$347,115,000 (2008: US$379,905,000).

Changes in the expected level of usage and technological developments could impact

the economic useful lives and the residual values of these assets, and therefore future

depreciation charges could be revised.

(ii) Investment properties (Note 17)The fair value of each investment property is individually determined at the end of each

reporting period by independent valuers based on a market value assessment, on an

existing use basis. The valuers have relied on the discounted cash flow analysis and the

capitalisation of income approach as their primary methods, supported by the direct

comparison method. These methodologies are based upon estimates of future results

and a set of assumptions specific to each property to reflect its tenancy and cash flow

profile. The fair value of each investment property reflects, among other things, rental

income from current leases and assumptions about rental income from future leases in

the light of current market conditions. The fair value also reflects, on a similar basis, any

cash outflows that could be expected in respect of the property.


Annual Report 2009


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

Key sources of estimation uncertainty (Continued)

(iii) Allowance for doubtful debtsThe policy for allowances for doubtful debts of the Group is based on the evaluation

of collectability and aging analysis of accounts and on management’s judgement.

The allowances as at 31 December 2009 amounted to US$5,665,000 (2008:

US$10,189,000). A considerable amount of judgement is required in assessing the

ultimate realisation of these receivables, including the current creditworthiness and the

past collection history of each customer. If the financial conditions of customers of the

Group were to deteriorate, resulting in an impairment of their ability to make payments,

additional allowances may be required. The carrying amounts of the Group’s trade and

bills receivables as at 31 December 2009 are US$130,243,000 and US$6,367,000

(2008: US$110,513,000 and US$4,061,000) respectively.

(iv) Allowance for inventory obsolescenceThe management of the Group reviews an aging analysis at the end of each reporting

period, and makes allowance for inventory obsolescence for items that are identified

as obsolete and slow-moving. The allowance for inventories as at 31 December 2009

amounted to US$4,036,000 (2008: US$4,861,000). The management estimates the

net realisable value for goods for resale based primarily on the latest selling prices and

current market conditions. The carrying amount of the inventories of the Group as at 31

December 2009 is US$39,738,000 (2008: US$39,582,000).

(v) Income and deferred taxesThe Group has exposure to income taxes in several jurisdictions. Significant judgement

is involved in determining the group-wide provision for income taxes. There are certain

transactions and computations for which the ultimate tax determination is uncertain

during the ordinary course of business. The Group recognises liabilities for expected tax

issues based on estimates of whether additional taxes will be due. Where the final tax

outcome of these matters is different from the amounts that were initially recognised,

such differences will impact the income tax and deferred tax provisions in the period in

which such determination is made. The Group’s tax payable amounts at 31 December

2009 is US$2,044,000 (2008: US$762,000). The Group’s deferred tax assets and

deferred tax liabilities at 31 December 2009 are US$1,437,000 (2008: US$1,446,000)

and US$2,416,000 (2008: US$1,998,000), respectively.


Annual Report 2009

70


4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT

Categories of financial instrumentsThe following table sets out the financial instruments as at the end of the reporting period:


2009 2008 2009 2008

US$’000 US$’000 US$’000 US$’000

Financial assets

Loans and receivables (including

cash and bank balances) 205,394 201,853 327,200 107,010

Financial liabilities

Amortised cost 216,247 282,278 199,507 2,031

Financial risk management policies and objectivesThe Group’s major financial instruments include bank balances and cash, bank borrowings,

trade and other receivables and bills receivables, trade and other payables and bills payables.

Details of these financial instruments are disclosed in respective notes. The risks associated

with these financial instruments and the policies on how to mitigate these risks are set out

below. The management manages and monitors these exposures to ensure appropriate

measures are implemented on a timely and effective manner.

Foreign exchange risk managementSeveral subsidiary companies of the Company have foreign currency sales/purchases

denominated in currencies other than the entity’s functional currencies, which expose the

Group to foreign currency risk.

Whenever possible, the Group seeks to maintain a natural hedge through the matching of

liabilities, including borrowings, against assets in the same currency or against the entity’s

functional currency, in particular its future revenue stream. Transactional exposures in

currencies other than entities’ functional currency are kept to minimal level.

When necessary, foreign exchange forward contracts are used by the Group to manage its

foreign currency exposure arising from its operating activities.


Annual Report 2009


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

Foreign exchange risk management (Continued)At the end of the reporting period, the carrying amounts of monetary assets and monetary

liabilities denominated in currencies other than the respective group entities’ functional

currencies are as follows:


Liabilities Assets Liabilities Assets

2009 2008 2009 2008 2009 2008 2009 2008

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

USD 1,607 1,015 4,003 9,332 – – – –

HKD 119,109 102,830 10,338 21,920 – – 5,517 2,156

RMB 42,418 58,898 56,709 34,231 9 – – –

SGD 232 197 38 30 148 119 38 102

GBP 37 39 15 26 – – – –

EUR 1,916 4,678 8,011 8,381 – – – –

JPY 4,844 10,665 2 4 – – – –

The following table details the sensitivity to a 5% increase and decrease in the Chinese

Renminbi against the United States Dollars. 5% is the sensitivity rate used when reporting

foreign currency risk internally to key management personnel and represents management’s

assessment of the possible change in foreign exchange rates. The sensitivity analysis includes

only outstanding foreign currency denominated monetary items and adjusts their translation at

the period end for a 5% change in foreign currency rates.

If the Chinese Renminbi strengthens by 5% against the United States Dollars, profit or loss will

increase (decrease) by:

THE GROUP

2009 2008

US$’000 US$’000

United States Dollars 547 (1,557 )

For a 5% weakening of the Chinese Renminbi against the United States Dollars, there would be

an equal and opposite impact on the profit and loss. This is mainly attributable to the exposure

outstanding on receivables and payables at the end of the reporting period in the Group.


Annual Report 2009

72



Foreign exchange risk management (Continued)Under the Linked Exchange Rate system in Hong Kong, the financial exposure on exchange

rate fluctuation between Hong Kong Dollars and United States Dollars is considered by the

management to be insignificant, and therefore no sensitivity analysis has been prepared for

Hong Kong Dollars.

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign

exchange risk as the year end exposure does not reflect the exposure during the year.

Interest rate risk managementThe Group’s primary interest rate risk relates to its borrowings from banks. The interest rates

and terms of repayment of the term loan and revolving loans, trust receipt loans and other

short-term bank loans of the Group are disclosed in Note 20.

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

for non-derivative instruments as referred to above at the end of the reporting period and

the stipulated change taking place at the beginning of the financial year and held constant

throughout the reporting period in the case of instruments that have floating rates. A 50

basis point increase or decrease is used when reporting interest rate risk internally to key

management personnel and represents management’s assessment of the reasonably possible

change in interest rates.

If interest rates had been 50 basis points higher or lower and all other variables were held

constant, the Group’s profit for the year ended 31 December 2009 would decrease/increase

by US$662,000 (2008: decrease/increase by US$795,000). This is mainly attributable to the

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

Credit risk managementCredit risk is the risk that counterparties are unable to meet their obligations resulting in

financial loss to the Group. It is the Group’s policy to enter into transactions with a diversity of

credit-worthy parties to mitigate any significant concentration of credit risk. The Group ensures

that sales of products are rendered to customers with appropriate credit history and has

internal mechanisms to monitor the granting of credit and management of credit exposures.

The Group has made provisions for potential losses on credits extended. Surplus funds are

placed with reputable financial institutions. The Group’s maximum exposure to credit risk in the

event the counterparties fail to perform their obligations in relation to each class of recognised

financial assets is the carrying amount of those assets as indicated in the statement of financial

position. As at financial year end, there was no significant concentration of credit risk to the

Group or the Company.

Further details of credit risks on trade receivables is disclosed in Note 12.


Annual Report 2009



Liquidity risk managementThe Group’s cash and short-term deposits, operating cash flow and availability of banking

facilities are actively managed to ensure that there is adequate working capital and that

repayment and funding needs are met.

Liquidity and interest risk analysis

Non-derivative financial liabilitiesThe following tables detail the remaining contractual maturity for non-derivative financial

liabilities. The tables have been drawn up based on the undiscounted cash flows of financial

liabilities based on the earliest date on which the Group and the Company can be required to

pay.

Weighted

average On demand Within Within Total Total

effective or within 6 months 2 to 5 undiscounted carrying

interest rate 6 months to 1 year years amount Adjustment amount

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

THE GROUP

2009

Bank overdrafts

and loans 1.35 36,147 17,684 64,783 118,614 (1,162 ) 117,452

Trade and other payables – 95,157 3,638 – 98,795 – 98,795

131,304 21,322 64,783 217,409 (1,162 ) 216,247

2008

Bank overdrafts

and loans 3.38 36,703 29,380 95,678 161,761 (4,162 ) 157,599

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

159,214 31,548 95,678 286,440 (4,162 ) 282,278


Annual Report 2009

74



Liquidity and interest risk analysis (Continued)

Non-derivative financial liabilities (Continued)

Weighted




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

THE COMPANY

2009

Amount due to subsidiary

companies – 199,507 – – 199,507 – 199,507

2008

Amount due to subsidiary

companies – 2,031 – – 2,031 – 2,031

The maximum amount that the Company could be forced to settle under the financial

guarantee contracts as disclosed in Note 20, if the full guarantee amount is claimed by the

counterparty, is US$186,000 (2008: US$185,000). The earliest period that the guarantee

could be called is within 1 year (2008: 1 year) from the end of the reporting period.

Non-derivative financial assetsThe following tables detail the expected maturity for non-derivative financial assets. The tables

below have been drawn up based on the undiscounted contractual maturities of the financial

assets including interest that will be earned on those assets except where the Group and the

Company anticipates that the cash flow will occur in a different period.


Annual Report 2009



Liquidity and interest risk analysis (Continued)

Non-derivative financial assets (Continued)

Weighted




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

THE GROUP

2009

Cash and bank balances 0.68 60,156 – – 60,156 (102 ) 60,054

Trade and other receivables – 142,733 2,607 – 145,340 – 145,340

202,889 2,607 – 205,496 (102 ) 205,394

2008

Cash and bank balances 1.90 68,998 – – 68,998 (326 ) 68,672

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

199,298 2,881 – 202,179 (326 ) 201,853

THE COMPANY

2009

Cash and bank balances – 43 – – 43 – 43

Trade and other receivables – 3 – – 3 – 3

Amount due from subsidiary

companies – 327,154 – – 327,154 – 327,154

327,200 – – 327,200 – 327,200

2008

Cash and bank balances – 36 – – 36 – 36

Trade and other receivables – 1 – – 1 – 1

Amount due from subsidiary

companies – 106,973 – – 106,973 – 106,973

107,010 – – 107,010 – 107,010


Annual Report 2009

76



Fair value of financial assets and financial liabilitiesFair value is defined as the amount at which the instrument could be exchanged in a current

transaction between knowledgeable willing parties in an arm’s length transaction, other than in

a forced or liquidation sale. Fair values are obtained through quoted market prices, discounted

cash flow models and option pricing models as appropriate.

Financial instruments whose carrying amounts approximate fair valuesManagement has determined that the carrying amounts of cash and bank balances, trade and

other receivables, amounts due from (to) subsidiary companies, bank overdrafts, trade and

other payables and interest bearing loans and borrowings, based on their notional amounts,

reasonably approximate their fair values because these are mostly short term in nature or are

repriced frequently.

Capital risk management policies and objectivesThe Group manages its capital to ensure that the entities in the Group will be able to continue

as a going concern while maximising the return to stakeholders through the optimisation of the

debt and equity balance. The Group’s overall strategy remains unchanged from prior year.

The capital structure of the Group consists of bank borrowings and equity attributable to

owners of the Company, comprising issued capital, reserves and retained earnings.

The Company manages its capital to ensure that it will able to continue as a going concern, to

maximise the return to stakeholders through the optimisation of the debt and equity balance,

and to ensure that all externally imposed capital requirements are complied with.

5. HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS

The Company is a subsidiary of Kingboard Chemical Holdings Limited, incorporated in Cayman

Islands, which is also the Company’s ultimate holding company. Related companies in these

financial statements refer to members of the holding company’s group of companies.

Some of the Group’s transactions and arrangements are between members of the Group and

the effect of these on the basis determined between the parties is reflected in these financial

statements. The intercompany balances are unsecured, interest-free and repayable on demand

unless otherwise stated.

Transactions between the Company and its subsidiary companies, which are related companies

of the Company, have been eliminated on consolidation and are not disclosed in this note.

Details of transactions between the Group and other related companies are disclosed below.


Annual Report 2009


5. HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS (Continued)

Trading transactionsThe significant transactions between the Group and its related parties and the effects of these

transactions on terms agreed among the companies are as follows:

THE GROUP

2009 2008

US$’000 US$’000

Income

Sales to related companies 6,388 5,777

Management fee income from a related company 1,254 259

Expenses

Purchases from related companies 94,457 113,706

Purchases from a related party 289 220

Consultation fees paid to a related party 73 72

Construction fee paid to a related party 84 105

Management fee paid to related companies 2,618 2,739

In addition, directors and key management executives received remuneration for services

rendered during the financial year. Non-cash benefits including share options were also

granted.

Compensation of directors and key management personnelTotal compensation paid to Company’s directors and key management executives, as well as

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

THE GROUP

2009 2008

US$’000 US$’000

Directors

Salaries, bonuses and other costs 1,745 1,620

Provident fund and other defined contributions 32 58

Share-based payments 110 192

1,887 1,870

Key management executives

(excluding executive directors)

Salaries, bonuses and other costs 1,565 1,734

Provident fund and other defined contributions 35 48

Share-based payments 18 32

1,618 1,814


Annual Report 2009

78


6. FINANCE COSTS

THE GROUP

2009 2008

US$’000 US$’000

Interest on bank loans 1,729 4,796

Interest on bank overdrafts – 24

1,729 4,820

7. INCOME TAX EXPENSE

THE GROUP

2009 2008

US$’000 US$’000

Tax expense comprises:

Singapore income tax

Current income taxation 4 5

Foreign income tax

Current income taxation 2,974 2,306

2,978 2,311

Deferred tax 441 315

3,419 2,626

Income tax for the Group is calculated at the rate prevailing for the respective jurisdiction.

It materially differs from the amount determined by applying the Singapore income tax rate

of 17% (2008: 18%) to pre-tax profits mainly due to tax privileges granted to the subsidiary

companies in the PRC and Thailand. Certain subsidiary companies in the PRC are only liable

for 50% of normal corporate profits tax and a subsidiary company in Thailand is exempted from

corporate profits tax for between three to seven years with effect from the date the operating

income is first earned.


Annual Report 2009


7. INCOME TAX EXPENSE (Continued)

The tax charge for the year can be reconciled as follows:

THE GROUP

2009 2008

% %

Tax at Singapore income tax rate 17.0 18.0

Lower statutory tax rates and tax incentives in other

countries (7.9 ) (16.7 )

Tax benefits not recognised 0.5 8.7

Others (2.7 ) (4.2 )

Effective tax rate 6.9 5.8

8. PROFIT FOR THE YEAR

THE GROUP

2009 2008

US$’000 US$’000

Profit for the year has been arrived at after charging

(crediting):

Directors’ emoluments

– Remuneration 1,706 1,581

– Fees 39 39

– Contributions to defined contribution plans 32 58

Staff costs (excluding directors’ emoluments)

– Salaries and employees benefits 56,359 62,128

– Contributions to defined contribution plans 2,284 2,814

Depreciation of property, plant and equipment 47,529 47,989

Statutory auditor’s emoluments

– Audit fees paid to auditor 362 353

– Non-audit fees paid to auditor 133 136

Share-based payment expense 183 361

Gain on disposal of a subsidiary company – (590 )

Gain on disposal of an associate (36 ) –

Loss on disposal of property, plant and equipment 1,340 –

Loss on fair value change of investment properties 5 4

Allowance for doubtful debts 152 1,749

Reversal of allowance for inventory obsolescence (810 ) (1,191)

Loss on foreign exchange 93 1,116


Annual Report 2009

80


9. DIVIDENDS

The amount and the rates of dividends paid are:

THE GROUP

AND THE COMPANY

2009 2008

US$’000 US$’000

In respect of previous financial year:

Ordinary dividend:

– Final one-tier tax exempt dividend United States

5.0 cents (2008: United States 4.5 cents) 8,944 8,050

Special dividend:

– Final one-tier tax exempt dividend United States

5.5 cents (2008: United States 8.0 cents) 9,839 14,311

18,783 22,361

In respect of current financial year:

Ordinary dividend:

- Interim one-tier tax exempt dividend: Nil

(2008: United States 10.0 cents) – 17,889

The Directors have recommended a one-tier tax exempt final dividend of United States 15.0

cents (2008: 5.0 cents) per share and a one-tier tax exempt special dividend of United States

10.0 cents (2008: 5.5 cents) per share totalling US$44,722,000 (2008: US$18,783,000) to

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

on the statement of financial position of the Company and of the Group upon approval by the

shareholders of the Company at the forthcoming Annual General Meeting of the Company.


Annual Report 2009


10. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share attributable to the owners of the

Company is based on the following:

THE GROUP

2009 2008

Basic Diluted Basic Diluted

US$’000 US$’000 US$’000 US$’000

Profit attributable to owners

of the Company 45,677 45,677 42,628 42,628

2009 2008

Number of shares Number of shares

’000 ’000 ’000 ’000

Weighted average

number of ordinary shares

used to compute basic and

diluted earnings per share 178,887 178,887 178,911 178,911

Earnings per share (US cents) 25.53 25.53 23.83 23.83

The same weighted average number of ordinary shares was used to compute both the basic

as well as the diluted earnings per share because the subscription prices of the Company’s

outstanding share options were higher than the average market price for both years.


Annual Report 2009

82


11. CASH AND BANK BALANCES


2009 2008 2009 2008

US$’000 US$’000 US$’000 US$’000

Fixed deposits 6,924 17,941 – –

Cash at bank and on hand 53,130 50,731 43 36

60,054 68,672 43 36

Cash and bank balances comprise cash held by the Group and short-term bank deposits.

Fixed deposits bear interest at average effective interest rate of 0.68% (2008: 1.90%) per

annum and for a tenure of less than three months.

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

functional currencies of the respective entities are as follows:


2009 2008 2009 2008

US$’000 US$’000 US$’000 US$’000

Denominated in:

Euro 7,472 6,832 – –

Hong Kong Dollars 7,110 20,667 – –

Chinese Renminbi 38,060 12,506 – –

Singapore Dollars 35 27 35 27

United States Dollars 713 6,039 – –

12. TRADE RECEIVABLES

THE GROUP

2009 2008

US$’000 US$’000

Third parties 124,108 107,479

Related companies 6,135 3,034

130,243 110,513

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

third parties of US$5,665,000 (2008: US$10,189,000). This allowance has been determined

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


Annual Report 2009


12. TRADE RECEIVABLES (Continued)

The amount due from related companies are unsecured, interest-free and are subject to credit

terms of 90 to 120 days.

Trade receivables are non-interest bearing and generally on 90 to 120 days’ terms. They

are recognised at their original invoice amounts which approximate their fair values on initial

recognition.

The Group has made substantial provision for all receivables which are overdue more than 180

days because historical experience is that such receivables are generally not fully recoverable.

Included in the Group’s trade receivable balance are debtors with a carrying amount of

US$17.2 million (2008: US$41.0 million) which are past due at the reporting date for which

the Group has not provided as there has not been a significant change in credit quality and the

amounts are still considered recoverable. The Group does not hold any collateral over these

balances. The average age of these receivables are 100 days (2008: 91 days).

In determining the recoverability of a trade receivable, the Group considers any change in

the credit quality of the trade receivable from the date credit was initially granted up to the

reporting date. The concentration of credit risk is limited due to the customer base being

large and unrelated. Accordingly, the directors believe that there is no further credit provision

required in excess of the allowance for doubtful debts.

Movement in the allowance for doubtful debts:

THE GROUP

2009 2008

US$’000 US$’000

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

Currency realignment 4 28

Amounts written off during the year (4,680 ) (1,079 )

Increase in allowance recognised in profit or loss 152 1,749

Balance at end of the year 5,665 10,189


Annual Report 2009

84


12. TRADE RECEIVABLES (Continued)

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

respective entities are as follows:

THE GROUP

2009 2008

US$’000 US$’000

Denominated in:

Chinese Renminbi 10,085 4,881

Hong Kong Dollars 3,214 1,218

Euro 531 1,181

13. OTHER RECEIVABLES


2009 2008 2009 2008

US$’000 US$’000 US$’000 US$’000

Deposits 319 483 – –

Prepaid expenses 1,292 1,068 – 2

Other tax refundable 5,977 14,295 – –

Others 2,434 3,829 3 1

10,022 19,675 3 3

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

currencies of the respective entities are as follows:


2009 2008 2009 2008

US$’000 US$’000 US$’000 US$’000

Denominated in:

Euro 8 367 – –

Hong Kong Dollars 14 34 – –

Chinese Renminbi 8,040 16,567 – –



Annual Report 2009


14. AMOUNTS DUE FROM (TO) SUBSIDIARY COMPANIES

The amounts due from (to) subsidiary companies are unsecured, interest free and repayable

on demand. The Company has not made any allowance as the directors are of the view that

these receivables are collectible.

The Company’s amount due from subsidiary companies that are not denominated in the

functional currency of the Company are as follows:

THE COMPANY

2009 2008

US$’000 US$’000

Amount due from subsidiary companies

Denominated in:


Singapore Dollars – 72

15. INVENTORIES

THE GROUP

2009 2008

US$’000 US$’000

Raw materials 15,531 14,263

Work-in-progress 15,112 12,713

Finished goods 9,095 12,606

39,738 39,582

The cost of inventories recognised as an expense of US$351.8 million (2008: US$430.2

million) includes US$0.8 million in respect of reversal of allowance for inventory obsolescence

(2008: US$1.2 million). The reversal of the allowance for inventory obsolescence was related

to the progressive consumption of slow moving inventories which allowance has been made

previously.


Annual Report 2009

86


16. PROPERTY, PLANT AND EQUIPMENT

Furniture Plant Motor Freehold Freehold Leasehold Leasehold Leasehold and and vehicles Construction– land buildings land buildings improvements fixtures equipment and yacht in-progress Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000

THE GROUPCostAt 1 January 2008 8,098 6,674 23,072 96,921 47,749 11,781 467,043 2,680 6,411 670,429Currency realignment (311 ) (245 ) (41 ) (277 ) (75 ) (25 ) (842 ) (66 ) (64 ) (1,946 )Reclassifications – – – 182 1,807 – 41,365 – (43,354 ) –Additions – – – 1,204 3,327 259 20,179 152 52,488 77,609Disposals – – – – (54 ) (354 ) (8,807 ) (203 ) – (9,418 )Revaluation – – – 603 – – – – – 603Transfer to investment properties – – – (7,027 ) – – – – – (7,027 )

At 31 December 2008 7,787 6,429 23,031 91,606 52,754 11,661 518,938 2,563 15,481 730,250Currency realignment 2 2 78 254 115 36 1,537 3 64 2,091Reclassifications – – – 1,742 1,842 260 7,299 – (11,143 ) –Additions – – – 356 1,582 104 8,692 94 8,746 19,574Disposals – – – (14 ) (2,697 ) (2,050 ) (23,886 ) (169 ) – (28,816 )Revaluation – – – 720 – – – – – 720Transfer to investment properties – – – (3,950 ) – – – – – (3,950 )

At 31 December 2009 7,789 6,431 23,109 90,714 53,596 10,011 512,580 2,491 13,148 719,869

Accumulated DepreciationAt 1 January 2008 – 5,148 4,298 15,950 25,462 9,474 250,907 1,891 – 313,130Currency realignment – (218 ) (9 ) (91 ) (65 ) (18 ) (1,318 ) (8 ) – (1,727 )Charge for the financial year – 339 463 2,101 4,049 884 39,899 254 – 47,989Disposals – – – – (52 ) (352 ) (8,469 ) (174 ) – (9,047 )

At 31 December 2008 – 5,269 4,752 17,960 29,394 9,988 281,019 1,963 – 350,345Currency realignment – 2 16 44 62 32 1,171 6 – 1,333Charge for the financial year – 169 466 1,557 4,303 777 40,046 211 – 47,529Transfer to investment properties – – – (439 ) – – – – – (439 )Disposals – – – – (2,563 ) (2,046 ) (21,236 ) (169 ) – (26,014 )

At 31 December 2009 – 5,440 5,234 19,122 31,196 8,751 301,000 2,011 – 372,754

Carrying AmountAt 31 December 2009 7,789 991 17,875 71,592 22,400 1,260 211,580 480 13,148 347,115

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


Annual Report 2009


16. PROPERTY, PLANT AND EQUIPMENT (Continued)

Furniture and Office

fixtures equipment Total

US$’000 US$’000 US$’000

THE COMPANY

Cost

At 1 January 2008 20 119 139

Additions 13 10 23

Disposals (8 ) (41 ) (49 )

At 31 December 2008 and

31 December 2009 25 88 113

Accumulated Depreciation

At 1 January 2008 19 109 128

Charge for the financial year 3 5 8

Disposals (8 ) (41 ) (49 )

At 31 December 2008 14 73 87

Charge for the financial year 4 5 9

At 31 December 2009 18 78 96

Carrying Amount

At 31 December 2009 7 10 17

At 31 December 2008 11 15 26

Details of the freehold and leasehold properties held by the Group as at 31 December 2009 are

set out below:

Description and location Gross area Tenure Use

(sq. m.)

Freehold:

(i) Land at No. 134 82,080 – Industrial

Moo 2 Soi Sriyothin

Pakred-Pathumthani Road,

Bang-Khayang,

Muang District, Thailand

(ii) Land at Rojana Industrial 17,180 – Industrial

Park No. 1/68 Moo 5,

Pranakorn, Sri Ayutthaya,

Thailand


Annual Report 2009

88


16. PROPERTY, PLANT AND EQUIPMENT (Continued)

Description and location Gross area Tenure Use

(sq. m.)

Leasehold:

(i) Land at New Technology 122,877 50 years commencing Industrial

Development Zone, from 30 July 1997

Kai Ping, Guangdong

Province, The PRC

(ii) Land at New Technology 158,500 50 years commencing Industrial

Development Zone, from 15 March 2004

Kai Ping, Guangdong

Province, The PRC

(iii) Land at New Technology 53,265 50 years commencing Industrial

Development Zone, from 30 November 2006

Kai Ping, Guangdong

Province, The PRC

(iv) Land at lot BW-5, 25,907 50 years commencing Industrial

Guangzhou Economic & from 31 December 1993

Technological Development

District, The PRC

(v) Land at Eastern Park of 160,554 50 years commencing Industrial

Guangzhou Economic & from 16 August 2000

Technological Development

District, The PRC

(vi) Factories and office units in 12,456 75 years commencing Industrial

Merit Industrial Centre, from 5 October 1953

Hong Kong and renewable for a

further 75 years

(vii) Land at Nanjing Economic 13,661 50 years commencing Industrial

& Technological from 28 November 2000

Development Zone,

Jiangsu Province, The PRC

During the year, US$60,000 (2008: US$591,000) of finance cost was capitalised and included

in the cost of leasehold buildings and plant and equipment. The capitalisation rate used to

determine the amount of borrowing costs eligible for capitalisation is 1.35% (2008: 3.34%).


Annual Report 2009


17. INVESTMENT PROPERTIES

THE GROUP

2009 2008

US$’000 US$’000

At fair value

Balance at beginning of year 15,756 8,733

Loss on fair value change include in profit or loss (5 ) (4 )

Transfer from property, plant and equipment 3,511 7,027

Balance at end of the year 19,262 15,756

The fair values of the Group’s investment properties at 31 December 2009 and 31 December

2008 have been determined on the basis of valuation carried out at the respective year end

date by independent valuer having an appropriate recognised professional qualification and

recent experience in the location and category of the properties being valued. The valuations

were arrived at by reference to market evidence of transaction prices for similar properties. It

was performed in accordance with valuation standards on properties as laid down by the Hong

Kong Institute of Surveyors and the Appraisal and Valuation Standards as published by the

Royal Institute of Chartered Surveyors.

The Group’s investment properties are held under leasehold interests. The property rental

income from the Group’s investment properties which are leased out under operating leases,

amounted to US$1,534,980 (2008: US$1,773,150). Direct operating expenses (including

repairs and maintenance) arising from the rental-generating investment properties are

immaterial.

During the year, there was a transfer of a building amounting to US$2,791,000 from property,

plant and equipment to investment properties which carried at fair value of US$3,511,000.

The resulting revaluation surplus of US$720,000 at the date of transfer has been credited to

revaluation reserve.


Annual Report 2009

90


17. INVESTMENT PROPERTIES (Continued)

Details of investment properties held by the Group as at 31 December 2009 are set out below:

Description and location Tenure Unexpired term of the lease

The PRC

(i) Factories at Eastern Park of

Guangzhou Economic and

Technological Development District,

The PRC

Leasehold 50 years commencing from

16 August 2000

Hong Kong

(ii) Office units at Merit Industrial

Centre, Hong Kong

Leasehold 75 years commencing from

5 October 1953 and

renewable for a further

75 years

18. SUBSIDIARY COMPANIES

THE COMPANY

2009 2008

US$’000 US$’000

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

Recognition of financial guarantee provided

to subsidiary companies 885 485

23,071 22,671

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

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

provisions of FRS 39 – Financial Instruments: Recognition and Measurement. The deemed

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

the Company to the subsidiary companies. The full amount of the guarantee fee, including the

unamortised portion, is deemed to be additional investment in the subsidiary companies.


Annual Report 2009


18. SUBSIDIARY COMPANIES (Continued)

Details of the subsidiary companies at 31 December 2009 are as follows:

Proportion of Country of ownership incorporation interest andName of subsidiary company and operation voting power held Principal activities 2009 2008 % %

Principal subsidiary companies

^ Elec & Eltek (Guangzhou) The PRC 98.0 98.0 Manufacturing and Electronic Company Limited distribution of PCBs 依利安達(廣州)電子有限公司

^ Guangzhou Elec & Eltek The PRC 98.0 98.0 Manufacturing and High Density Interconnect distribution of PCBs Technology No. 1 Company Limited 廣州依利安達精密互連科技第一有限公司

^ Guangzhou Elec & Eltek The PRC 98.0 98.0 Manufacturing and Microvia Technology Limited distribution of PCBs 廣州依利安達微通科技有限公司

^ Kai Ping Elec & Eltek The PRC 95.0 95.0 Manufacturing and Company Limited distribution of PCBs 開平依利安達電子有限公司

^ Kaiping Elec & Eltek The PRC 95.0 95.0 Manufacturing and No.2 Company Limited distribution of PCBs 開平依利安達電子第二有限公司

^ Kaiping Elec & Eltek The PRC 95.0 95.0 Manufacturing and No.3 Company Limited distribution of PCBs 開平依利安達電子第三有限公司

^ Kaiping Elec & Eltek The PRC 95.0 95.0 Manufacturing and No.5 Company Limited distribution of PCBs 開平依利安達電子第五有限公司

^ Nanjing Elec & Eltek The PRC 100.0 100.0 Manufacturing and Electronic Co., Ltd. distribution of PCBs 南京依利安達電子有限公司

@ Elec & Eltek Multilayer Hong Kong 100.0 100.0 Manufacturing and PCB Limited distribution of PCBs 依利多層線路板有限公司


Annual Report 2009

92


18. SUBSIDIARY COMPANIES (Continued)

Proportion of

Country of ownership

incorporation interest and

Name of subsidiary company and operation voting power held Principal activities

2009 2008

% %

Principal subsidiary companies (continued)

ß Elec & Eltek (Thailand) Limited Thailand 100.0 100.0 Manufacturing and

distribution of PCBs

% Elec & Eltek Company Macao 100.0 100.0 Trading of PCBs and

(Macao Commercial provision of sales and

Offshore) Limited marketing services

依利安達(澳門離岸商業服務) 有限公司

* Elec & Eltek Technology Singapore 100.0 100.0 Technology research

Research & Marketing and marketing

Pte. Ltd.

^ Kaiping Pacific Insulating The PRC 100.0 100.0 Manufacturing and

Material Company Limited distribution of high-end

開平太平洋絕緣材料有限公司 PCB raw materials

ß Pacific Insulating Material Thailand 100.0 100.0 Manufacturing and

(Thailand) Limited distribution of PCB

raw materials

^ Shenzhen Pacific Insulating The PRC 93.5 93.5 Manufacturing and

Material Co., Ltd. distribution of PCB

深圳太平洋絕緣材料有限公司 raw materials

* Audited by Deloitte & Touche LLP – Singapore.

@ Audited by Deloitte Touche Tohmatsu – Hong Kong.

ß Audited by Deloitte Touche Tohmatsu Jaiyos – Thailand.

% Audited by Deloitte Touche Tohmatsu – Macao for statutory purpose. Deloitte Touche Tohmatsu –

Hong Kong audited the financial statements for consolidation purposes.

^ Audited by Guangzhou Xin Zhong Nan Certified Public Accountants Co., Ltd., a Certified

Public Accountants firm in the PRC under PRC Generally Accepted Accounting Principles for

local compliance. Deloitte Touche Tohmatsu – Hong Kong audited the financial statements for

consolidation purposes.


Annual Report 2009


19. INTEREST IN AN ASSOCIATE

2009 2008

US$’000 US$’000

Cost of investment in an associate – 5,441

Share of post-acquisition reserves – 2,947

Carrying amount of investment – 8,388

Proportion of

Country of ownership interest

Name incorporation Principal activities and voting power held

2009 2008

Held through a subsidiary company

United Hill Group Limited British Virgin Investment holding – 49%

(“United Hill”) Islands

On 16 December 2009, Elec & Eltek Jiangmen (BVI) High Tech Limited (“E&E Jiangmen”), a

wholly-owned subsidiary of the Company, entered into an agreement with Ocean Glory Ltd.

(“Ocean Glory”), an independent third party, under which Ocean Glory agreed to purchase the

entire 49% interest in United Hill at a consideration of US$10,583,000. At completion of the

transaction, E&E Jiangmen recognised a gain of US$36,000.

Summarised financial information of the associate is set out below:

At disposal

date 2008

US$’000 US$’000

Total assets 41,094 40,175

Total liabilities (19,570 ) (23,056 )

Net assets 21,524 17,119

Revenue 11,981 11,539

Profit for the year 3,390 3,163

Group’s share of profits of an associate 1,661 1,550

Gain on disposal of an associate 36 –

1,697 1,550


Annual Report 2009

94


20. BANK OVERDRAFTS AND LOANS

THE GROUP 2009 2008 US$’000 US$’000

Unsecured: HKD bank loans 113,993 155,004 Japanese Yen bank loans 3,459 – USD bank overdrafts – 2 Trust receipts – 2,593

117,452 157,599

Comprising amounts following due: – within one year 53,532 65,063 – more than one year 63,920 92,536

117,452 157,599

The effective interest rate of bank overdrafts in 2008 was 5.40% per annum.

The Group’s unsecured bank loans are repayable in quarterly or monthly instalments commencing from 2006 and ending in 2013 and bear interest at weighted effective rate of 1.35% (2008: 3.37%) per annum. The interest rates of these floating rate loans repriced at 0.5% to 1.25% (2008: 0.5% to 1.55%) per annum over 1, 2 or 3 months London Interbank Offer Rate (LIBOR) or Hong Kong Interbank Offer Rate (HIBOR).

The above credit facilities are provided under:

(a) corporate guarantees from the Company;

(b) the Company undertakes to maintain:

(i) a consolidated tangible net worth at a level not less than US$250,000,000 at any time;

(ii) a consolidated gearing ratio and consolidated interest cover ratio at a level of not higher than 85% and not less than 5 times, respectively at all time; and

(c) negative pledges from the Company.

The Group has complied with the financial covenants as at the end of the financial year.

There are no fixed or floating charges against any assets belonging to the Group or the Company.

All borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk.

The fair value of the Group’s borrowings approximates their carrying amount.


Annual Report 2009


21. TRADE PAYABLES

THE GROUP

2009 2008

US$’000 US$’000

Third parties 47,052 56,682

Related companies 37,521 31,568

84,573 88,250

Trade payables are non-interest bearing and generally on 90 to 120 days’ terms. The Group

has financial risk management policies in place to ensure that all payables are within the credit

timeframe.

The Group’s trade payables that are not denominated in the functional currencies of the

respective entities are as follows:

2009 2008

US$’000 US$’000

Denominated in:


Chinese Renminbi 27,698 46,238

Euro 1,692 239

Japanese Yen 145 90

United States Dollars 1,594 979

Trade payables principally comprise amounts outstanding for trade purchases and ongoing

costs.

Amount due to related companies are unsecured, interest-free and are repayable on demand.


Annual Report 2009

96


22. OTHER PAYABLES


2009 2008 2009 2008

US$’000 US$’000 US$’000 US$’000

Accrued expenses 17,455 15,148 185 119

Financial guarantee contracts – – 186 185

Other payables 12,634 23,472 – –

30,089 38,620 371 304

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

currencies of the respective entities are as follows:


2009 2008 2009 2008

US$’000 US$’000 US$’000 US$’000

Denominated in:

Chinese Renminbi 14,720 12,660 9 –

Euro 101 4,053 – –

Hong Kong Dollars 1,164 3,142 – –

Japanese Yen 16 940 – –


United States Dollars 13 36 – –

23. DEFERRED TAXATION

The followings are the major deferred tax liabilities and assets recognised by the Group, and

the movements thereon, during the current and prior reporting periods:

THE GROUP

2009 2008

US$’000 US$’000

Deferred tax assets 1,437 1,446

Deferred tax liabilities (2,416 ) (1,998 )


Annual Report 2009


23. DEFERRED TAXATION (Continued)

Deferred tax assets

Excess of tax written down value over carrying amount of fixed assets Others Total US$’000 US$’000 US$’000

THE GROUPAt 1 January 2008 1,182 169 1,351Currency realignment 82 – 82(Charge) credit to profit or loss for the year (13 ) 26 13

At 31 December 2008 1,251 195 1,446Currency realignment 5 – 5(Charge) credit to profit or loss for the year (28 ) 14 (14 )

At 31 December 2009 1,228 209 1,437

Deferred tax liabilities

Excess of carrying amount of fixed assets over tax written Undistributed down value earnings Total US$’000 US$’000 US$’000

THE GROUPAt 1 January 2008 (1,657 ) – (1,657 )Currency realignment (13 ) – (13 )Credit (charge) to profit or loss for the year 258 (586 ) (328 )

At 31 December 2008 (1,412 ) (586 ) (1,998 )Currency realignment 9 – 9Credit (charge) to profit or loss for the year 123 (550 ) (427 )

At 31 December 2009 (1,280 ) (1,136 ) (2,416 )

At the end of the reporting period, the Group has unutilised tax losses of US$31.9 million (2008: US$29.0 million) available for offset against future profits. No deferred tax asset has been recognised (2008: nil) due to the unpredictability of future profit streams.


Annual Report 2009

98


24. SHARE CAPITAL

THE GROUP AND THE COMPANY

2009 2008

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

Issued and fully paid:

At beginning and end

of financial year 179,635,062 98,656 179,635,062 98,656

As at the end of the reporting period, the Company has a total of 178,887,062 (2008:

178,887,062) issued ordinary shares excluding treasury shares.

The holders of ordinary shares are entitled to receive dividends as and when declared by the

Company. All ordinary shares carry one vote per share without restriction and has no par value.

Details of the outstanding options to subscribe for unissued ordinary shares of the Company

are set out in Note 26.

As at the end of the financial year, there are options outstanding granted to directors and

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

shares totalling 9,126,200 (2008: 9,333,800) ordinary shares each as described in the report

of directors.

25. TREASURY SHARES

THE GROUP AND THE COMPANY

2009 2008

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

At beginning of financial year 748,000 1,356 487,000 896

Repurchase during the year – – 261,000 460

At end of financial year 748,000 1,356 748,000 1,356

In 2008, the Company acquired 261,000 shares of its own shares through on market

purchases on the Singapore Exchange Securities Trading Limited. Such shares were held as

treasury shares, with no voting rights and dividend entitlements, for future application. The

total consideration paid to acquire the shares was US$460,000 and this was deducted against

shareholders’ equity.


Annual Report 2009


26. SHARE-BASED PAYMENTS

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

Employees’ Share Option Scheme (the “2002 Scheme”) which was terminated upon its expiry

without affecting the rights of holders of any options granted and outstanding under the 2002

Scheme.

In 2008, a new share option scheme, namely, the 2008 Elec & Eltek Employees’ Share Option

Scheme (the “2008 Scheme”) was approved by the shareholders at the Extraordinary General

Meeting held on 21 April 2008 and was adopted by the Company on 9 May 2008 upon

fulfilment of all the conditions precedent as set out in Rule 2 of the 2008 Scheme. Since its

adoption, no option has been granted by the Company pursuant to the 2008 Scheme.

The 2008 Scheme is open to full-time employees and directors of any company within the

Group, the parent group and of an associated company of the Company, subject to certain

conditions being satisfied.

The 2008 Scheme entitles the option holders to exercise their options and subscribe for new

ordinary shares in the Company either at an “Exercise Price”, which equals to the average

of the last dealt prices of the Company’s shares for a period of five consecutive market days

immediately preceding the relevant date of grant, or at a discount to the Exercise Price as

defined earlier, whereby the discount shall not exceed 20% of the Exercise Price.

Options granted at the Exercise Price or at a discount to the Exercise Price may be exercised

after the first or second anniversary respectively, of the date of grant and expiring on the fifth

anniversary of the date of grant.

The duration of the 2008 Scheme is ten years and the total number of shares that may be issued

shall not exceed 10% of the total number of shares in issue as at the adoption date or subject

to certain conditions being satisfied, 15% of the total issued shares of the Company excluding

treasury shares from time to time.

The Company did not grant any share option under the 2008 Scheme in 2008 and 2009.


Annual Report 2009

100


26. SHARE-BASED PAYMENTS (Continued)

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

financial year is as follows:

Balance Balance

as at as at

1 January 31 December Subscription

Date of grant 2009 Lapsed 2009 price Expiry date

US$

24.6.2005 8,380,800 (105,600 ) 8,275,200 2.033 24.5.2010

29.9.2005 120,000 – 120,000 2.375 4.9.2010

12.12.2006 833,000 (102,000 ) 731,000 2.400 12.11.2011

9,333,800 (207,600 ) 9,126,200

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

financial year is as follows:

Balance Balance

as at as at

1 January 31 December Subscription

Date of grant 2008 Lapsed 2008 price Expiry date

US$

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

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

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

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

In the above tables, adjustments were made to the subscription price and number of share

options granted on 24 June 2005 and 29 September 2005 under the 2002 Scheme with effect

from 13 October 2005, upon the bonus issue of shares on the basis of one (1) bonus share

for every five (5) ordinary shares held in the capital of the Company. Such adjustments were

reviewed by the Company’s Employees’ Share Option Scheme Committee.


Annual Report 2009


26. SHARE-BASED PAYMENTS (Continued)

Details of the share options and the estimated fair value of the options are as follows:

Option 1 Option 2 Option 3

Date of grant 24 June 2005 29 September 2005 12 December 2006

Estimated fair value per option US$0.2033 US$0.1997 US$0.3293

These fair values were calculated using the Trinomial Lattice Model. The inputs into the model

were as follows:

Option 1 Option 2 Option 3

Share price at grant date US$2.53 US$2.92 US$2.74

Subscription price US$2.033 * US$2.375 * US$2.40

Expected volatility 25.4% 21.2% 36.6%

Expected life (years) 5 5 5

Risk free interest rate 3.7% 4.2% 3.7%

Expected dividend yield 7.5% 7.5% 7.5%

* The subscription price reflected are after adjustment made to effect the bonus issue of shares on

the basis of one bonus share for every five ordinary shares held in the capital of the Company on

13 October 2005.

Expected volatility was determined by calculating the historical volatility of the Company’s

share price over the previous five years. The expected life used in the model has been

adjusted, based on management’s best estimate, for the effects of non-transferability, exercise

restrictions and behavioural considerations.

As at end of the reporting period, the total exercisable share options were 9,126,200 (2008:

9,333,800).

There was no option exercised in both years. The share options outstanding at the end of year

have a weighted average contracted age of 1.5 (2008: 2.5) years.

The Group recognised total expenses of US$183,000 (2008: US$361,000) related to equity-

settled share-based payment transactions during the year.


Annual Report 2009

102


27. RETIREMENT BENEFIT OBLIGATIONS

Defined contribution plansThe employees of the Group that are located in Singapore, the PRC and Hong Kong are

members of the Central Provident Fund Board in Singapore, a state-sponsored retirement

benefit plan in the PRC and Mandatory Provident Fund Scheme in Hong Kong, operated by the

Government of Singapore, the PRC and Hong Kong, respectively. The respective entities are

required to contribute a specified percentage of payroll costs to the retirement benefit schemes

to fund the benefits. The only obligation of the Group with respect to the retirement benefit

plans is to make the specified contributions.

The total expense recognised in profit or loss of US$2,316,000 (2008: US$2,872,000)

represents contributions payable to these plans by the Group at rates specified in the rules

of the respective plans. The amounts were paid during the year and over the end of the

subsequent reporting period.

28. CONTINGENT LIABILITIES


2009 2008 2009 2008

US$’000 US$’000 US$’000 US$’000

Bank guarantees given to third

parties (unsecured) 729 779 – –

Corporate guarantees given by the

Company to secure bank credit

facilities granted to subsidiary

companies (unsecured) – – 367,188 348,268

The Group’s subsidiary company, Kaiping Elec & Eltek No.3 Company Limited (“KPEE#3”) is

currently involved in potential lawsuits, claims and proceedings with one of our PRC customers

amounting to approximately RMB30.0 million (approximately US$4.4 million), arising from

some negative feedback from the end users of the assembled products using PCBs supplied

by KPEE#3. At the same time, the Group is now seeking to recover the long overdue trade

receivables of approximately RMB1.0 million (approximately US$0.1 million) from the same

customer.

Based on the legal advice obtained by the Group, the Board is of the opinion that the

abovementioned claim has no merit and the potential lawsuit will not have a material adverse

effect on the consolidated financial position of the Group.


Annual Report 2009


29. CAPITAL COMMITMENTS

THE GROUP

2009 2008

US$’000 US$’000

Capital expenditure not provided for in the

financial statements:

Commitments for capital contributions in

subsidiary companies 3,533 17,925

Commitments in respect of contracts placed for

plant expansion 18,002 12,968

21,535 30,893

30. OPERATING LEASES ARRANGEMENT

The Group as lessee

THE GROUP

2009 2008

US$’000 US$’000

Minimum lease payments under operating leases

recognised as an expense in the current year 727 781

At the end of the reporting period, the Group had outstanding commitments under non-

cancellable operating leases, when fall due as follows:

THE GROUP

2009 2008

US$’000 US$’000

Within one year 380 361

In two to five years 213 272

Total 593 633

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

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


Annual Report 2009

104


30. OPERATING LEASES ARRANGEMENT (Continued)

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

Hong Kong under operating leases. Property rental income earned during the year was

US$1,534,980 (2008: US$1,773,150). Properties has committed tenants for the next two

years.

At the end of the reporting period, the Group has contracted with tenants for the following

future minimum lease payments:

THE GROUP

2009 2008

US$’000 US$’000

Within one year 1,664 1,513

In the second to fifth years inclusive 2,908 4,390

4,572 5,903

31. INFORMATION BY SEGMENT ON GROUP’S OPERATIONS

The Group’s operating activities are attributable to a single reporting segment focusing on

fabrication and distribution of PCBs. This reportable segment has been identified on the basis

of internal management reports prepared in accordance with accounting policies conform to

FRSs, that are regularly reviewed by the Executive Directors of the Company. The Executive

Directors of the Company regularly reviews revenue analysis. However, other than revenue

analysis, no operating results by segments and other discrete financial information is available

for the assessment of performance of the respective products. The Executive Directors of the

Company reviews the overall results of the Group as a whole to make decisions about resources

allocation. Accordingly, no analysis of this single reporting segment is presented.


Annual Report 2009


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

Revenue by geographical areaThe Group’s revenue from continuing operations from external customers and information

about its non-current assets by geographical location are detailed below:

Revenue from

external customers Non-current assets

2009 2008 2009 2008

US$’000 US$’000 US$’000 US$’000

Asia

The PRC (including Hong Kong) 265,306 297,531 339,592 374,214

South East Asia 93,640 100,631 29,475 32,945

Others 4,949 15,108 – –

363,895 413,270 369,067 407,159

Europe 38,137 68,966 – –

North and Central America 29,231 28,438 – –

Rest of the World 3,302 7,257 – –

434,565 517,931 369,067 407,159

Revenue by layer countThe proportion of PCBs sales by layer count is provided below:

2009 2008

% %

2- to 6-Layer 68.2 66.6

8-Layer & above 25.6 30.5

HDI 6.2 2.9

100.0 100.0


Annual Report 2009

106

SGX Listing Manual Requirements

1. Directors’ Remuneration

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

Company Limited (the “Company”).

Number of Directors in remuneration bands

Group

2009 2008

S$500,000 (US$344,709 equivalent) and above 2 –

S$250,000 to S$499,999

(US$172,354 to US$344,709 equivalent) 3 5

Below S$250,000 (US$172,354 equivalent) 4 5

Total 9 10

The number of directors disclosed for 2008 includes director who resigned during the financial

year ended 31 December 2008. In addition, the four directors nominated from Kingboard

Chemical Holdings Limited, namely, Messrs Cheung Kwok Wing, Chadwick Mok Cham Hung,

Chan Wing Kwan and Chang Wing Yiu did not receive any remuneration from the Company or

from any of its subsidiary companies.

Summary of Directors’ remuneration (in percentage terms) for the financial year ended 31 December 2009

Other

Name of Director Salary Bonus Fees # Benefits Total

% % % % %

Chadwick Mok Cham Hung – – – – –

Li Muk Kam 78 15 – 7 100

Philip Chan Sai Kit 61 33 – 6 100

Clement Sun 60 37 – 3 100

Claudia Heng Nguan Leng 74 11 – 15 100

Li Chiu Cheuk 56 41 – 3 100

Chan Wai Leung 97 – – 3 100

Cheung Kwok Wing – – – – –

Chan Wing Kwan – – – – –

Chang Wing Yiu – – – – –

Philip Wong Yu Hong – 32 63 5 100

Larry Lai Chong Tuck – 32 63 5 100

Raymond Leung Hai Ming – 33 67 – 100

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


Annual Report 2009

107SGX Listing Manual Requirements

2. Remuneration Data

The remuneration paid to the top five key management executives who are not Directors of

the Company fall within the remuneration band of S$217,212 (US$149,750 equivalent) to

S$333,899 (US$230,196 equivalent) for the financial year ended 31 December 2009.

During the financial year under review, no employee whose annual remuneration exceeded

S$150,000 was related to the Chairman, the Chief Executive Officer or any other Director of the

Company.

3. Interested Person Transactions

The amount of interested person transactions to be disclosed pursuant to Rule 920 (1)(a)(ii) of

the Listing Manual of the Singapore Exchange Securities Trading Limited for the financial year

ended 31 December 2009 are as follows:

Aggregate value of all interested person transactions

during the financial year

(including transactions less than S$100,000)

Excluding transactions

conducted under Conducted under

shareholders’ mandate shareholders’ mandate

Name of Interested Person pursuant to Rule 920 pursuant to Rule 920

US$’000 2009 2008 2009 2008

Purchase of plant and equipment

Chung Shun Laminates

(Macao Commercial Offshore) Limited

formerly known as Kingboard Laminates

(Macao Commercial Offshore) Limited 191 – – –

191 – – –


Annual Report 2009

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 2009 2008 2009 2008

Purchases of goods and servicesChung Shun Copper Foil (Macao Commercial Offshore) Limited formerly known as Kingboard Copper Foil (Macao Commercial Offshore) Limited – – 25,543 44,527Chung Shun Laminates (Macao Commercial Offshore) Limited formerly known as Kingboard Laminates (Macao Commercial Offshore) Limited – – 56,651 44,287Elec & Eltek Corporate Services Limited 516 509 – –Heng Yang Kingboard Chemical Co., Ltd. – – 8,948 7,405Hong Kong Fibre Glass Company Limited – – 1,116 2,884Huizhou Chung Shun Chemical Co., Ltd. – – 225 346Jiangmen Glory Faith PCB Co. Ltd. – – 18 19Joyful Source Group Limited 1,798 1,507 – –Kingboard Investments Limited 356 775 – –Kingboard (Lian Zhou) Electronic Materials Ltd. – – – 14,135Techwise (Macao Commercial Offshore) Circuits Limited – – 31 –Top Faith PCB Co. Ltd. – – 1,682 51

2,670 2,791 94,214 113,654

Provision of goods and servicesChung Shun Laminates (Macao Commercial Offshore) Limited formerly known as Kingboard Laminates (Macao Commercial Offshore) Limited 1,254 259 30 –E & E Magnetic Products Limited – 7 – –Elec & Eltek Display Technology Limited 19 42 – –Express Electronics Ltd. – – 881 –Express Electronics (Suzhou) Co. Ltd. – – – 12Jiangmen Glory Faith PCB Co. Ltd. – – 3,781 4,687Techwise (Macao Commercial Offshore) Circuits Limited – – 773 332Top Faith PCB Co. Ltd. – – 833 573Shenzhen Wing Fung PCB Company Limited – – 71 124

1,273 308 6,369 5,728


Annual Report 2009

109SGX Listing Manual Requirements

4. Shareholding Statistics as at 25 February 2010

Number of shares in issue : 178,887,062 (excluding treasury shares)

Class of Shares : Ordinary Shares

Voting Rights : One vote per share

Distribution of Shareholdings

No. of

Size of Shareholdings Shareholders % No. of Shares %

1 – 999 157 7.03 50,847 0.03

1,000 – 10,000 1,680 75.20 5,852,180 3.27

10,001 – 1,000,000 387 17.32 13,927,308 7.79

1,000,001 and above 10 0.45 159,056,727 88.91

Total 2,234 100.00 178,887,062 100.00

As at 25 February 2010, 18.21% of the Company’s total number of issued ordinary shares,

excluding treasury shares, was held in the hands of the public. Accordingly, the Company

confirms that Rule 723 of the Listing Manual has been complied with.

SUBSTANTIAL SHAREHOLDERS (HOLDING 5% AND ABOVE)(as shown in the Register of Substantial Shareholders)

No. of

Name of substantial shareholders shares held

Cheung Kwok Wing(1) 128,538,165

Hallgain Management Limited (“HML”)(1) 128,350,165

Kingboard Chemical Holdings Limited (“Kingboard”)(2) 128,350,165

Ease Ever Investments Limited (“Ease Ever”)(3) 90,741,550

Elec & Eltek International Holdings Limited (“EEIH”) 90,741,550

Elitelink Holdings Limited (“Elitelink”) 34,321,615

Cheah Cheng Hye(4) 16,069,800

To Hau Yin(4) 16,069,800

Hang Seng Bank Trustee International Limited (“HSBTIL”)(4) 16,069,800

Cheah Company Limited (“CCL”)(4) 16,069,800

Cheah Capital Management Limited (“CCML”)(4) 16,069,800

Value Partners Group Limited (“VPGL”)(4) 16,069,800

Value Partners Limited (“VPL”)(5) 16,069,800


Annual Report 2009

110


4. Shareholding Statistics as at 25 February 2010 (Continued)

(1) HML’s deemed interest arises from its direct shareholding interest in Kingboard of 30.97% and Mr. Cheung Kwok Wing holds approximately 23% in HML.

(2) Kingboard’s deemed interest arises from its direct shareholding interest in Elitelink and Kingboard Investments Limited of 100%, direct shareholding interest of 11.59% in EEIH and deemed interest of 88.41% in EEIH by virtue of its shareholding interest in Ease Ever and Kingboard Investments Limited.

(3) Ease Ever’s deemed interest arises from its direct shareholding interest in EEIH of 77.34%.

(4) Cheah Cheng Hye and To Hau Yin are deemed interested in the shares held by the funds managed by VPL, by virtue of them being the founder and beneficiary respectively of a discretionary trust, The C H Cheah Family Trust, with HSBTIL as the trustee. HSBTIL owns 100% in CCL which in turn owns 100% in CCML which in turn owns 35.65% in VPGL which in turn owns 100% in VPL.

(5) VPL, a fund manager, is deemed interested by virtue of shares held directly by the funds under its management.

Twenty Largest Shareholders

No. Name No. of Shares %

1 Elec & Eltek International Holdings Limited 90,741,550 50.732 Elitelink Holdings Limited 34,321,615 19.193 Raffles Nominees Pte Ltd 8,298,720 4.644 HSBC (Singapore) Nominees Pte Ltd 7,308,866 4.095 Citibank Nominees Singapore Pte Ltd 6,960,800 3.896 DBS Nominees Pte Ltd 4,907,851 2.747 DBSN Services Pte Ltd 2,092,089 1.178 Merrill Lynch (S’pore) Pte Ltd 1,795,164 1.009 DBS Vickers Securities (S) Pte Ltd 1,594,196 0.8910 Li Muk Kam 1,035,876 0.5811 UOB Kay Hian Pte Ltd 567,040 0.3212 Phillip Securities Pte Ltd 387,768 0.2213 Heng Nguan Leng 322,800 0.1814 Mellford Pte Ltd 319,000 0.1815 Cosmic Insurance Corporation Limited – SIF 275,712 0.1516 Tok Ching Ka 270,000 0.1517 DB Nominees (S) Pte Ltd 265,000 0.1518 Kwan Choon Ying or Loke Kwan Ying 250,000 0.1419 Leap International Pte Ltd 240,000 0.1320 Tan Ah Chai 220,000 0.12

Total 162,174,047 90.66

The shareholding statistics shown above exclude 748,000 shares, representing 0.42% of the total number of issued ordinary shares excluding treasury shares, bought back by the Company and held as treasury shares as at 25 February 2010. The percentage of issued ordinary shares is calculated based on the number of issued ordinary shares of the Company as at 25 February 2010 excluding treasury shares.


Annual Report 2009

111

Notice of Annual General Meeting

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

Auditorium, 168 Robinson Road, Level 9 Capital Tower, Singapore 068912 on 5 April 2010, Monday

at 2:00 p.m. to transact the following ordinary and special businesses:

ORDINARY BUSINESSES:

1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the

financial year ended 31 December 2009 with the Auditors’ Report thereon.

2. To declare a one-tier tax exempt final dividend of United States 15.0 cents per share and a

one-tier tax exempt special dividend of United States 10.0 cents per share for the financial year

ended 31 December 2009.

3. To re-elect Mr. Li Muk Kam, retiring by rotation in accordance with Articles 95(2) and 95(4) of

the Company’s Articles of Association (the “Articles”), as Director of the Company.

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

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

5. To re-elect Mr. Clement Sun, retiring by rotation in accordance with Articles 95(2) and 95(4) of

the Articles, as Director of the Company.

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

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

7. To approve Directors’ fees of HK$120,000 for the financial year ending 31 December 2010. [see

Note (2) below]

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

fix their remuneration.


Annual Report 2009

112


SPECIAL BUSINESSES:

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

without any modification:

9.1 Authority to issue shares pursuant to the exercise of share options granted under

the 2002 Elec & Eltek Employees’ Share Option Scheme and the 2008 Elec & Eltek

Employees’ Share Option Scheme (collectively the “Option Schemes”) [see Note (3)

below]

That approval be and is hereby given to the Directors or a Committee of the Directors of

the Company to allot and issue from time to time such number of new ordinary shares

in the capital of the Company as may be required to be issued pursuant to the exercise

of share options granted under the Option Schemes in accordance with the provisions

of the Option Schemes; PROVIDED ALWAYS that the aggregate number of new ordinary

shares to be issued pursuant to the Option Schemes shall not exceed 15% of the issued

shares in the capital of the Company, excluding treasury shares, from time to time.

9.2 Authority to issue new shares [see Note (4) below]

That pursuant to Section 161 of the Companies Act (Cap. 50, Singapore Statutes) and

Rule 806 of the Listing Manual of Singapore Exchange Securities Trading Limited (the

“SGX-ST”), authority be and is hereby given to the Directors to

(a) (i) issue shares in the capital of the Company (“shares”) whether by way of

rights, bonus or otherwise; and/or

(ii) make or grant offers, agreements or options (collectively “Instruments”) that

might or would require shares to be issued, including but not limited to the

creation and issue of (as well as adjustments to) warrants, debentures or

other instruments convertible into shares,

at any time and upon such terms and conditions and for such purposes and to

such persons as the Directors may in their absolute discretion deem fit; and

(b) issue shares in pursuance of any Instrument made or granted by the Directors

while this Resolution was in force, notwithstanding that the authority granted by

this Resolution may have ceased to be in force at the time of such issuance of

shares.


Annual Report 2009

113Notice of Annual General Meeting

PROVIDED THAT

(1) the aggregate number of shares to be issued pursuant to this Resolution (including

shares to be issued in pursuance of Instruments made or granted pursuant to this

Resolution):

(i) by way of renounceable rights issues on a pro-rata basis to shareholders

of the Company (“Renounceable Rights Issues”) shall not exceed 100% of

the total number of issued shares in the capital of the Company excluding

treasury shares (as calculated in accordance with sub-paragraph (2)

below); and

(ii) otherwise than by way of Renounceable Rights Issues (“Other Share Issues”)

shall not exceed 50% of the total number of issued shares in the capital of

the Company excluding treasury shares (as calculated in accordance with

sub-paragraph (2) below), of which the aggregate number of shares to be

issued other than on a pro-rata basis to shareholders of the Company shall

not exceed 20% of the total number of issued shares in the capital of the

Company excluding treasury shares (as calculated in accordance with sub-

paragraph (2) below),

for the avoidance of doubt, the shares issued pursuant to the Renounceable

Rights Issues and Other Share Issues shall not, in aggregate, exceed 100% of the

total number of issued shares in the capital of the Company excluding treasury

shares (as calculated in accordance with sub-paragraph (2) below);

(2) (subject to such manner of calculation and adjustments as may be prescribed

by the SGX-ST) for the purpose of determining the aggregate number of shares

that may be issued under sub-paragraph (1) above, the percentage of issued

shares shall be based on the total number of issued shares in the capital of the

Company, excluding treasury shares, at the time this Resolution is passed, after

adjusting for:

(i) new shares arising from the conversion or exercise of any convertible

securities or share options or vesting of share awards which are outstanding

or subsisting at the time this Resolution is passed; and

(ii) any subsequent bonus issue, consolidation or subdivision of the shares;

(3) in exercising the authority conferred by this Resolution, the Company shall comply

with the provisions of the Listing Manual of the SGX-ST for the time being in force

(unless such compliance has been waived by the SGX-ST) and the Articles for the

time being; and


Annual Report 2009

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 or the Articles to be held,

whichever is the earlier; save for paragraph (1)(i) above which shall continue in

force until 31 December 2010 or such other date as may be prescribed by the

SGX-ST.

BY ORDER OF THE BOARD

CLAUDIA HENG NGUAN LENG

Company Secretary

Singapore

18 March 2010

Notes:

(1) Mr. Chang Wing Yiu will, upon re-election as Director, remain as member of the Employees’ Share Option

Scheme Committee of the Company.

(2) For the financial year ended 31 December 2009, the approved Directors’ fee was HK$300,000.

(3) Resolution 9.1, if passed, will empower the Directors of the Company to issue shares in the capital of the

Company pursuant to the exercise of share options granted under the Option Schemes, up to and not

exceeding in total 15% of the issued shares in the capital of the Company, excluding treasury shares,

from time to time.

(4) Resolution 9.2, if passed, will authorise the Directors of the Company to issue shares and Instruments

in the Company up to 50% of the Company’s total number of issued shares excluding treasury shares

(calculated as described in Resolution 9.2) with an aggregate sub-limit of 20% of the Company’s total

number of issued shares excluding treasury shares (calculated as described in Resolution 9.2) for any

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

(5) A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy to

attend and vote on his behalf. A proxy need not also be a member. The instrument appointing a proxy

must be deposited at the registered office of the Company at 80 Raffles Place, #33-00 UOB Plaza 1,

Singapore 048624, not less than 48 hours before the time of the meeting.

Total No. of Shares in No. of Shares

CDP Register

Register of Members

✄

ANNUAL GENERAL MEETINGProxy Form

Registered Office: 80 Raffles Place #33-00 UOB Plaza 1 Singapore 048624

(Please read notes overleaf carefully before completing this Form)

I/We

NRIC/Passport No./Company Registration No.

of

(Address)

being a member(s) of Elec & Eltek International Company Limited (the “Company”) hereby appoint:

Name Address NRIC/Passport No. No. of Shares Proportion of Shareholding (%)

and/or (delete as appropriate)(The next row should be completed only where it is desired to appoint two proxies or an alternate proxy)

as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and if necessary, to demand a poll at the Annual General Meeting (“AGM”) of the Company to be held at the STI Auditorium, 168 Robinson Road, Level 9 Capital Tower, Singapore 068912 on 5 April 2010, Monday, at 2:00 p.m., and at any adjournment thereof, for the purpose of considering and if thought fit, passing with or without modifications, the Resolutions as set out in the Notice convening the AGM, as hereunder indicated.

Please indicate with an “X” in the spaces provided below whether your wish your vote(s) to be cast for or against the respective Resolutions as set out in the Notice convening the AGM. In the absence of specific directions, the proxy/proxies may vote or abstain from voting in his/their discretion on any matter arising at the AGM.

Ordinary Resolutions

To be used on a show of hands

To be used in the event of a poll

For* Against* For** Against**

1 Adoption of the Directors’ Report and the Audited Accounts for the financial year ended 31 December 2009 with the Auditors’ Report thereon

2 Declaration of dividends

3 Re-election of Mr. Li Muk Kam as Director

4 Re-election of Mr. Philip Chan Sai Kit as Director

5 Re-election of Mr. Clement Sun as Director

6 Re-election of Mr. Chang Wing Yiu as Director

7 Approval of Directors’ fees for financial year ending 31 December 2010

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

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

9.2 Authority of Directors to issue new shares

* Please indicate your vote “For” or “Against”.

** If you wish to use all your votes “For” or “Against”, please indicate with an “X” within the box provided. Otherwise, please indicate number of votes.

Dated this day of 2010

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

✄

IMPORTANT (PLEASE READ NOTES BELOW BEFORE COMPLETING THIS PROXY FORM)

Notes:

1. Please insert the total number of shares in the capital of the Company (“Shares”) held by you. If you have Shares entered against your name in the

Depository Register (as defined in Section 130A of the Companies Act (Cap. 50, Singapore Statutes) (the “Act”), you should insert that number of

Shares. If you have Shares registered in your name in the Register of Members of the Company, you should insert that number of Shares. If you

have Shares entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert

the aggregate number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no

number of Shares is inserted, this proxy form will be deemed to relate to all the Shares held by you.

2. A member entitled to attend and vote at the AGM of the Company is entitled to appoint one or two proxies to attend and vote on his behalf. A proxy

need not be a member of the Company.

3. Where a member appoints two proxies, the appointment shall be invalid unless the member specifies the proportion of his shareholding (expressed as a

percentage of the whole) to be represented by each proxy.

4. This proxy form appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised in writing by the appointor.

Where the proxy form is executed by a corporation, it must be executed under its common seal or under the hand of any officer or attorney duly

authorised by the corporation.

5. Where a proxy form is signed on behalf of the appointor by an attorney, the power of attorney (or other authority) or a duly certified true copy thereof

must (failing previous registration with the Company) be lodged with the proxy form, failing which the proxy form shall be treated as invalid.

6. A corporation which is a member of the Company may authorise by resolution of its directors or other governing body, such person as it thinks fit to

act as its representative at the AGM in accordance with Section 179 of the Act. The representative attending the AGM must produce evidence of his

authority.

7. This proxy form duly executed must be deposited at the Company’s registered office at 80 Raffles Place #33-00, UOB Plaza 1, Singapore 048624 not

less than 48 hours before the time appointed for holding the AGM in order for the proxy or proxies to be entitled to attend and vote at the AGM.

8. The Company shall be entitled to reject this proxy form if it is incomplete, improperly completed, illegible or where the true intentions of the appointor

are not ascertainable from the instructions of the appointor specified in the proxy form. In addition, in the case of a member of the Company whose

Shares are entered against his name in the Depository Register, the Company may reject the proxy form deposited if such member is not shown to

have Shares entered against his name in the Depository Register 48 hours before the time appointed for holding the AGM, as certified by The Central

Depository (Pte) Limited to the Company.

9. The submission of a proxy form by a member of the Company does not preclude him from attending and voting in person at the AGM if he so wishes.

AN

NU

AL R

EPO

RT

20

09

Elec & Eltek In

ternatio

nal C

om

pan

y Limited

www.eleceltek.com

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ANNUAL REPORT 2009

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