Paving an open road for the Brighter Future · Paving an open road for the Brighter Future. 2 Corporate Profile 3 Financial Highlights and Calendar 6 Production and Market Information

AN

NU

AL R

EPO

RT 2007

Elec & Eltek In

ternatio

nal C

om

pan

y Limited

www.eleceltek.com

ANNUAL REPORT 2007

Paving an open road for

the Brighter Future

2 Corporate Profile

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

15 Statement on Corporate Governance

27 Profiles of Board of Directors and Core Management

35 Report of the Directors

43 Independent Auditors’ Report

45 Consolidated Profit and Loss Statement

46 Balance Sheets

48 Statements of Changes in Equity

50 Consolidated Cash Flow Statement

52 Notes to the Financial Statements

100 Statement of Directors

101 SGX Listing Manual Requirements

106 Notice of Annual General Meeting

Contents

Elec & Eltek International Company LimitedAnnual Report 2007

02

Corporate Profile

Listed on the Mainboard of Singapore Exchange in 1994, Elec & Eltek International Company Limited (“Elec & Eltek”) principally engages in the fabrication and distribution of double-sided, multi-layer and high density interconnect (“HDI”) printed circuit boards (“PCB”).

The Group has an annual production capacity of over 56 million square feet. In addition to the mass production of HDI, backplanes, high-end server and up to 40-layer PCBs, the Group also provides customers with value-added service, Quick-Turn Around (QTA) supports. The customer base encompasses worldwide market leaders in different electronics sectors with main focus on Computer & Computer Peripherals, High-end Communication & Networking, Consumer Electronics and Automotive.

Founded over 35 years ago in Hong Kong with no more than 40 staff, nowadays, Elec & Eltek has become the largest PCB enterprise in China and together with the other PCB investments of its parent company, Kingboard Chemical Holdings Limited, ranked one of the top ten independent PCB companies worldwide in terms of sales revenue thanks to the continuous supports from its customers. Its footprints have stretched across the globe, with 22 offices worldwide and 17 plants in Asia – 1 in Hong Kong, 2 in Thailand and 14 in Mainland China.

With particular positioning of its different production facilities, Elec & Eltek provides “one-stop-shopping” to customers with wide array of PCB requirements. On the upstream, through vertical integration, the prepreg and laminate material supply from parent company, Kingboard Chemical Holdings Limited, has sharpened the competitive edge on quality, cost and delivery.

As one of the world’s top PCB enterprises, Elec & Eltek has well-equipped itself on both capacity expansion and technology research and development in order to embrace the robust market demand and the challenges in future technology ahead. Throughout the years, Elec & Eltek has been running at the forefront of the PCB industry and is striving for superiority and further advancement in its products and services.

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


03

Financial Highlights and Calendar31 December 2007

12 months 6 months 31.12.2007 31.12.2006 US$ million US$ million

Profit and Loss Account

Turnover 572 285

Profit before taxation 37 35

Profit after taxation and minority interests but before extraordinary item 35 31

Per Share

Net earnings (US cents) – Basic 19.39 17.51Net earnings (US cents) – Diluted 19.27 17.27Net tangible assets (US$) 1.91 1.76

Balance Sheet

Shareholders’ funds 342 315Total assets 656 614

Financial Ratios

Current assets: Current liabilities (ratio) 1.06 1.29Inventory turnover period (month) 1.47 2.02Gearing ratio 0.29 0.39

12 months 6 months 31.12.2007 31.12.2006

Financial Calendar

Financial year results announced on 27 February 2008 27 February 2007Annual Report and Accounts issued on 4 April 2008 27 March 2007Annual General Meeting held on 21 April 2008 12 April 2007Registers of Shareholders closed on 5:00 pm 25 April 2008 5:00 pm 19 April 2007Dividend paid/payable on Interim 13 September 2007 N/A Final 7 May 2008 4 May 2007


04

Financial Highlights and Calendar31 December 2007

TURNOVER BY GEOGRAPHICAL LOCATIONS

12 months ended 31 December 2007Others (1%)

South East Asia (20%)

MainlandChina

(includingHong Kong)

(51%)

Other Asian countries (4%)

Europe (18%)

North & Central America (6%)

6 months ended 31 December 2006Others (1%)

South East Asia (21%)

Other Asian countries (4%)

Europe (18%)

North & Central America (9%)

MainlandChina


(47%)

TURNOVER BY LAYER COUNT

% TURNOVER CONTRIBUTION BY MANUFACTURING LOCATIONS

12 months ended 31 December 2007Microvia (4%)

8, 10 &12-Layer (16%)

14-Layer& up (10%)

6 months ended 31 December 2006


Thailand (14%)


2, 4 &6-Layer(70%)

MainlandChina


(86%)

Microvia (4%)

8, 10 &12-Layer (14%)

14-Layer& up (13%)

2, 4 &6-Layer(69%)

Thailand (16%)

MainlandChina


(84%)


05

Financial Highlights and Calendar

US$ Million

700

600

500

400

300

200

100

0

US$ Million

60

50

40

30

20

10

0

TURNOVER

EARNINGS & DIVIDEND PAYOUT TREND

PROFIT TREND

COMPARE TOTAL ASSETS WITHSHAREHOLDERS’ FUNDS

US$ Million

700

600

500

400

300

200

100

0

US$ Million

60

50

40

30

20

10

012 months30.6.2004

12 months30.6.2005

12 months30.6.2006

6 months31.12.2006

12 months31.12.2007

Financial Year

Profit after taxation & minority interests but before extraordinary item (excluding exceptional items)

Profit after taxation but before minority interests & extraordinary item (excluding exceptional items)

Financial Year

Dividend payout

Profit after taxation & minority interests

354.4

437.5475.9

285.1

572.3

40.643.0 44.3

47.4

53.355.5

31.3 32.234.8 34.9

26.1

40.6

29.5

42.6

36.7

52.0

19.7

31.3

36.734.8

470.5

238.3

530.7

259.0

588.2

294.4

613.7

315.2

656.5

341.8

Financial Year

12 months30.6.2004

12 months30.6.2005

12 months30.6.2006

6 months31.12.2006

12 months31.12.2007

12 months30.6.2004

12 months30.6.2005

12 months30.6.2006

6 months31.12.2006

12 months31.12.2007

30.6.2004 30.6.2005 30.6.2006 31.12.2006 31.12.2007

Financial Year

Total assets

Shareholders’ funds


06

Production and Market Information

PRODUCTION CAPACITY AS AT 31 DECEMBER 2007

PCBs withMass Laminate

Pathumthani1 Plant

PCB Raw Materials

Shenzhen1 Plant

PCB Raw Materials

Kaiping1 Plant

PCBs with Mass Laminate

Nanjing1 Plant


Huangpu5 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

2008 WORLDWIDE PROJECTED PCB MARKET AND PRODUCTION (US$ BILLION) 2006 2008 2011

Projected PCB World Market 47.9 54.5 71.3

Projected Double-sided and Multi-layer PCB Market 29.0 32.7 43.4

Projected Double-sided and Multi-layer PCB Market CAAGR (2006-2011)

Projected PCB World Production 47.9 54.7 71.4

Projected Double-sided and Multi-layer PCB Production 29.0 32.8 43.6

Projected Double-sided and Multi-layer PCB Production CAAGR (2006-2011)

Projected Double-sided and Multi-layer PCB Production in Asia (excluding Japan)

2006 2008 2011Country US$ BN US$ BN US$ BN

China (incl. HK) 9.5 12.2 18.3S. Korea 2.6 3.0 3.8Singapore 0.3 0.3 0.3Taiwan 4.1 4.6 6.0Rest of Asia 1.0 1.0 1.5

Total 17.5 21.1 29.9

N America $5.7 Bn

$4.8 Bn

$3.7 Bn

2.8%

-0.6%W Europe $4.6 Bn

$3.8 Bn

$2.8 Bn

3.8%

3.0%

$1.3 Bn

$0.3 Bn

5.1%

3.4%

Former Soviet Union& E Europe $1.5 Bn

$18.7 Bn

$21.1 Bn

11.5%

11.6%

Asia (excl. Japan)$31.2 Bn Japan $10.1 Bn

$3.1 Bn

$4.6 Bn

6.2%

6.0%

$1.0 Bn

$0.3 Bn

4.7%

2.0%

Rest of World$1.4 Bn

Source: BPA Consulting Ltd. 5-Year Forecast, Feb 2008CAAGR: Compounded Annual Average Growth Rate


07

Five Years’ Financial Summary

12 months 6 months 12 months 12 months 12 months 31.12.2007 31.12.2006 30.6.2006 30.6.2005 30.6.2004 US$’000 US$’000 US$’000 US$’000 US$’000

Consolidated Results

Turnover 572,274 285,109 475,869 437,510 354,388

Profit before taxation 37,163 35,464 60,991 50,910 46,406Taxation (2,272 ) (3,313 ) (6,760 ) (5,193 ) (3,403 )

Profit after taxation 34,891 32,151 54,231 45,717 43,003Minority interests (94 ) (836 ) (2,223 ) (3,103 ) (2,408 )

Profit for the period 34,797 31,315 52,008 42,614 40,595

Financial Positions

Property, plant and equipment 357,299 356,158 331,449 300,120 274,287Non-current deposits 3,825 1,557 5,535 1,448 3,702Intangible assets – 2 5 11 71Investment in an associate 8,169 6,110 5,504 – –Investment properties 8,733 – – – –Deferred tax assets 1,351 1,245 1,601 2,771 2,111Current assets 277,120 248,656 244,138 226,327 190,300

Total assets 656,497 613,728 588,232 530,677 470,471

Non-current liabilities 52,178 94,795 73,199 51,698 50,941Current liabilities 252,827 193,473 207,601 204,505 167,473

Total liabilities 305,005 288,268 280,800 256,203 218,414

Net assets 351,492 325,460 307,432 274,474 252,057

Represented by:Shareholders’ funds 341,815 315,243 294,373 259,029 238,294Minority interests 9,677 10,217 13,059 15,445 13,763

351,492 325,460 307,432 274,474 252,057


08

Corporate Information

BOARD OF DIRECTORS

Executive DirectorsChadwick Mok Cham Hung Vice-ChairmanSammy Leung Tin Po (resigned on 1 February 2008) Chief Executive OfficerLi Muk KamPhilip Chan Sai KitClement SunClaudia Heng Nguan LengLi Chiu Cheuk (appointed on 1 January 2008)Chan Wai Leung (appointed on 1 January 2008)

Non-executive DirectorsCheung Kwok Wing ChairmanChan Wing KwanChang Wing Yiu

Independent Non-executive DirectorsPhilip Wong Yu HongAnn Chiang Lai Wan (resigned on 1 January 2008)Larry Lai Chong TuckRaymond Leung Hai Ming (appointed on 1 January 2008)

AUDIT COMMITTEELarry Lai Chong Tuck (Chairman)Philip Wong Yu HongRaymond Leung Hai Ming

NOMINATING COMMITTEEPhilip Wong Yu Hong (Chairman) Larry Lai Chong TuckRaymond Leung Hai Ming

REMUNERATION COMMITTEEPhilip Wong Yu Hong (Chairman)Larry Lai Chong TuckRaymond Leung Hai Ming

EMPLOYEES’ SHARE OPTION SCHEME COMMITTEECheung Kwok WingChan Wing KwanChang Wing Yiu

SECRETARIESClaudia Heng Nguan LengMarian Ho Wui Mee

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

PRINCIPAL OFFICE8 Shenton Way #37–03Singapore 068811Tel: 6226 0488Fax: 6220 2377Website: www.eleceltek.com

SHARE REGISTRARBoardroom Corporate & Advisory Services Pte. Ltd.3 Church Street #08-01Samsung HubSingapore 049483

STATUTORY AUDITORSDeloitte & ToucheCertified Public AccountantsPartner: Michael Kee Cheng Kong(since the financial year 2007)

SOLICITORSRodyk & Davidson LLPChang See Hiang & Partners

PRINCIPAL BANKERSThe Hongkong and Shanghai Banking Corporation LimitedCitibank, N.A.DBS Bank LtdBank of America, N.A.Rabobank InternationalStandard Chartered Bank


09

Structure of the Group31 December 2007

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

Elec & Eltek International Company Limited Singapore

Investment Holdings

Overseas China

Kaiping Pacific 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.2 Company Limited (95%)

Elec & Eltek Company(Macao Commercial Offshore) Limited

Macao (100%)

Elec & Eltek TechnologyResearch & Marketing Pte. Ltd.

Singapore (100%)


Elec & Eltek Multilayer PCB Limited

HongKong (100%)


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

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

Guangzhou Elec & Eltek Microvia Technology Limited (98%)

Guangzhou Elec & Eltek High Density Interconnect Technology No. 1 Company Limited (98%)

Major Subsidiaries Major Joint Ventures

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

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


10


11

Chairman's Letter

Dear Shareholders,

It gives me great pleasure to present you the 2007 Annual Report for the financial year ended 31 December 2007 (“CY2007”) of Elec & Eltek International Company Limited and its subsidiary companies (the “Group”).

BUSINESS REVIEW

The Group’s revenue for the financial year under review recorded an increase of US$56.4 million or 10.9% to US$572.3 million in tandem with higher shipment made during the year.

Revenue from the Automotive and Consumer Electronics sectors grew 33.6% and 50.8% to US$58.5 million and US$99.6 million in CY2007 respectively as compared to the previous corresponding year. The proportion of sales from 2- to 6- layers printed circuits boards (“PCBs”) marginally increased to 69.9% in CY2007 from 68.8% for the twelve months period ended 31 December 2006 (“CY2006”) whilst the proportion of 8-layer and above PCBs declined to 30.1% in CY2007 from 31.2% a year ago. Nevertheless, the blended average selling price expanded by 3.6% in CY2007 as compared to CY2006 as the Group managed to pass on the higher material costs to our customers in the form of price adjustment. Being one of the key players in the PCB industry with materials support from its parent company, Kingboard Chemical Holdings Limited, the Group was able to enhance its corporate profile with both existing and new customers and continued to maintain its market share.

The gross margin for CY2007 was 16.1% as compared to 22.3% a year ago mainly due to (a) seasonal fluctuation on computer industry in the first quarter of CY2007; (b) high volatility in raw materials prices; and (c) under-performance of Kaiping plants during the year.

As a result of the foregoing factors, along with higher provision for doubtful debts and weakened US$, the Group’s net profit attributable to the equity holders declined by 38.5% to US$34.8 million in CY2007 as compared to its previous corresponding year. On a brighter note, we are gratified and encouraged that our continuous efforts in sharpening the operations allow the Group to post a healthy 65.4% jump in net attributable profits to US$13.3 million in the fourth quarter of CY2007 from US$8.1 million in the third quarter of CY2007.

Share Passion Create Harmony


12

Chairman's Letter

The Directors having considered the Group’s continued ability on free cash flow generation a n d t h e i r c o n f i d e n c e i n t h e c o r p o r a t e performance going forward, hereby recommend a one-tier tax exempt final dividend of US 12.5 cents, comprising a one-tier tax exempt final dividend of US 4.5 cents and a one-tier tax exempt special dividend of US 8.0 cents (collectively “one-tier tax exempt final dividend”). This together with the one-tier tax exempt interim dividend of US 8.0 cents paid in September 2007, represents 105.7% of the earnings per share for CY2007. This one-tier tax exempt final dividend recommendation shall be subject to shareholders’ approval at the forthcoming annual general meeting of the Company.

In the opinion of the Directors, no i tem, transaction or event of material or unusual nature has occurred during the period from 1 January 2008 to the date of this report that would materially affect the results of the Company and/or the Group for CY2007.

FUTURE PROSPECTS

The Group began the new f inancia l year (“CY2008”), in line with seasonal effect, with softening order backlog. We are mindful of the challenges facing the industry due to the US economy slowdown. However, the restructuring initiatives made by the Group in CY2007 were taken to ensure a strong financial position as we took the steps toward the rationalisation and revitalisation of our businesses. Equipped with a strong balance sheet and lower net borrowings, the Group is wel l posi t ioned to meet the challenges ahead.


13

Chairman's Letter

Our plants in Kaiping start to improve its production yield in the last quarter of CY2007. We plan to keep a steady focus on quality, cost and operational improvements to mitigate the effects of uncertain economics environment, especially the chain effects of the possible adverse global financial markets.

In CY2008, we will continue to grow our business as well as to develop new capabilities to address changing customers’ needs. The high density interconnect (“HDI”) products remain one of our key growth drivers in the year ahead as exemplified by its anticipated profit contribution. The Group’s new HDI plant in Kaiping South is underway of construction and is expected to fully ramp-up its phase one by the end of year 2008.

We are also expanding our production capacities of our Guangzhou and Thailand facilities so as to step up our business development efforts to meet increasing demand.

Barring unforeseen circumstances, the Directors expect the Group to achieve growth and progress in the first quarter of CY2008.

I would like to thank my fellow Directors for their commitment to the Company during the financial year under review. We bid farewell to two Directors this year – Mr. Sammy Leung Tin Po and Ms. Ann Chiang Lai Wan. Messrs Sammy Leung and Ann Chiang have made solid contributions to the Board over the years.

We were honoured to welcome to the Board, Mr. Raymond Leung Hai Ming who joined us as Independent Non-executive Director of the Company on 1 January 2008 and Mr. Li Chiu Cheuk & Mr. Chan Wai Leung as Executive Directors of the Company on the same date. Messrs Raymond Leung, Li Chiu Cheuk and Chan Wai Leung would bring to the Company a wealth of business experience and we sincerely look forward to their contributions.

At the close of a 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.

By order of the Board

Cheung Kwok WingChairman

5 March 2008


14


15

Statement on Corporate Governance

INTRODUCTION

The Board of Directors (the “Board”) and management of Elec & Eltek International Company Limited (the “Company”) continues to be committed to complying with the Code of Corporate Governance 2005 (the “2005 Code”) issued by the Corporate Governance Committee so as to promote greater corporate transparency and protection of shareholders’ interests.

This Statement describes the corporate governance practices of the Company during the financial year ended 31 December 2007 with reference to the 2005 Code. The Board is pleased to confirm that the Company has generally adhered to the principles and guidelines as set out in the 2005 Code, save for Guideline 2.1 (There should be strong and independent element on the Board, with independent directors making up at least one-third of the Board), the reason for which deviation is explained below.

BOARD MATTERS

Board’s Conduct of Its Affairs

Principle 1: Effective board to lead and control the company

The Board oversees the business of the Company and every Director is expected to exercise objective judgment on the Company’s affairs and to always consider the interests of the Company and its subsidiary companies (the “Group”). The Board reviews and discusses reports by management on the performance, plans and prospects of the Group.

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

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

(ii) approving major acquisitions or disposals, corporate or financial restructuring, issuance of shares and other equity or debt instruments, payment of dividends and other distribution to shareholders;

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

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

(v) approving nominations to the Board;

(vi) reviewing and endorsing the recommended framework of remuneration for the Board and key management executives by the Remuneration Committee; and

(vii) assuming overall responsibility for corporate governance.


16


To give effect to the discharge of its responsibilities, the Board has established four Board Committees, namely, the Nominating Committee, the Remuneration Committee, the Employees’ Share Option Scheme Committee and the Audit Committee. These committees have written mandates and operating procedures which are reviewed periodically. The Chairman of the respective Board Committees will report to the Board the outcome of the Board Committee meetings.

The Board conducts scheduled meetings on a quarterly basis to coincide with the announcement of the Group’s quarterly and year end results and as warranted by particular circumstances. The Articles of Association of the Company 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 and Board Committee meetings held from the date of last annual report to the date of this annual report, as well as the attendance of each Board member at these meetings are disclosed below:

Board Committee

Audit Nominating Remuneration Board Committee Committee Committee

Total number of meetings held 4 4 1 1

Cheung Kwok Wing 2 – – –Chadwick Mok Cham Hung 4 – – –Li Muk Kam 4 – – –Philip Chan Sai Kit 4 – – –Clement Sun 4 – – –Claudia Heng Nguan Leng 4 – – –Li Chiu Cheuk1 1 – – –Chan Wai Leung1 1 – – –Chan Wing Kwan 3 – – –Chang Wing Yiu 2 – – –Philip Wong Yu Hong 4 4 1 1Larry Lai Chong Tuck 4 4 1 1Raymond Leung Hai Ming1 1 1 1 1Sammy Leung Tin Po2 3 – – –Ann Chiang Lai Wan3 3 3 – –

1 Appointed on 1 January 20082 Resigned on 1 February 20083 Resigned on 1 January 2008

The Board adopts an internal framework whereby a formal letter is sent to the newly appointed director explaining their statutory duties and responsibilities as director. All newly appointed directors shall receive an orientation kit comprising, but not limited to, the Articles of Association of the Company, directors’ code of professional conduct, directors’ duties on notification, internal code for securities transactions, code of corporate governance and other relevant materials.


17


Board Composition and Guidance

Principle 2: Strong and independent element on the board

Presently, the Board comprises thirteen Directors as follows:

(i) seven Executive Directors;

(ii) three Non-executive Directors; and

(iii) three Independent Non-executive Directors.

The Board considers that the present Board size and the number of Board Committees facilitate effective decision making are appropriate for the nature and scope of the Group’s operation. The Board will continuously examine its size, and Board composition with a view to ensure effective decision-making be set 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

With the recent departure of the Chief Executive Officer (“CEO”) of the Company on 1 February 2008, the Vice Chairman has assumed the role and responsibilities of the CEO until further notice.

The Chairman and the Vice-Chairman bear responsibility for the workings of the Board and ensure the integrity and effectiveness of the governance process of the Board. Whilst the Chairman sets the strategic direction for the Board, the Vice-Chairman is responsible for ensuring the execution of strategic goals and assuming the role and responsibilities of the CEO until further notice.

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.


18


Nominating Committee

The current Nominating Committee members comprise Dr. Philip Wong Yu Hong (Chairman), Mr. Larry Lai Chong Tuck and Mr. Raymond Leung Hai Ming, all of whom are Independent Non-executive Directors.

The Nominating Committee is responsible for the following functions:

(i) evaluate the independence of the Directors on an annual basis and was satisfied that notwithstanding that less than one-third of the current Board is made up of independent Directors, the Board is able to exercise any judgment on corporate affairs objectively and independently;

(ii) review and recommend to the Board, the retirement and re-election of Directors in accordance with the Company’s Articles of Association at each annual general meeting;

(iii) evaluate the Board’s performance as a whole as well as contribution of each Director to the effectiveness of the Board; and

(iv) where a Director has multiple board representations, to assess if such Director is able to and has been adequately carrying out his duties as a Director of the Company.

Where it is considered that the Board would benefit from the services of a new director with particular skills, the Nominating Committee would, in consultation with the Board, determines the selection criteria and identifies candidates with the appropriate expertise for the position. The Nominating Committee then nominates the most suitable candidates to the Board.

In accordance with the 2005 Code and the Company’s Articles of Association, each Director is required to retire at least once every three years by rotation and all newly appointed Directors are required to retire at next annual general meeting. The retiring Directors are eligible to offer themselves for re-election. The Nominating Committee has recommended to the Board, the re-appointment of three Directors, Mr. Philip Chan Sai Kit, Dr. Philip Wong Yu Hong and Mr. Larry Lai Chong Tuck, and three newly appointed Directors, Mr. Li Chiu Cheuk, Mr. Chan Wai Leung and Mr. Raymond Leung Hai Ming at the forthcoming Annual General Meeting. The Board has accepted the Nominating Committee’s recommendation, and all the abovementioned Directors have accepted the Company’s invitation for re-election, will be offering themselves for re-election at the forthcoming Annual General Meeting.


19


The profiles of the Directors and their shareholding in the Company and its subsidiaries are set forth on pages 27 to 31 and 36 to 38 respectively of this Annual Report. The date of initial appointment and last re-election of each director, together with their directorships in listed companies are set out below:

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

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

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

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

Chadwick Mok Executive/ 13 December 2004 13 October 2006 KBCHL Cham Hung non-independent

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

Philip Chan Sai Kit Executive/ 18 January 2005 5 October 2005 Nil non-independent

Clement Sun Executive/ 15 January 2007 12 April 2007 Nil non-independent

Claudia Heng Executive/ 17 July 1995 13 October 2006 Nil Nguan Leng non-independent

Li Chiu Cheuk Executive/ 1 January 2008 Not applicable Nil non-independent

Chan Wai Leung Executive/ 1 January 2008 Not applicable Nil non-independent


20


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

Philip Wong Yu Hong Non-executive/ 26 February 2005 5 October 2005 Hop Hing (Holdings) Ltd. independent Asia Financial Holdings Ltd. Qin Jia Yuan Media Services Co. Ltd.

Larry Lai Chong Tuck Non-executive/ 26 February 2005 5 October 2005 Nil independent

Raymond Leung Non-executive/ 1 January 2008 Not applicable China State Construction Hai Ming independent International Holdings Ltd. Continental Holdings Ltd.

KBCHL – Kingboard Chemical Holdings LimitedKBCFHL – Kingboard Copper Foil Holdings Limited


21


Board Performance

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

The Board uses its best efforts to ensure that each Director appointed to the Board possesses the background and expertise in technology, business, finance and management skills critical to the Group’s business to enable the Board to make sound and well-considered decisions.

The Nominating Committee has identified a set of performance criteria that is linked to long-term shareholders’ value, to be used for evaluating the effectiveness of the Board as well as the performance of each Director. The set of performance criteria includes qualitative and quantitative factors but is not limited to the performance of principal functions and fiduciary duties, level of participation at meetings, guidance provided to the management and attendance records. Other performance criteria that may be used include return on assets, return on equity, return on investment and the comparison of the Company’s share price performance against appropriate indices of the Singapore Exchange Securities Trading Limited (“SGX-ST”).

Access to Information

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

The management provides the Board and its various Board Committees with adequate and timely information and reports prior to their respective meetings and on an on-going basis.

Directors have separate and independent access to the Company’s senior management and the company secretaries for additional information. In addition, should Directors, whether as a group or individually, need independent professional advice relating to the Company’s affairs, the Management will, upon direction by the Board, appoint a professional advisor selected by the group or the individual Director, to render the advice. The cost of such professional advice will be borne by the Company.

At least one of the company secretaries will attend Board meetings, particularly the meetings for reviewing the draft announcements of the Group’s quarterly and full year results, and is responsible for ensuring that Board procedures are followed. Together with the management, the company secretaries are responsible for ensuring compliance with the Companies Act (Chapter 50, Singapore Statutes) and all other SGX-ST rules and regulations applicable to the Company.


22


REMUNERATION MATTERS

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

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

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

Remuneration Committee

The current Remuneration Committee members comprise Dr. Philip Wong Yu Hong (Chairman), Mr. Larry Lai Chong Tuck and Mr. Raymond Leung Hai Ming, all of whom are Independent Non-executive Directors.

The Remuneration Committee will review and recommend remuneration policies and packages for key management executives. The review will cover all aspects of remuneration, including but not limited to salaries, allowances, bonuses, share options and benefits-in-kind. In conducting its review, the Remuneration Committee will give due regard to the financial and commercial health and business needs of the Group. Where appropriate, external consultants will be appointed to assist the Remuneration Committee in the review. The Remuneration Committee’s recommendations will be submitted for endorsement by the entire Board.

The Remuneration Committee has a set of terms of reference defining its scope of authority, and is responsible for the following functions:

(i) ensure the Remuneration Committee’s recommendations have been made in consultation with the Chairman of the Board and submitted for endorsement by the entire Board; and

(ii) liaise with the Board in relation to the preparation of executive compensation for inclusion in the Company’s Annual Report as required.

The Group’s remuneration policy is to provide compensation packages at rates which reward successful performance and the enhancement of shareholder value and to attract, retain and motivate the Directors and employees. Details of remuneration and benefits of Directors and top five key management executives are disclosed in the section “SGX Listing Manual Requirements” on pages 101 to 102.


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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 “Scheme”), including but not limited to, offer and grant of share options to eligible participants in accordance to the rules of the Scheme, to modify and/or amend the 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 Scheme.

Information on the Scheme are disclosed on pages 39 to 40 in the Report of the Directors and pages 94 to 96 in Note 27 to the financial statements.

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 financial statements to shareholders, it is the aim of the Board to provide the shareholders with a balanced and comprehensible assessment of the Group’s position and prospects. Management will provide the Board with appropriately detailed management accounts of the Group’s performance, position and prospects.

Audit Committee

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

The current Audit Committee members comprise Mr. Larry Lai Chong Tuck (Chairman), Dr. Philip Wong Yu Hong and Mr. Raymond Leung Hai Ming, all of whom are Independent Non-executive Directors.

The Audit Committee has written terms of reference approved by the Board. During the financial year and up to the date of this report, the Audit Committee met with the management, internal auditor and statutory auditors of the Company and performed, inter alia, the following functions:

(i) reviewed the annual audit plan of the Company’s statutory auditors and the results of their examination of the financial statements of the Company and the consolidated financial statements of the Group;

(ii) recommended to the Board, subject to shareholders’ approval, the re-appointment of the Company’s statutory auditors;


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(iii) reviewed the internal audit plans and results of internal audits and evaluation of the Group’s systems of internal accounting controls and management’s responses to the internal auditors’ recommendations;

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

(v) reviewed the quarterly and annual financial statements as well as the content of the results announcements before their submission to the Board; and

(vi) reviewed the co-operation and assistance given by the management to the Group’s statutory auditors.

In addition, the Audit Committee reviewed all non-audit services provided by the statutory auditors during the financial year and is of the opinion that the provision of such services will not affect the independence of the statutory auditors.

The Audit Committee has full access to and co-operation from the Company’s management and the statutory and internal auditors and has full discretion to invite any Director or executive officer to attend its meeting. The statutory and internal auditors have unrestricted access to the Audit Committee.

The Management of the Company has drafted certain procedures (the “draft procedures”) to require the staff of the Group to raise concerns, in confidence, about possible improprieties in matters of financial reporting or other matters; and for the independent investigation of such matters and appropriate follow-up action. The Audit Committee has reviewed and commented on the sufficiency of the draft procedures. The management shall consolidate all comments from the Audit Committee and table the aforesaid draft procedures for adoption and finalisation as soon as possible.

Internal Controls

Principle 12: Sound system of internal controls

The Group’s system of internal controls are designed to provide reasonable assurance that assets are safeguarded, that proper accounting records are maintained, and that financial information used within the business and for publication are reliable.

The statutory auditors, in the course of conducting their annual audit procedures on the statutory financial statements, also reviewed the Group’s significant internal financial controls to the extent of their scope as laid out in their audit plan. Any material non-compliance and internal financial control weaknesses noted by the auditors and their recommendations are reported to the Audit Committee. The management would then take action to rectify the weaknesses highlighted.

The Audit Committee, in the course of their review of the reports presented by the internal auditors and statutory auditors, also reviewed the effectiveness of the Group’s system of internal controls and is satisfied that there are adequate internal controls to meet the needs of the Group in its current business environment.


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Internal Audit

Principle 13: Independent internal audit function

The Group has an adequately resourced internal audit function to conduct regular review of the systems of internal controls and to report independently the findings and recommendations of any internal control weakness to the Audit Committee and to senior management for remedial action.

The internal audit function would report to the Audit Committee and assist the Board in monitoring, and managing business risks and internal controls. The Audit Committee reviews and approves the internal audit plan. Reports from the internal auditors are tabled at meetings of the Audit Committee quarterly.

COMMUNICATION WITH SHAREHOLDERS

Principle 14: Regular, effective and fair communication with shareholders

Principle 15: Greater shareholder participation at Annual General Meeting

The Board is mindful of its obligation to provide timely and fair disclosure of material information to its shareholders. Financial results, annual reports, circulars and other announcements are released through SGXNET, and annual reports and circulars are sent to all shareholders by post.

Price sensitive information is first publicly released, either before the Company meets with any group of investors or investment analysts or simultaneously with such meetings, if necessary.

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

Notices of shareholders’ meetings are advertised in the newspapers. Shareholders are encouraged to communicate their views and ask questions regarding the Group and resolutions being proposed during shareholders’ meetings.

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

Under the Company’s Articles of Association, 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 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.


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 102 to 103.

INTERNAL CODE ON DEALING IN SECURITIES

The Company has adopted an Internal Code which prohibits dealings in the Company’s securities by directors and employees and their connected persons one month before the release of the full year results and two weeks before the release of the quarterly results and if they are in possession of unpublished price-sensitive information. Apart from setting out the implications of insider trading, the Internal Code also provides a comprehensive system of controls in monitoring the dealing in the Company’s securities by its employees, in particular, the identification of the parties subject to the control system and the prompt reporting of such dealings by the management to the Board.

On behalf of the Board

Chadwick Mok Cham HungVice-Chairman

Chan Wing KwanDirector

5 March 2008


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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 all activities in relation to the operations of the Kaiping Site and coordination with Kingboard PCB Group.

Mr. Li holds a Higher Certificate in Mechanical Engineering from The Hong Kong Polytechnic University and a Master Degree in Manufacturing Systems Engineering from the University of Warwick.

MR. PHILIP CHAN SAI KIT

Mr. Philip Chan Sai Kit joined the Elec & Eltek Group in 1989 and served as the regional sales head firstly responsible for the Europe and then America region. He was appointed the Executive Director of the Company on 18 January 2005 and is responsible for all activities in relation to business development, supply chain management and market research functions of the Elec & Eltek Group.

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


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MR. CLEMENT SUN

Mr. Clement Sun joined the Elec & Eltek Group in 1983 and served in various senior positions in the manufacturing operations in Hong Kong and Mainland China. He was appointed the Executive Director of the Company on 15 January 2007 and is responsible for all activities in relation to the strategic business unit of the Guangzhou, Hong Kong, Shenzhen and Thailand manufacturing facilities of the Elec & Eltek Group.

Mr. Sun holds a Diploma in Production and Industrial Engineering from The Hong Kong Polytechnic University and a Master Degree in Business Administration from the Bulacan State University, Republic of the Philippines.

MS. CLAUDIA HENG NGUAN LENG

Ms. Claudia Heng Nguan Leng joined the Elec & Eltek Group in 1994 and has been the Executive Director since July 1995. In her current capacity as Vice President – Group Finance, and Company Secretary of the Company, she has the overall responsibility for the corporate financial affairs of the Group, including treasury, tax planning and compliance functions. She also oversees the Group’s information systems, human resource matters, legal and secretariat and investor relations functions.

Ms. Heng holds a Master in Business Administration from Manchester Business School and a Master in Applied Finance from Macquarie University. She is a Fellow Certified Public Accountant of the Institute of Certified Public Accountants in Singapore and a Fellow Certified Public Accountant of CPA Australia. She is also a member of the Singapore Institute of Directors.

MR. LI CHIU CHEUK

Mr. Li Chiu Cheuk is appointed the Executive Director of the Company with effect from 1 January 2008. He is responsible for all activities in relation to the strategic business unit of the Guangzhou manufacturing facilities of the Elec & Eltek Group.

Mr. Li joined the Elec & Eltek Group in 1986 and served in various senior positions in the manufacturing operations in Hong Kong and Mainland China. Prior to his appointment as Executive Director, he is 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.


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MR. CHAN WAI LEUNG

Mr. Chan Wai Leung is appointed the Executive Director of the Company with effect from 1 January 2008. Mr. Chan is responsible for all supporting functions of the Kaiping strategic business unit, including but not limited to finance, human resource and administration, shipping, public relations, production planning and material control, procurement, quality assurance, factory maintenance and machine shop. 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.

MR. CHAN WING KWAN

Mr. Chan Wing Kwan has been the Non-executive Director of the Company since 13 December 2004. He is a member of the Employees’ Share Option Scheme Committee of the Company. Mr. Chan is the father of Mr. Chan Wai Leung, Executive Director of the Company.

Mr. Chan acquired a Degree of Doctor of Business Science from Pacific Western University, L.A.. Prior to the setting up of the Kingboard Group, Mr. Chan had over 22 years’ experience in the sales and distribution of electronic components, industrial chemicals and printed circuit boards.

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


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MR. CHANG WING YIU

Mr. Chang Wing Yiu has been the Non-executive Director of the Company since 13 December 2004. He is a member of the Employees’ Share Option Scheme Committee of the Company. Mr. Chang is the brother-in-law of Mr. Cheung Kwok Wing, Non-executive Director and Chairman of the Company.

Mr. Chang graduated from The Hong Kong Polytechnic University with a Higher Diploma in Marine Electronics. He has over 18 years’ experience in laminates production.

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

DR. PHILIP WONG YU HONG

The Honorable Dr. Philip Wong Yu Hong was appointed the Independent Non-executive Director of the Company on 26 February 2005. He serves as Chairman of the Nominating Committee and the Remuneration Committee of the Company. He is also a member of the Audit Committee of the Company.

He received his M.Sc. (Engineering) from University of California, USA in 1967, J.D. (Law) from Southland University, USA in 1982 and Ph.D. (Engineering) from California Coast University, USA in 1987. Before his return to Hong Kong in 1971, he was a senior engineer in a leading computer firm in the United States.

Dr. Wong was a Deputy of the National People’s Congress and a Member of the HKSAR Legislative Council where he was elected the Chairman of the Public Accounts Committee. He is the Life Honorary Chairman of the Chinese General Chamber of Commerce and a Member of the Hong Kong Trade Development Council. Dr. Wong received the Gold Bauhinia Star Award from the HKSAR Government in 2003.

MR. LARRY LAI CHONG TUCK

Mr. Larry Lai Chong Tuck was appointed the Independent Non-executive Director of the Company on 26 February 2005. He serves as Chairman of the Audit Committee of the Company. He is also a member of the Nominating Committee and the Remuneration Committee of the Company.

Mr. Lai graduated with a Bachelor of Arts Degree from the National University of Singapore. He holds also a Graduate Diploma in Financial Management and a Diploma in Counseling Psychology. During his career as a banker, Mr. Lai has attended various professional and management training conducted by leading international organizations and academic institutions.


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MR. LARRY LAI CHONG TUCK (Continued)

Mr. Lai presently manages his own business consulting firm, Asteri Consulting Private Limited. Prior to this, he was a senior career expatriate banker with over 20 years of diverse international banking expertise that spans investment banking, corporate banking, structured commodity finance, international trade finance and operations. Mr. Lai was an active member of the business community. He served in the EXCO of the Dutch Business Group in Vietnam and the Shanghai Singapore Business Group in China and was a regular speaker at business forums.

MR. RAYMOND LEUNG HAI MING

Mr. Raymond Leung Hai Ming is appointed the Independent Non-executive Director of the Company on 1 January 2008. He is also a member of the Audit Committee, Nominating Committee and the Remuneration Committee of the Company.

Mr. Leung is a qualified Fellow Engineer of the Institute of Civil Engineers, the American Society of Civil Engineers, Hong Kong (“ASCE”), The Hong Kong Institute of Engineers, Society of Builders, the Hong Kong Institute of Construction Managers (“HKICM”), with a Master Degree in Construction Management from the University of Toronto, Canada. He is a member to the Disciplinary Tribunal Panel of HKSAR Economic Development and Labour Dept, the President of HKICM, Vice Governor of HKAARECT and Founding President of ASCE (HK).

Mr. Leung is presently the Chief Executive Officer of C & L Holdings Ltd., whose business activities comprise of Project Management, Direct Investment, Financial Services and China Business Consultancy.

VICE PRESIDENT – BUSINESS DEVELOPMENT, AMERICA AND EUROPE

Mr. Simon Michael Geeson joined the Elec & Eltek Group since 1992. He had 8 years of experience in the electronics industry working primarily in purchasing and material control before joining the Elec & Eltek Group.

In his current capacity as Vice President – Business Development, America and Europe, he is responsible for the market research, liaison activities and business development in the American and European markets.


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VICE PRESIDENT – BUSINESS DEVELOPMENT, NORTH ASIA

Mr. Jason Ho King Man joined the Elec & Eltek Group in 1995 and have served in the Marketing Department in the various regions over the years. Including his employment with the Elec & Eltek Group, Mr. Ho has over 20 years of experience in PCB industry. He is currently the Vice President – Business Development, North Asia, responsible for the market research, liaison activities and business development in Japan and Korea.

Mr. Ho holds a Higher Diploma in Production and Industrial Engineering from The Hong Kong Polytechnic University and a Master Degree in Engineering Business Management from the University of Warwick.

VICE PRESIDENT – BUSINESS DEVELOPMENT, SOUTH ASIA AND PACIFIC

Ms. Sherran Chan King Chiu joined the Elec & Eltek Group since 1995 and has over 12 years of experience in the electronics industry working primarily in marketing. In her current capacity as Vice President – Business Development, South Asia and Pacific region, she is responsible for the market research, liaison activities and business development in the Southeast Asia markets.

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

VICE PRESIDENT – BUSINESS DEVELOPMENT, TAIWAN BUSINESS

Mr. Sparkey Wu Neng Chi has more than 25 years of relevant experience in the electronics industry, 14 years of which was with PCB industry. He joined the Elec & Eltek Group in January 2003 and in his current capacity as Vice President – Business Development, Taiwan Business, he is responsible for the market research, liaison activities and business development in the Taiwanese market.

Mr. Wu holds a Bachelor Degree in Engineering majoring in Industrial Engineering from Taiwan Chung-Yuan University.

VICE PRESIDENT – QUALITY ASSURANCE

Mr. Oscar Cheung Yiu Wai has more than 25 years of relevant experience in the manufacturing industry, 14 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.


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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 PLANTS

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 plants, responsible for the overall operational management of both the PCB and material plants 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 – ADVANCED PRODUCTS, KAIPING SITE

Mr. Paul Barlow has extensive experience in the high-end PCB industry holding various senior executive positions with key European PCB manufacturers located in the U.K. and Shanghai. He joined the Elec & Eltek Group in August 2007 as General Manager – Advanced Products, with responsibility for the overall operational management of the Advanced Products division in Kaiping site.

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


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GENERAL MANAGER – STANDARD PRODUCTS, KAIPING SITE

Mr. Albert Chang Jen-Hwa has extensive experience in PCB industry holding various senior executive positions with major PCB manufacturers located in Taiwan, United States of America, Shanghai and China South. Mr. Chang joined the Elec & Eltek Group in August 2007 involving in plant management and in his current capacity as General Manager – Standard Products, he is responsible for the overall operational management of the Standard Products division in Kaiping site.

Mr. Chang holds a Bachelor of Science Degree in Electrical Engineering from National Taiwan University and a Master of Science Degree in Engineering from Northeastern University Graduate School in Mass, USA.

GENERAL MANAGER – NANJING PLANT

Mr. Chan Chi Hong joined the Elec & Eltek Group since 1983. He was the Manager – Products Engineering since 2002 before taking up plant management function in 2006. In his current capacity as General Manager – Nanjing Plant, Mr. Chan is responsible for the overall operational management of the PCB plant in Nanjing.

Mr. Chan holds a Higher Diploma in Mechanical Engineering from The Hong Kong Polytechnic University and a Master Degree in Business Administration from the Bulacan State University, Republic of the Philippines.

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

Ms. Condia Yu Yuk Ying joined the Elec & Eltek Group since 1984 and served in various positions relating to production and engineering over the years. She is currently the Vice President – Technology cum Acting General Manager – Hong Kong Plant. She is responsible for all the technology advancement of our PCB products and the overall operational management of the PCB plant in Hong Kong.

Ms. Yu holds a Bachelor of Science Degree from the University of British Columbia and a Master Degree in Engineering Business Management from the University of Warwick. She is also a Chartered Engineer of the Engineering Council and a member with the Institute of Engineering and Technology in the U.K..


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Report of the Directors

The directors present their report together with the audited consolidated financial statements of the Group and balance sheet and statement of changes in equity of the Company for the financial year ended 31 December 2007.

DIRECTORS

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

Cheung Kwok WingChadwick Mok Cham HungLi Muk KamPhilip Chan Sai KitClement SunClaudia Heng Nguan LengLi Chiu Cheuk (appointed on 1 January 2008)Chan Wai Leung (appointed on 1 January 2008)Chan Wing KwanChang Wing YiuPhilip Wong Yu HongLarry Lai Chong TuckRaymond Leung Hai Ming (appointed on 1 January 2008)

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.


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DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The directors of the Company who held office at the end of the financial year had no other interests in the share capital and debentures of the Company, its ultimate holding company, Kingboard Chemical Holdings Limited (“Kingboard”), and related corporations (other than wholly-owned subsidiaries) as recorded in the register of directors’ shareholdings kept by the Company under Section 164 of the Singapore Companies Act (the “Act”), either at the beginning of the financial year (or date of appointment, if later) or at the end of the financial year, except as follows:

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 At At At 31.12.2007 Atwhich interests are held 21.1.2008 31.12.2007 31.12.2006 and 21.1.2008 31.12.2006

The Company(Ordinary shares)

Cheung Kwok Wing 60,000 60,000 177,600 126,782,165 126,782,165 @

Chadwick Mok Cham Hung 74,000 74,000 74,000 – –Sammy Leung Tin Po 232,000 232,000 96,000 – –Li Muk Kam 1,035,876 1,035,876 843,876 – –Philip Chan Sai Kit 156,481 156,481 108,481 – –Clement Sun + 40,000 40,000 – – –Claudia Heng Nguan Leng 322,800 322,800 274,800 – –Larry Lai Chong Tuck – – 10,000 – –

The Company(Options to subscribe for the Company’s ordinary shares)

At subscription price of US$2.033

Cheung Kwok Wing 973,200 973,200 973,200 – –Chadwick Mok Cham Hung 973,200 973,200 973,200 – –Sammy Leung Tin Po 960,000 960,000 1,200,000 – –Li Muk Kam 768,000 768,000 960,000 – –Philip Chan Sai Kit 912,000 912,000 960,000 – –Clement Sun + 240,000 240,000 – – –Claudia Heng Nguan Leng 192,000 192,000 240,000 – –Li Chiu Cheuk ++ 162,000 – – – –Chan Wing Kwan 973,200 973,200 973,200 – –Chang Wing Yiu 973,200 973,200 973,200 – –

At subscription price of US$2.375

Philip Wong Yu Hong 60,000 60,000 60,000 – –Ann Chiang Lai Wan +++ – 60,000 60,000 – –Larry Lai Chong Tuck 60,000 60,000 60,000 – –


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DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (Continued)

Shareholdings Shareholdings in which registered in name of or directors are deemed

Name of directors beneficially held by directors to have an interest and companies in At At At At At Atwhich interests are held 21.1.2008 31.12.2007 31.12.2006 21.1.2008 31.12.2007 31.12.2006

Kingboard(Ordinary shares of HK$0.10 each)

Cheung Kwok Wing 4,302,185 3,880,685 3,088,385 259,968,929 259,968,929 252,674,429 #

Chan Wing Kwan 831,000 731,000 870,340 60,000 60,000 –Chang Wing Yiu 1,928,974 1,928,974 1,555,874 840,200 840,200 860,200Chadwick Mok Cham Hung 1,010,000 960,000 660,000 – – –Philip Chan Sai Kit 10,000 10,000 10,000 – – –Chan Wai Leung ++ – – – 500 – –

Kingboard(Options to subscribe for unissued ordinary shares of HK$0.10 each)

Cheung Kwok Wing 210,600 210,600 1,145,000 – – –Chan Wing Kwan 2,558,800 2,558,800 3,026,000 – – –Chang Wing Yiu 3,175,800 3,175,800 3,643,000 – – –

Kingboard Laminates Holdings Limited(Ordinary shares of HK$0.10 each)

Cheung Kwok Wing 784,500 934,500 – 2,244,550,500 2,244,550,500 2,175,000,000 &

Chan Wing Kwan – – – 100,000 100,000 –Chang Wing Yiu – – – 100,000 100,000 –Sammy Leung Tin Po 30,000 30,000 119,000 – – –Li Muk Kam 33,000 33,000 33,000 – – –Philip Chan Sai Kit 27,500 27,500 27,500 35,000 35,000 35,000Clement Sun + 30,000 30,000 – – – –Claudia Heng Nguan Leng 21,000 21,000 21,000 768,250 768,250 1,115,000Li Chiu Cheuk ++ – – – 20,000 – –Chan Wai Leung ++ 22,000 – – – – –

Kingboard Copper Foil Holdings Limited(Ordinary shares of US$0.10 each)

Cheung Kwok Wing – – – 449,002,000 449,002,000 449,002,000 ̂


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DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (Continued)

@ 90,741,550 (2006: 90,741,550) shares are held by Elec & Eltek International Holdings Limited (“EEIH”). 34,321,615 (2006: 34,321,615) shares are held by Elitelink Holdings Limited (“Elitelink”). The balance of 1,719,000 (2006: 1,719,000) shares are held by Kingboard Investments Limited (“KBIL”). EEIH, Elitelink and KBIL are wholly-owned subsidiaries of Kingboard.

+ Mr. Clement Sun was appointed as executive director on 15 January 2007.

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

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

# These shares are held by Hallgain Management Limited (“HML”). At the balance sheet date, HML holds approximately 31.01% interests in the issued share capital of Kingboard and in turn Mr. Cheung Kwok Wing holds approximately 23% shareholding interests in HML.

& 2,175,000,000 (2006: 2,175,000,000) shares are held by Jamplan (BVI) Limited, 61,582,000 (2006: Nil) shares are held by KBIL, 6,468,500 (2006: Nil) shares are held by Kingboard and 1,500,000 (2006: Nil) shares are held by HML. Jamplan (BVI) Limited is a wholly-owned subsidiary of Kingboard.

^ These shares are held by a subsidiary of Kingboard.

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

Save as disclosed above, there were no other changes in any of the above-mentioned interests between the end of the financial year and 21 January 2008.

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.


39


SHARE OPTIONS

(a) Options to take up unissued sharesThe 2002 Elec & Eltek Employees’ Share Option Scheme (the “Scheme”) was approved by the shareholders of the Company at an Extraordinary General Meeting held on 8 November 2002 and was adopted and took effect from 12 November 2002 upon fulfilment of all the conditions precedent as set out in Rule 3 of the Scheme. The duration of the Scheme is five years and it has accordingly terminated in November 2007 without affecting the rights of holders of any options granted and outstanding under the Scheme.

Particulars of the options granted under the Scheme were set out in the Report of the Directors for the financial year ended 31 December 2007 and in Note 27 to the financial statements.

The Scheme is administered by the Employees’ Share Option Scheme Committee whose members are:

Cheung Kwok WingChan Wing KwanChang Wing Yiu

Under the Scheme, options granted to the directors and employees may, except in certain special circumstances, be exercised at any time after one or two years from the date of grant but no later than the expiry date. The options may be exercised in full or in respect of 1,000 ordinary shares of the Company (“Shares”) or a multiple thereof, on the payment of the aggregate subscription price. The subscription price is based on the average of the last dealt price of the Shares on the Singapore Exchange Securities Trading Limited for the last five market days immediately preceding the date of grant (“average of the last dealt price”). The Employees’ Share Option Scheme Committee may at its discretion fix the subscription price at a discount not exceeding 20 percent to the average of the last dealt price.

(b) Unissued shares under option and options exercisedThe number of Shares available under the 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 Scheme are as follows:

Number of options to subscribe for ordinary shares Balance at Balance at Exercise 31 December 31 December priceDate of grant 2006 Lapsed Exercised 2007 per share Exercisable period US$

24.6.2005 10,706,400 (346,800 ) (780,600 ) 9,579,000 2.033 26.11.2006 to 24.5.201029.9.2005 180,000 – – 180,000 2.375 5.9.2006 to 4.9.201012.12.2006 1,020,000 (92,000 ) – 928,000 2.400 13.11.2008 to 12.11.2011

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


40


SHARE OPTIONS (Continued)

(b) Unissued shares under option and options exercised (Continued)There were no share options granted during the financial year. A total of 15,714,000 options were granted under the Scheme since commencement of the Scheme to the end of the financial year, to subscribe for unissued ordinary shares in the Company.

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

Aggregate Aggregate Aggregate options options options granted since exercised since lapsed since Aggregate commencement commencement commencement options of the Scheme of the Scheme of the Scheme outstanding to the end of to the end of to the end of at the end ofName of director financial year financial year financial year financial year

Cheung Kwok Wing 973,200 – – 973,200Chadwick Mok Cham Hung 973,200 – – 973,200Sammy Leung Tin Po 1,200,000 (240,000 ) – 960,000Li Muk Kam 960,000 (192,000 ) – 768,000Philip Chan Sai Kit 960,000 (48,000 ) – 912,000Clement Sun 240,000 – – 240,000Claudia Heng Nguan Leng 240,000 (48,000 ) – 192,000Chan Wing Kwan 973,200 – – 973,200Chang Wing Yiu 973,200 – – 973,200Philip Wong Yu Hong 60,000 – – 60,000Ann Chiang Lai Wan 60,000 – – 60,000Larry Lai Chong Tuck 60,000 – – 60,000

None of the participants under the Scheme have received more than 5% of the total number of options available under the Scheme, save for Messrs. Cheung Kwok Wing, Chadwick Mok Cham Hung, Sammy Leung Tin Po, Li Muk Kam, Philip Chan Sai Kit, Chan Wing Kwan and Chang Wing Yiu, as disclosed above.

Save as disclosed above, there have been no other options granted to the eligible employees, directors and substantial shareholder of the Company pursuant to the Scheme.


41


AUDIT COMMITTEE

The Audit Committee of the Company is chaired by Mr. Larry Lai Chong Tuck, an independent non-executive director, and includes Dr. Philip Wong Yu Hong and Mr. Raymond Leung Hai Ming, both of whom are independent non-executive directors. The Audit Committee has met on a quarterly basis since the last Annual General Meeting (“AGM”) and has reviewed the following, where relevant, with the executive directors and statutory and internal auditors of the Company:

(a) the annual audit plan of the Company’s statutory auditors and the results of their examination of the financial statements of the Company and the consolidated financial statements of the Group;

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

(c) the internal audit plans and results of the internal audits and evaluation of the Group’s systems of internal accounting controls and management’s responses to the internal auditors’ recommendations;

(d) the Group’s interested person transactions;

(e) the quarterly and annual financial statements as well as the content of the results announcements before their submission to the directors of the Company; and

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

In addition, the Audit Committee reviewed all non-audit services provided by the statutory auditors during the financial year and is of the opinion that the provision of such services will not affect the independence of the statutory auditors.

The Audit Committee has full access to and has the co-operation of the management and has been given the resources required for it to discharge its function properly. It also has full discretion to invite any director and executive officer to attend its meetings. The statutory and internal auditors have unrestricted access to the Audit Committee.

The Audit Committee has recommended to the directors the nomination of Deloitte & Touche for re-appointment as statutory auditors of the Group at the forthcoming AGM of the Company.


42


AUDITORS

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




5 March 2008


43

Independent Auditors’ Report

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

We have audited the accompanying financial statements of Elec & Eltek International Company Limited (the “Company”) and its subsidiaries (the “Group”) which comprise the balance sheets of the Group and the Company as at 31 December 2007, the profit and loss statement, statement of changes in equity and cash flow statement of the Group and the statement of changes in equity of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes as set out on pages 45 to 99.

Directors’ Responsibility

The Company’s directors are responsible for the preparation and fair presentation of these financial statements in accordance with the provisions of the Singapore Companies Act, Cap. 50 (the “Act”) and the Singapore Financial Reporting Standards. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; 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 directors, 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.


44

Independent Auditors’ Report

Opinion

In our opinion,

(a) the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 31 December 2007 and of the results, changes in equity and cash flows of the Group and changes in equity of the Company for the year ended on that date; and

(b) the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

Deloitte & ToucheCertified Public AccountantsSingapore

Michael Kee Cheng KongPartner

5 March 2008


45

Consolidated Profit and Loss StatementFor the year ended 31 December 2007

THE GROUP 12 months 6 months NOTES 31.12.2007 31.12.2006 US$’000 US$’000

Revenue 572,274 285,109Cost of sales (480,174 ) (224,968 )

Gross profit 92,100 60,141Interest income 234 183Distribution and selling costs (17,508 ) (8,770 )Administrative costs (28,931 ) (11,600 )Other operating expenses (2,651 ) (900 )Finance costs 6 (7,507 ) (4,175 )Share of profits of an associate 1,426 585

Profit before taxation 7 37,163 35,464Income tax expense 8 (2,272 ) (3,313 )

Profit for the financial year/period 34,891 32,151

Attributable to: Equity holders of the Company 34,797 31,315 Minority interests 94 836

34,891 32,151

United States United States cents centsEarnings per share: 10

– basic 19.39 17.51

– diluted 19.27 17.27

See accompanying notes to financial statements


46

Balance SheetsAs at 31 December 2007

THE GROUP THE COMPANY NOTES 31.12.2007 31.12.2006 31.12.2007 31.12.2006 US$’000 US$’000 US$’000 US$’000

ASSETS

Current assets Cash and bank balances 11 26,478 24,435 37 70 Trade receivables 12 152,432 140,504 – – Bills receivables 4,265 2,745 – – Other receivables 13 19,346 13,423 6 9 Amounts due from subsidiary companies 14 – – 117,448 138,521 Inventories 15 58,978 67,549 – –

261,499 248,656 117,491 138,600Assets classified as held for sale 16 15,621 – – –

277,120 248,656 117,491 138,600

Non-current assets Property, plant and equipment 17 357,299 356,158 11 14 Deposits for acquisition of plant and equipment 3,825 1,557 – – Investment properties 18 8,733 – – – Intangible assets 19 – 2 – – Subsidiary companies 20 – – 24,571 22,186 Interest in an associate 21 8,169 6,110 – – Deferred tax assets 25 1,351 1,245 – –

379,377 365,072 24,582 22,200

Total assets 656,497 613,728 142,073 160,800


47

Balance Sheets

THE GROUP THE COMPANY NOTES 31.12.2007 31.12.2006 31.12.2007 31.12.2006 US$’000 US$’000 US$’000 US$’000

LIABILITIES AND EQUITY

Current liabilities Bank overdrafts and loans 24 83,223 57,912 – – Trade payables 22 119,233 101,855 – – Bills payables 2,981 1,856 – – Other payables 23 32,654 29,994 757 117 Amounts due to subsidiary companies 14 – – 1,366 1,947 Provision for taxation 2,189 1,856 1 2

240,280 193,473 2,124 2,066Liabilities directly associated with assets classified as held for sale 16 12,547 – – –

252,827 193,473 2,124 2,066

Non-current liabilities Bank loans 24 50,521 93,015 – – Deferred tax liabilities 25 1,657 1,780 – –

52,178 94,795 – –

Capital and reserves Share capital 26 98,656 97,069 98,656 97,069 Treasury shares 26 (896 ) – (896 ) – Reserves 244,055 218,174 42,189 61,665

Equity attributable to equity holders of the Company 341,815 315,243 139,949 158,734Minority interests 9,677 10,217 – –

351,492 325,460 139,949 158,734

Total liabilities and equity 656,497 613,728 142,073 160,800



48

Statements of Changes in EquityFor the year ended 31 December 2007

Attributable to equity holders of the Company Foreign currency Share Share Treasury Capital Statutory Revaluation Other Revenue translation option Minority Total capital shares reserve reserve reserve reserve reserve reserve reserve Total interests equity US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 (Note (b))

THE GROUPBalance at 1 July 2006 97,050 – 2,597 1,930 – – 208,936 (16,974 ) 834 294,373 13,059 307,432

Profit for the financial period – – – – – – 31,315 – – 31,315 836 32,151Foreign currency translation – – – – – – – 11,303 – 11,303 461 11,764

Total recognised income for the financial period – – – – – – 31,315 11,303 – 42,618 1,297 43,915

Shares issued pursuant to the exercise of share options 19 – – – – – – – – 19 – 19Transfer from revenue reserve to statutory reserve – – – 304 – – (304 ) – – – – –Grant of share options to employees (Note 27) – – – – – – – – 423 423 – 423Capital injection from minority shareholders – – – – – – – – – – 210 210Acquisition of additional interest in subsidiaries (Note (a)) – – – – – 166 – – – 166 (3,858 ) (3,692 )Dividends paid in respect of previous financial year (Note 9) – – – – – – (22,356 ) – – (22,356 ) (491 ) (22,847 )

19 – – 304 – 166 (22,660 ) – 423 (21,748 ) (4,139 ) (25,887 )

Balance at 31 December 2006 97,069 – 2,597 2,234 – 166 217,591 (5,671 ) 1,257 315,243 10,217 325,460

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

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

Shares issued pursuant to the exercise of share options 1,587 – – – – – – – – 1,587 – 1,587Purchase of treasury shares – (896 ) – – – – – – – (896 ) – (896 )Transfer from revenue reserve to statutory reserve – – – 463 – – (463 ) – – – – –Arising from revaluation of properties – – – – 844 – – – – 844 – 844Transfer to capital reserve upon exercise of share options – – 105 – – – – – (105 ) – – –Transfer to revenue reserve upon lapse of share options – – – – – – 68 – (68 ) – – –Grant of share options to employees (Note 27) – – – – – – – – 570 570 – 570Capital injection from minority shareholders – – – – – – – – – – 1,511 1,511Dividends paid (Note 9) – in respect of previous financial period – – – – – – (19,760 ) – – (19,760 ) (2,575 ) (22,335 ) – in respect of current financial year – – – – – – (14,371 ) – – (14,371 ) – (14,371 )

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

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


49

Statements of Changes in Equity

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

THE COMPANYBalance at 1 July 2006 97,050 – 69,417 402 166,869Shares issued pursuant to the exercise of share options 19 – – – 19Grant of share options to employees (Note 27) – – – 210 210Profit for the financial period – – 13,992 – 13,992Dividends paid in respect of previous financial year (Note 9) – – (22,356 ) – (22,356 )

Balance at 31 December 2006 97,069 – 61,053 612 158,734Shares issued pursuant to the exercise of share options 1,587 – – – 1,587Purchase of treasury shares – (896 ) – – (896 )Grant of share options to employees (Note 27) – – – 232 232Profit for the financial year – – 14,423 – 14,423Dividends paid (Note 9) – in respect of previous financial period – – (19,760 ) – (19,760 ) – in respect of current financial year – – (14,371 ) – (14,371 )

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

Notes:

(a) The amount credited to other reserve represents the difference between the fair value and the carrying amount of the net assets attributable to the additional interest in subsidiaries being acquired from minority shareholders, which will be recognised in the profit and loss statement upon the earlier of the disposal of the subsidiaries or the disposal by the subsidiaries of the relevant assets which it relates.

(b) The capital reserve relates to amounts set aside by subsidiary companies operating in Thailand for declaration of dividends as required under the laws of Thailand and the amounts transferred from share option reserve upon the exercise of share options.



50

Consolidated Cash Flow StatementFor the year ended 31 December 2007

12 months 6 months 31.12.2007 31.12.2006 US$’000 US$’000

Operating activitiesProfit before taxation 37,163 35,464Adjustments for: Amortisation of intangible assets 2 2 Depreciation of property, plant and equipment 46,055 21,280 Interest expense 7,507 4,175 Loss on disposal of property, plant and equipment 805 412 Share-based payment expense 570 423 Allowance for doubtful debts 3,783 152 Allowance for inventory obsolescence 2,154 1,142 Interest income (234 ) (183 ) Share of profits of an associate (1,426 ) (585 )

Operating income before reinvestment in working capital 96,379 62,282Decrease in inventories 6,417 4,186Increase in trade and other receivables (23,524 ) (5,486 )Increase (decrease) in trade and other payables 29,094 (8,146 )

Cash generated from operations 108,366 52,836Interest income received 234 183Interest paid (7,507 ) (4,175 )Income taxes paid (2,089 ) (3,415 )

Net cash from operating activities 99,004 45,429

Investing activitiesProceeds from disposal of property, plant and equipment 333 289Purchase of property, plant and equipment (47,000 ) (34,809 )Proceeds received in advance relating to “assets held for sale” 8,308 –(Increase) decrease in deposits paid for acquisition of property, plant and equipment (2,268 ) 3,978Acquisition of equity interest in an associate (441 ) –Payments of consideration for the acquisition of equity interest in subsidiary company in prior year (3,692 ) –

Net cash used in investing activities (44,760 ) (30,542 )

Financing activitiesProceeds from bank borrowings 136,046 106,087Repayment of bank borrowings (152,941 ) (87,915 )Proceeds from share issue pursuant to the exercise of share options 1,587 19Payment for share buy-back (896 ) –Capital injection from minority shareholders 1,511 210Dividends paid by the Company (34,131 ) (22,356 )Dividends paid by subsidiary companies to minority shareholders (2,575 ) (491 )

Net cash used in financing activities (51,399 ) (4,446 )


51

Consolidated Cash Flow Statement

12 months 6 months NOTES 31.12.2007 31.12.2006 US$’000 US$’000

Net increase in cash and cash equivalents 2,845 10,441

Cash and cash equivalents at beginning of the financial year/period 24,072 13,836

Effect of foreign exchange rate changes, net 4,622 (205 )

Cash and cash equivalents at end of the financial year/period 31,539 24,072

Cash and cash equivalents consist ofFixed and call deposits 943 4,317Cash at bank and on hand 25,535 20,118

26,478 24,435Cash and bank balances classified as held for sale 16 5,136 –Bank overdrafts – unsecured 24 (75 ) (363 )

31,539 24,072



52

Notes to the Financial Statements31 December 2007

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 8 Shenton Way, #37-03, Singapore 068811 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 design, development, fabrication and distribution of double-sided, multi-layer and high density interconnect printed circuit boards. Details of the principal activities of the subsidiaries are disclosed in Note 20. There have been no significant changes in the nature of these activities during the financial year.

The consolidated financial statements of the Group and balance sheet and statement of changes in equity of the Company for the year ended 31 December 2007 were authorised for the issue by the Board of Directors on 5 March 2008.

The Company had on 23 August 2006 changed its financial year end from 30 June to 31 December to be co-terminous with the financial year end of its ultimate holding company.

The consolidated financial statements for the current year cover the twelve months period ended 31 December 2007. The corresponding comparative amounts shown for the consolidated profit and loss statement, statements of changes in equity, consolidated cash flow statement and related notes cover a six months period from 1 July 2006 to 31 December 2006.


53

Notes to the Financial Statements

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of accountingThe financial statements are prepared in accordance with the historical cost convention, except as disclosed in the accounting policies below, and are drawn up in accordance with the provisions of the Singapore Companies Act and Singapore Financial Reporting Standards (“FRS”).

In the current financial year, the Group has adopted all the new and revised FRS and Interpretations of FRS (“INT FRS”) that are relevant to its operations and effective for annual periods beginning on or after 1 January 2007. The adoption of these new/revised FRS and INT FRS does not result in changes to the Group’s and Company’s accounting policies and has no material effect on the amounts reported for the current year or prior years/periods, except as follows:

FRS 107 – Financial Instruments: Disclosures and amendments to FRS 1 Presentation of Financial Statements relating to capital disclosuresThe Group has adopted FRS 107 with effect from annual periods beginning on or after 1 January 2007. The new standard has resulted in an expansion of the disclosures in these financial statements regarding the Group’s financial instruments. The Group has also presented information regarding its objectives, policies and processes for managing capital (see Note 4) as required by the amendments to FRS 1 which are effective from annual periods beginning on or after 1 January 2007.

FRS 40 – Investment PropertiesFRS 40 is effective for annual periods beginning on or after 1 January 2007. The Group adopted the fair value model under FRS 40 whereby all changes in fair value of the Group’s investment properties are recognised in the profit and loss statement.

At the date of authorisation of these financial statements, the following FRS, INT FRS and amendments to FRS that are relevant to the Group and the Company were issued but not effective:

FRS 23 Borrowing costs (Revised)FRS 108 Operating segmentsINT FRS 111 FRS 102 – Group and treasury share transactions

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

The directors anticipate that the adoption of the above FRS and INT FRS and amendments to FRS in future periods will have no material impact on the financial statements of the Company and of the Group in the period of their initial adoption.


54


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basis of consolidationThe consolidated financial statements incorporate the financial statements of the Company and entities (including special purpose entities) controlled by the Company (its 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 profit and loss statement from the effective date of acquisition or up to the effective date of disposal, as appropriate.

Where necessary, adjustments are made to the financial statements of subsidiary companies to bring their accounting policies in line with those used by other members of the Group.

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

Minority interests in the net assets of consolidated 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 associates are carried at cost less any impairment in net recoverable value that has been recognised in the profit and loss statement.

Business combinationsThe acquisition of 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, except for non-current assets (or disposal groups) that are classified as held for sale in accordance with FRS 105 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised and measured at fair value less costs to sell.

Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being the excess of the cost of the business combination over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment, the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities exceeds the cost of the business combination, the excess is recognised immediately in the consolidated profit and loss statement.

The interest of minority shareholders in the acquiree is initially measured at the minority’s proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.


55



Financial instrumentsFinancial assets and financial liabilities are recognised on the Group’s balance sheet when the Group becomes a party to the contractual provisions of the instrument.

Effective interest methodThe effective interest method is a method of calculating the amortised cost of a financial instrument and of allocating interest income or expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash receipts or payments through the expected life of the financial instrument, or where appropriate, a shorter period. Income is recognised on an effective interest rate basis for debt instruments.

Financial assets

Loans and receivablesTrade receivables, bill receivables (and other receivables) that have fixed or determinable payments that are not quoted in an active market are classified as “loans and receivables”. Loans and receivables are measured at amortised cost using the effective interest method less impairment. Interest is recognised by applying the effective interest method, except for short-term receivables when the recognition of interest would be immaterial.

Impairment of financial assetsFinancial assets are assessed for indicators of impairment at each balance sheet date. Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows of the investment have been impacted. For financial assets carried at amortised cost, the amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for all financial assets with the exception of trade receivables where the carrying amount is reduced through the use of an allowance account. When a trade receivable is uncollectible, it is written off against the allowance account. Subsequent recoveries of amounts previously written off are credited to profit or loss. Changes in the carrying amount of the allowance account are recognised in the profit and loss statement.

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.


56



Financial instruments (Continued)

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.

Financial liabilitiesTrade and other payables and bill payables are initially measured at fair value, net of transaction costs, and are subsequently measured at amortised cost, using the effective interest method, with interest expense recognised on an effective yield basis.

Interest-bearing bank loans and overdrafts are initially measured at fair value, and are subsequently measured at amortised cost, using the effective interest method. Any difference between the proceeds (net of transaction costs) and the settlement or redemption of borrowings is recognised over the term of the borrowings in accordance with the Group’s accounting policy for borrowing costs.

Financial guarantee contract liabilities are measured initially at their fair values and subsequently at the higher of the amount recognised as a provision and the amount initially recognised less accumulated amortisation in accordance with the revenue recognition policies below.

LeasesLeases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessee. All other leases are classified as operating leases.

The Group as lesseeRentals payable under operating leases are charged to profit or loss on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.


57



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.

Assets under construction are stated at cost. No depreciation is provided until the construction is completed and the assets are available for use.

Depreciation is charged so as to write off the cost of assets, other than freehold land and construction-in-progress, over their estimated useful lives, using the straight-line method, on the following bases:

Freehold buildings 20 yearsLeasehold land and buildings 50 – 75 yearsLeasehold improvements lower of 10 years or lease termsFurniture and fixtures 5 yearsPlant and equipment 5 – 10 yearsMotor vehicles and yacht 5 – 7 years

No depreciation is provided on freehold land and construction-in-progress.

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

The estimated useful lives, residual values and depreciation method are reviewed at each period end, with the effect of any changes in estimate accounted for on a prospective basis.

The gain or loss arising on disposal or retirement of an item of property, plant and equipment is determined as the difference between the sales proceeds and the carrying amounts of the asset and is recognised in the profit and loss statement.


58



Non-current assets held for saleNon-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a sale transaction rather than through continuing use. This condition is regarded as met only when the sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification.

Non-current assets (and disposal groups) classified as held for sale are measured at the lower of the assets’ previous carrying amount and fair value less costs to sell.

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.

Intangible assets

Technical know-howTechnical know-how is technical knowledge acquired from third parties and stated at purchase cost less accumulated amortisation and any accumulated impairment losses.

The intangibles with finite useful lives are amortised on a straight-line basis over their estimated useful lives of over 5 years. The estimated useful life and amortisation method are reviewed at the end of each annual reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

Impairment of tangible and intangible assetsAt each balance sheet date, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.


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Impairment of tangible and intangible assets (Continued)If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to its recoverable amount. An impairment loss is recognised immediately in the profit and loss statement.

Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-generating unit) is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognised for the asset (cash-generating unit) in prior years. A reversal of an impairment loss is recognised immediately in the profit and loss statement.

AssociatesAn associate is an entity over which the Group has significant influence and that is neither a subsidiary nor an interest in a joint venture. Significant influence is the power to participate in the financial and operating policy decisions of the investee but is not control or joint control over those policies.

The results and assets and liabilities of associates are incorporated in these financial statements using the equity method of accounting, except when the investment is classified as held for sale, in which case it is accounted for under FRS 105 Non-current Assets Held for Sale and Discontinued Operations. Under the equity method, investments in associates are carried in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the Group’s share of the net assets of the associate, less any impairment in the value of individual investments. Losses of an associate in excess of the Group’s interest in that associate (which includes any long-term interests that, in substance, form part of the Group’s net investment in the associate) are not recognised, unless the Group has incurred legal or constructive obligation or made payments on behalf of the associate.

Any excess of the cost of acquisition over the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities of the associate recognised at the date of acquisition is recognised as goodwill. The goodwill is included within the carrying amount of the investment and is assessed for impairment as part of the investment. Any excess of the Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities over the cost of acquisition, after reassessment, is recognised immediately in the consolidated profit and loss statement.

Where a group entity transacts with an associate of the Group, profits and losses are eliminated to the extent of the Group’s interest in the relevant associate.


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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. Provisions are measured at the directors’ best estimate of the expenditure required to settle the obligation at the balance sheet date, and are discounted to present value where the effect is material.

Share-based paymentsThe Group issues equity-settled share-based payments to certain employees. Equity-settled share-based payments are measured at fair value (excluding the effect of non market-based vesting conditions) at the date of grant. 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 shares that will eventually vest and adjusted for the effect of non market-based vesting conditions.

Fair value is measured using the Trinomial Lattice model. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations.

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.

Revenue recognitionRevenue is measured at the fair value of the consideration received or receivable. Revenue is reduced for customer returns, rebates and other similar allowances.

Revenue from the sale of manufactured products is recognised upon their delivery which is taken to be the point of acceptance when the significant risks of ownership have been transferred to the customer and the Group maintains no effective control over the goods delivered.

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.


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Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use or sale. Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalisation.

All other borrowing costs are recognised in the profit and loss statement in the period in which they are incurred.

Retirement benefit costsPayments to defined contribution retirement benefit plans are charged as expenses as they fall due. Payments made to state-managed retirement benefit schemes, such as the Singapore Central Provident Fund, state-sponsored retirement benefit scheme in the PRC and Mandatory Provident Fund in Hong Kong, are dealt with as payments to defined contribution plans where the Group’s obligations under the plans are equivalent to those arising in a defined contribution retirement benefit plan.

Employee leave entitlementEmployee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.

Income taxIncome tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profit as reported in the profit and loss statement because it excludes items of income or expense that are taxable or deductible in other periods and it further excludes items that are not taxable or tax deductible. The Group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted in countries where the Company and its subsidiaries operate by the balance sheet date.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary difference arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.


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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 each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised based on the tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.

Current and deferred tax are recognised as an expense or income in profit or loss, except when they relate to items credited or debited directly to equity, in which case the tax is also recognised directly in equity, or where they arise from the initial accounting for a business combination. In the case of a business combination, the tax effect is taken into account in calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.

Foreign currency transactions and translationThe individual financial statements of each group entity are measured and presented in the currency of the primary economic environment in which the entity operates (its functional currency). The consolidated financial statements of the Group and the balance sheet of the Company are presented in United States dollars, which is the functional currency of the Company, and the presentation currency for the consolidated financial statements.

In preparing the financial statements of the individual entities, transactions in currencies other than the entity’s functional currency are recorded at the rates of exchange prevailing on the date of the transaction. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated.


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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 directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including comparatives) are expressed in United States dollars using exchange rates prevailing on the balance sheet date. Income and expense items (including comparatives) are translated at the average exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are classified as equity and transferred to the Group’s foreign currency translation reserve. Such translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

On consolidation, exchange differences arising from the translation of the net investment in foreign entities (including monetary items that, in substance, form part of the net investment in foreign entities) are taken to the foreign currency translation reserve.

Cash and cash equivalentsCash and cash equivalents comprise cash on hand and demand deposits, bank overdrafts and other short term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insignificant risk of changes in value.

3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY

Critical judgements in applying the Group’s accounting policiesIn the application of the Group’s accounting policies, which are described in Note 2, management is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods.


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

Key sources of estimation uncertaintyThe key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:

(i) 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 amount at 31 December 2007 is US$2,189,000 (2006: US$1,856,000). The Group’s deferred tax assets and deferred tax liabilities at 31 December 2007 are US$1,351,000 (2006: US$1,245,000) and US$1,657,000 (2006: US$1,780,000), respectively.

(ii) 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 2007 amounted to US$9,491,000 (2006: US$5,705,000). 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.

(iii) Allowance for inventory obsolescenceThe management of the Group reviews an aging analysis at each balance sheet date, and makes allowance for inventory obsolescence for items that are identified as obsolete and slow-moving. The allowance for inventories as at 31 December 2007 amounted to US$5,728,000 (2006: US$2,928,000). The management estimates the net realisable value for goods for resale based primarily on the latest selling prices and current market conditions.


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4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT

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

THE GROUP THE COMPANY 31.12.2007 31.12.2006 31.12.2007 31.12.2006 US$’000 US$’000 US$’000 US$’000

Financial assets

Loans and receivables (including cash and cash equivalents) 207,952 180,744 117,491 138,600

Financial risk management policies and objectivesThe Group’s major financial instruments include bank balances and cash, bank borrowings, trade receivables, bills receivables and other receivables, trade and other payables and bills payable. Details of these financial instruments are disclosed in respective notes. The risks associated with these financial instruments and the policies on how to mitigate these risks are set out below. The management manages and monitors these exposures to ensure appropriate measures are implemented on a timely and effective manner.

Foreign exchange risk managementSeveral subsidiaries of the Company have foreign currency sales/purchases denominated in currencies other than the entity’s functional currencies, which expose the Group to foreign currency risk.

Whenever possible, the Group seeks to maintain a natural hedge through the matching of liabilities, including borrowings, against assets in the same currency or against the entity’s functional currency, in particular its future revenue stream. Transactional exposures in currencies other than the entities’ functional currency are kept to a minimal level.

When necessary, foreign exchange forward contracts are used by the Group to manage its foreign currency exposure arising from its operating activities.


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

Foreign exchange risk management (Continued)The carrying amounts of foreign currency denominated monetary assets and monetary liabilities at the reporting date are as follows:

THE GROUP Liabilities Assets 31.12.2007 31.12.2006 31.12.2007 31.12.2006 US$’000 US$’000 US$’000 US$’000

United States Dollars 11,706 30,743 11,895 3,746Hong Kong Dollars 33,924 53,887 3,607 5,926Singapore Dollars 242 121 34 48Pound Sterling 109 – 69 84Euro 284 181 7,811 3,160Japanese Yen 20 959 318 7

Foreign currency sensitivityThe 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 strengthened by 5% against the United States Dollars, profit or loss will increase (decrease) by:

The Group 31.12.2007 31.12.2006 US$’000 US$’000

Profit or lossUnited States Dollars (i) (213 ) 1,421

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.

(i) This is mainly attributable to the exposure outstanding on receivables and payables denominated in USD at year end.

In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign exchange risk as the year end exposure does not reflect the actual exposure during the year.


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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 24.

Interest rate sensitivityThe sensitivity analyses below have been determined based on the exposure to interest rates for both derivatives and non-derivative instruments at the balance sheet date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. A 50 basis point increase or decrease is used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the possible change in interest rates.

If interest rates had been 50 basis points higher or lower and all other variables were held constant, the Group’s:

• profit for the year ended 31 December 2007 would decrease/increase by US$743,000 (six months ended 31 December 2006: decrease/increase by US$373,000). This is mainly attributable to the group’s exposure to interest rates on its variable rate borrowings.

Credit riskCredit risk is the risk that counterparties are unable to meet their obligations resulting in financial loss to the Group. It is the Group’s policy to enter into transactions with a diversity of credit-worthy parties to mitigate any significant concentration of credit risk. The Group ensures that sales of products are rendered to customers with appropriate credit history and has internal mechanisms to monitor the granting of credit and management of credit exposures. The Group has made provisions for potential losses on credits extended. Surplus funds are placed with reputable financial institutions. The Group’s maximum exposure to credit risk in the event the counterparties fail to perform their obligations in relation to each class of recognised financial assets is the carrying amount of those assets as indicated in the balance sheet. As at financial year end, there was no significant concentration of credit risk to the Group or the Company.

Further details of credit risks on trade receivables are disclosed in Note 12.


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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.

Non-derivative financial liabilitiesThe following tables detail the remaining contractual maturity for non-derivative financial liabilities. The tables have been drawn up using 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 effective or within 6 months AfterTHE GROUP interest rate 6 months to 1 year 1 year Total % US$’000 US$’000 US$’000 US$’000

31.12.2007

Bank overdrafts and loans 5.23 68,474 14,749 50,521 133,744Trade and other payables – 154,136 732 – 154,868

222,610 15,481 50,521 288,612

31.12.2006

Bank overdrafts and loans 5.88 52,181 5,731 93,015 150,927Trade and other payables – 133,033 672 – 133,705

185,214 6,403 93,015 284,632

Non-derivative financial assetsThe following tables detail the expected maturity for non-derivative financial assets. The tables below have been drawn up using 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.


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Non-derivative financial assets (Continued)

Weighted average On demand Within effective or within 6 months AfterTHE GROUP interest rate 6 months to 1 year 1 year Total % US$’000 US$’000 US$’000 US$’000

31.12.2007

Cash and bank balances – 26,478 – – 26,478Trade and other receivables – 174,820 281 – 175,101

201,298 281 – 201,579

31.12.2006

Cash and bank balances – 24,435 – – 24,435Trade and other receivables – 155,715 14 – 155,729

180,150 14 – 180,164

Fair value of financial assets and financial liabilitiesFair value is defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm’s length transaction, other than in a forced or liquidation sale. Fair values are obtained through quoted market prices, discounted cash flow models and option pricing models as appropriate.

Financial instruments whose carrying amounts approximate fair valuesManagement has determined that the carrying amounts of cash and bank balances, fixed deposits with banks, trade and other receivables, amounts due from (to) subsidiary companies, bank overdrafts, trade and other payables and interest bearing loans and borrowings, based on their notional amounts, reasonably approximate their fair values because these are mostly short term in nature or are repriced frequently.

Capital risk management policies and objectivesThe Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The Group’s overall strategy remains unchanged from prior year.

The capital structure of the Group consists of debt, cash and cash equivalents and equity attributable to equity holders of the Company, comprising issued capital, reserves and retained earnings.


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5. HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS

The Company is a subsidiary of Kingboard Chemical Holdings Limited, incorporated in the Cayman Islands, which is also the Company’s ultimate holding company. Related companies in these financial statements refer to members of the holding company’s group of companies.

Some of the Group’s transactions and arrangements are between members of the Group and the effect of these on the basis determined between the parties is reflected in these financial statements. The intercompany balances are unsecured, interest-free and repayable on demand unless otherwise stated.

Transactions between the Company and its subsidiaries, which are related companies of the Company, have been eliminated on consolidation and are not disclosed in this note. Details of transactions between the Group and other related companies are disclosed below.

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 12 months 6 months 31.12.2007 31.12.2006 US$’000 US$’000

Income Sales to related companies 4,411 2,918 Rental income from a related party 85 –

Expenses Purchases from related companies 124,467 47,365 Purchases from a related party 179 192 Consultation fees paid to related parties 395 165 Construction fee paid to a related party 1,918 200 Management fee paid to related companies 3,144 141

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.


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5. HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS (Continued)

Total compensation paid to Company’s directors and key management executives, as well as fees paid to the Company directors and directors of subsidiaries were as follows:


Directors Salaries, bonuses and other costs 2,127 938 Provident fund and other defined contributions 54 21 Share-based payments 241 323

2,422 1,282

Key management executives (excluding executive directors) Salaries, bonuses and other costs 1,956 946 Provident fund and other defined contributions 73 37 Share-based payments 73 42

2,102 1,025

6. FINANCE COSTS


Interest on bank loans 7,405 4,129Interest on bank overdrafts 102 46

7,507 4,175


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7. PROFIT BEFORE TAXATION


Profit before taxation is arrived at after charging:

Directors’ emoluments – Remuneration 2,089 919 – Fees 38 19 – Contributions to defined contribution plans 54 21Staff costs (excluding directors’ emoluments) – Salaries and employees benefits 59,159 29,537 – Contributions to defined contribution plans 2,990 1,605Depreciation of property, plant and equipment 46,055 21,280Statutory auditor’s emoluments – Audit fees paid to auditors 357 298 – Non-audit fees paid to auditors 132 54Amortisation of intangible assets 2 2Share-based payment expense 570 423Loss on disposal of property, plant and equipment 805 412Allowance for doubtful debts 3,783 152Allowance for inventory obsolescence 2,154 1,142Loss on foreign exchange 1,704 364

8. INCOME TAX EXPENSE


Current:

Singapore income tax Current income taxation – 1

Foreign income tax Current income taxation 2,422 3,143

2,422 3,144Deferred tax (150 ) 169

2,272 3,313


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8. INCOME TAX EXPENSE (Continued)

Income tax for the Group is calculated at the rate prevailing for the respective jurisdiction. It materially differs from the amount determined by applying the Singapore income tax rate of 18% (2006: 20%) 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.

The average effective tax rate based on the income tax expense varied from the domestic tax rates applicable to the profit in the country concerned as a result of the following differences:

THE GROUP 12 months 6 months 31.12.2007 31.12.2006 % %

Tax at Singapore income tax rate 18.0 20.0Lower statutory tax rates and tax incentives in other countries (15.3 ) (10.8 )Tax benefits not recognised 6.0 2.1Adjustments in respect of current tax of previous year (3.5 ) –Utilisation of tax losses brought forward – (1.0 )Others 0.9 (1.0 )

Effective tax rate 6.1 9.3


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9. DIVIDENDS

The amount, net of tax, and the rates of dividends paid are:

THE GROUP AND THE COMPANY 12 months 6 months 31.12.2007 31.12.2006 US$’000 US$’000

In respect of previous financial period/year

Ordinary dividend: – Final one-tier tax exempt dividend United States 5.0 cents (six months ended 31 December 2006: United States 4.5 cents) 8,982 8,048Special dividend: – Final one-tier tax exempt dividend United States 6.0 cents (six months ended 31 December 2006: United States 8.0 cents) 10,778 14,308

19,760 22,356

In respect of current financial year/period

Ordinary dividend: – Interim one-tier tax exempt dividend United States 8.0 cents (2006: Nil) 14,371 –

The Directors have proposed a one-tier tax exempt final dividend of United States 4.5 cents per share and a one-tier tax-exempt special dividend of United States 8.0 cents per share, totaling US$22.4 million to be paid in respect of the current financial year. This dividend will be recorded as a liability on the balance sheets of the Company and of the Group upon approval by the shareholders of the Company at the forthcoming Annual General Meeting of the Company.


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10. EARNINGS PER SHARE

The calculation of the basic and diluted earnings per share attributable to shareholders of the Company is based on the following:

THE GROUP

12 months 6 months 31.12.2007 31.12.2006 Basic Diluted Basic Diluted US$’000 US$’000 US$’000 US$’000

Profit attributable to equity holders of the Company 34,797 34,797 31,315 31,315

Number of shares Number of shares Basic Diluted Basic Diluted ’000 ’000 ’000 ’000

Weighted average number of ordinary shares 179,498 179,498 178,845 178,845Adjustment for assumed conversion of share options – 1,112 – 2,432

Adjusted weighted average number of ordinary shares used to compute earnings per share 179,498 180,610 178,845 181,277

Earnings per share (US cents) 19.39 19.27 17.51 17.27


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11. CASH AND BANK BALANCES


Fixed deposits 943 4,317 – 27Cash at bank and on hand 25,535 20,118 37 43

26,478 24,435 37 70

Fixed deposits bear interest at average effective interest rate of 1.02% (2006: 0.70%) per annum and for a tenure of less than three months.

The Group and the Company’s cash and bank balances that are not denominated in the functional currencies of the respective entities are as follows:


Denominated in: Euro 1,123 89 – – Hong Kong Dollars 1,227 452 – – Singapore Dollars 28 48 25 46 United States Dollars 2,468 3,498 – –

12. TRADE RECEIVABLES

THE GROUP 31.12.2007 31.12.2006 US$’000 US$’000

Third parties 151,141 137,485Related companies 1,291 3,019

152,432 140,504


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12. TRADE RECEIVABLES (Continued)

An allowance has been made for estimated irrecoverable amounts from the sales of goods to third parties of US$9,491,000 (2006: US$5,705,000). This allowance has been determined by reference to past default experience and assessment of recoverability by management.

The amounts 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’ credit terms. They are recognised at their original invoice amounts which approximate their fair values on initial recognition.

The Group has provided fully for all receivables over 180 days because historical experience is such that receivables that are past due beyond 180 days are generally not recoverable.

Included in the Group’s trade receivable balance are debtors with a carrying amount of US$25.9 million (2006: US$17.9 million) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable. The Group does not hold any collateral over these balances. The average age of these receivables are 97 days (2006: 99 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.

Included in the allowance for doubtful debts are specific trade receivables with a balance of US$4.3m (2006: US$4.3m) for which the customers have been placed under liquidation. The impairment recognised represents the difference between the carrying amount of the specific trade receivable and present value of expected liquidation proceeds.

Movement in the allowance for doubtful debts:


Balance at beginning of the year/period 5,705 5,899Currency realignment 3 2Amounts written off during the year/period – (348 )Increase in allowance recognised in profit and loss statement 3,783 152

Balance at end of the year/period 9,491 5,705


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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 31.12.2007 31.12.2006 US$’000 US$’000

Denominated in: Hong Kong Dollars 1,906 2,866 Euro 3,843 3,069

13. OTHER RECEIVABLES


Deposits 459 421 – –Prepaid expenses 942 943 6 9Tax refundable 14,393 9,875 – –Others 3,552 2,184 – –

19,346 13,423 6 9

The Group’s other receivables that are not denominated in the functional currencies of the respective entities are as follows:

THE GROUP 31.12.2007 31.12.2006 US$’000 US$’000

Denominated in: Euro 2,845 2 Hong Kong Dollars 473 2,608 Japanese Yen 314 – United States Dollars 7 248


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14. AMOUNTS DUE FROM (TO) SUBSIDIARY COMPANIES

The amounts due from (to) subsidiary companies are unsecured, interest free and repayable on demand. The Company has not made any allowance as the directors are of the view that these receivables are collectible.

The Company’s amount due from (to) subsidiary companies that are not denominated in the functional currencies are as follows:

THE COMPANY 31.12.2007 31.12.2006 US$’000 US$’000

Amount due from subsidiary companiesDenominated in: Hong Kong Dollars 14,788 42,647 Singapore Dollars 627 1,015

THE COMPANY 31.12.2007 31.12.2006 US$’000 US$’000

Amount due to subsidiary companiesDenominated in: Hong Kong Dollars 126 127

15. INVENTORIES

THE GROUP 31.12.2007 31.12.2006 US$’000 US$’000

Raw materials 18,195 21,473Work-in-progress 26,484 29,353Finished goods 14,299 16,723

58,978 67,549

The cost of inventories recognised as an expense of US$480.2 million (six months ended 31 December 2006: US$225.0 million) includes US$2.2 million (six months ended 31 December 2006: US$1.1 million) in respect of write-downs of inventory to net realisable value.


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16. ASSETS CLASSIFIED AS HELD FOR SALE

On 30 October 2007, the Company entered into an agreement to transfer entire equity interest in Elec & Eltek Electronic (Kunshan) Company Limited (“E&E Kunshan”), a wholly-owned subsidiary of the Company to a subsidiary of its ultimate holding company. The assets and liabilities are expected to be sold within twelve months from the balance sheet date as the transfer documentation and other registration procedures were pending for approval by the relevant Chinese authorities.

The proceeds (i.e. US$8,308,000) of disposal are expected to exceed the net carrying amount of the relevant assets and liabilities and, accordingly, no impairment loss has been recognised on the classification of these operations as held for sale.

The major classes of assets and liabilities comprising the disposal company classified as held for sale are as follows:

31.12.2007 US$’000

Property, plant and equipment 10,115Other receivables 370Cash and bank balances 5,136

Assets classified as held for sale 15,621

Other payables (9,521 )Trade payables (3,026 )

Liabilities directly associated with assets classified as held for sale (12,547 )

Net assets of the disposal company 3,074


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17. 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 July 2006 7,135 6,151 21,169 75,019 38,660 12,574 416,539 2,463 5,248 584,958Currency realignment 648 558 620 1,776 1,548 351 15,360 74 85 21,020Reclassifications – – – 3,612 1,262 340 46 10 (5,270 ) –Additions – – 2,555 2,854 2,645 357 20,917 175 5,306 34,809Disposals – (295 ) – – (1,598 ) (381 ) (12,482 ) (197 ) (11 ) (14,964 )

At 31 December 2006 7,783 6,414 24,344 83,261 42,517 13,241 440,380 2,525 5,358 625,823Currency realignment 315 260 725 4,572 2,172 728 25,036 133 278 34,219Reclassifications – – – 3,262 1,804 63 26 – (5,155 ) –Additions – – 65 13,735 1,910 301 16,642 364 13,983 47,000Disposals – – – (20 ) (654 ) (2,552 ) (15,041 ) (342 ) – (18,609 )Revaluation – – – 844 – – – – – 844Transfer to investment properties – – – (8,733 ) – – – – – (8,733 )Transfer to assets held for sale – – (2,062 ) – – – – – (8,053 ) (10,115 )

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

Accumulated DepreciationAt 1 July 2006 – 4,342 3,521 12,181 20,863 10,415 200,419 1,768 – 253,509Currency realignment – 401 29 311 438 159 7,744 57 – 9,139Charge for the financial period – 164 221 874 1,520 393 17,971 137 – 21,280Disposals – (295 ) – – (1,390 ) (381 ) (12,000 ) (197 ) – (14,263 )

At 31 December 2006 – 4,612 3,771 13,366 21,431 10,586 214,134 1,765 – 269,665Currency realignment – 188 74 714 1,073 576 12,151 105 – 14,881Charge for the financial year – 348 453 1,872 3,600 859 38,664 259 – 46,055Disposals – – – (2 ) (642 ) (2,547 ) (14,042 ) (238 ) – (17,471 )

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

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

At 31 December 2006 7,783 1,802 20,573 69,895 21,086 2,655 226,246 760 5,358 356,158


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17. PROPERTY, PLANT AND EQUIPMENT (Continued)

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

THE COMPANYCostAt 1 July 2006 and 31 December 2006 20 120 140Additions – 7 7Disposals – (8 ) (8 )

At 31 December 2007 20 119 139

Accumulated DepreciationAt 1 July 2006 13 108 121Charge for the financial period 2 3 5

At 31 December 2006 15 111 126Charge for the financial year 4 6 10Disposals – (8 ) (8 )

At 31 December 2007 19 109 128

Carrying AmountAt 31 December 2007 1 10 11

At 31 December 2006 5 9 14


83



Details of the freehold and leasehold properties held by the Group as at 31 December 2007 are set out below:

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

Freehold:

(i) Land at No. 134 82,080 – Industrial Moo 2 Soi Sriyothin Pakred-Pathumthani Road, Bang-Khayang, Muang District, Thailand

(ii) Land at Rojana Industrial 17,180 – Industrial Park No. 1/68 Moo 5, Pranakorn, Sri Ayutthaya, Thailand

Leasehold:

(i) Land at New Technology 122,877 50 years commencing Industrial Development Zone, from 30 July 1997 Kai Ping, Guangdong Province, The PRC

(ii) Land at New Technology 158,500 50 years commencing Industrial Development Zone, from 15 March 2004 Kai Ping, Guangdong Province, The PRC

(iii) Land at New Technology 53,265 50 years commencing Industrial Development Zone, from 30 November 2006 Kai Ping, Guangdong Province, The PRC

(iv) Land at lot BW-5, 25,907 50 years commencing Industrial Guangzhou Economic & from 31 December 1993 Technological Development District, The PRC


84



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

Leasehold: (Continued)

(v) Land at Eastern Park of 160,554 50 years commencing Industrial Guangzhou Economic & from 16 August 2000 Technological Development District, The PRC

(vi) Factories and office units in 13,764 75 years commencing Industrial Merit Industrial Centre, from 5 October 1953 Hong Kong and renewable for a further 75 years

(vii) Land at Nanjing Economic 13,661 50 years commencing Industrial & Technological from 28 November 2000 Development Zone, Jiangsu Province, The PRC

(viii) Land at East of Qinhe Road 81,280 50 years commencing Industrial Zhangpu Town, Kunshan from 22 November 2006 The PRC (transferred to assets held for sale)

(ix) Land at North of Jiangfeng 12,197 50 years commencing Industrial Road, Zhangpu Town, from 22 November 2006 Kunshan, The PRC (transferred to assets held for sale)

During the year, US$346,000 (six months ended 31 December 2006: US$295,000) of interest cost was capitalised and included in the cost of leasehold buildings and plant and equipment. The capitalisation rate used to determine the amount of borrowing costs eligible for capitalisation is 5.20% (2006: 5.92%) per annum.

18. INVESTMENT PROPERTIES

THE GROUP US$’000

At fair value Balance at 1 July 2006 and 31 December 2006 – Transfer from property, plant and equipment 8,733

Balance at end of year 8,733


85


18. INVESTMENT PROPERTIES (Continued)

The fair value of the Group’s investment property at 31 December 2007 has been determined on the basis of a valuation carried out on that date by Messrs. Chung, Chan & Associates, independent qualified professional valuers not connected with the Group. Messrs. Chung, Chan & Associates are members of the Institute of Valuers, and have appropriate qualifications and recent experience in the valuation of similar properties in the relevant locations. The valuation, which conforms to International Valuation Standards, was arrived at by reference to market evidence of transaction prices for similar properties.

The Group’s investment property is held under leasehold interests. The property rental income from the Group’s investment properties all of which are leased out under operating leases, amounted to US$92,850 (six months ended 31 December 2006: Nil).

19. INTANGIBLE ASSETS

THE GROUP US$’000

CostAt 1 July 2006, 31 December 2006 and 31 December 2007 516

Accumulated AmortisationAt 1 July 2006 510Currency realignment 2Charge for the financial period 2

At 31 December 2006 514Charge for the financial year 2

At 31 December 2007 516

Carrying AmountAt 31 December 2007 –

At 31 December 2006 2

Intangible assets represent technical know-how stated at purchase cost less accumulated amortisation. The intangible assets have finite useful lives, over which the assets are amortised. The amortisation period for the technical know-how is five years.


86


20. SUBSIDIARY COMPANIES

THE COMPANY 31.12.2007 31.12.2006 US$’000 US$’000

Unquoted equity shares, at cost 24,571 22,186

Details of the Company’s principal subsidiary companies at 31 December 2007 are as follows:

Proportion of Country of ownership incorporation interest andName of subsidiary and operation voting power held Principal activities 31.12.2007 31.12.2006 % %

Principal subsidiary companies

^ Elec & Eltek (Guangzhou) The PRC 98.0 98.0 Manufacturing and Electronic Company Limited distribution of printed 依利安達(廣州)電子有限公司 circuit boards (“PCBs”)

^ Elec & Eltek (Guangzhou) The PRC 98.0 98.0 Research and Technology Company Limited development, 依利安達(廣州)電子科技有限公司 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 Multilayer Hong Kong 100.0 100.0 Manufacturing and PCB Limited distribution of PCBs

* Elec & Eltek Technology Singapore 100.0 100.0 Technology research Research & Marketing and marketing Pte. Ltd.

ß Elec & Eltek (Thailand) Limited Thailand 100.0 100.0 Manufacturing and distribution of PCBs


87


20. SUBSIDIARY COMPANIES (Continued)


Principal subsidiary companies (Continued)

^ 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

^ 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

^ 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


88


20. SUBSIDIARY COMPANIES (Continued)


Principal subsidiary companies (Continued)

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 – Singapore.

@ Audited by Deloitte Touche Tohmatsu – Hong Kong.

ß Audited by Ernst & Young – Thailand.

% Audited by Deloitte Touche Tohmatsu – Macao for statutory purpose. Deloitte Touche Tohmatsu – Hong Kong performed audit for Group 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 performed audit for Group consolidation purposes.

During the six months ended 31 December 2006, the Group acquired additional 25.94% equity interest in Nanjing Elec & Eltek Electronic Co., Ltd, for a consideration of US$3,692,000. The Group has settled the consideration of US$3,692,000 in the financial year 2007.


89


21. INTEREST IN AN ASSOCIATE

THE GROUP 31.12.2007 31.12.2006 US$’000 US$’000

Cost of investment in an associate 5,441 5,441Share of post-acquisition reserves 2,728 1,110

Carrying amount of investment 8,169 6,551

Amount due to an associate – (441 )

During the year ended 31 December 2007, capital injection of US$441,000 was paid.

Proportion of Country of ownership interestName incorporation Principal activities and voting power held 31.12.2007 31.12.2006

Held through a subsidiary

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

Summarised financial information of the associate is set out below:

12 months 6 months 31.12.2007 31.12.2006 US$’000 US$’000

Total assets 34,731 29,676Total liabilities (18,060 ) (16,274 )

Net assets 16,671 13,402

Revenue 9,377 3,693

Profit for the year 2,910 1,193

Group’s share of profits of associate 1,426 585


90


22. TRADE PAYABLES

THE GROUP 31.12.2007 31.12.2006 US$’000 US$’000

Third parties 80,057 72,847Related companies 39,176 29,008

119,233 101,855

Trade payables are non-interest bearing and generally on 90 – 120 days’ credit terms. The Group has financial risk management policies in place to ensure that all payables are within the credit time frame.

The Group’s trade payables that are not denominated in the functional currencies of the respective entities are as follows:

THE GROUP 31.12.2007 31.12.2006 US$’000 US$’000

Denominated in: Hong Kong Dollars 5,053 5,533 Euro 269 181 Japanese Yen 20 422 United States Dollars 7,725 29,556

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.

23. OTHER PAYABLES


Accrued expenses 17,993 13,941 180 107Other payables 14,661 16,053 577 10

32,654 29,994 757 117


91


23. OTHER PAYABLES (Continued)

The Group and the Company’s other payables that are not denominated in the functional currencies of the respective entities are as follows:


Denominated in: Chinese Renminbi 5 270 – – Hong Kong Dollars 2,554 1,565 – – Japanese Yen – 537 – – Macau Pataca – 122 – – Singapore Dollars 235 109 179 53 United States Dollars 1,881 1,187 – –

24. BANK OVERDRAFTS AND LOANS

THE GROUP 31.12.2007 31.12.2006 US$’000 US$’000

Unsecured: USD bank loans 27,400 103,775 HKD bank loans 106,269 46,789 USD bank overdrafts 75 363

133,744 150,927

Comprising amounts due: – within one year 83,223 57,912 – more than one year 50,521 93,015

133,744 150,927

The effective interest rate of bank overdrafts is 6.04% (2006: 5.52%) per annum.

The Group’s unsecured bank loans are repayable in quarterly instalments commencing from 2004 and ending in 2010 and bear interest at weighted effective rates of 5.22% (2006: 5.89%) per annum. The interest rates of these floating rate loans reprice at 0.5% – 1.25% per annum over 1, 2 or 3 months Singapore Interbank Offer Rate (“SIBOR”) or Hong Kong Interbank Offer Rate (“HIBOR”).


92


24. BANK OVERDRAFTS AND LOANS (Continued)

The above credit facilities are provided under:

(a) corporate guarantees from the Company;

(b) a letter of undertaking from the Company to maintain:

(i) a consolidated tangible net worth at a level not less than US$210,000,000 for the period up to 30 December 2009;

(ii) a consolidated gearing ratio and consolidated interest cover ratio at a level of not higher than 85% and not less than 5 times, respectively at all time; and

(c) negative pledges from the Company.

There are no fixed or floating charges against any assets belonging to the Group or the Company.

All borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate risk.

The fair value of the Group’s borrowings approximates their carrying amount.

25. DEFERRED TAXATION

The following are the major deferred tax liabilities and assets recognised by the Group, and the movements thereon, during the current and prior reporting periods:

THE GROUP 31.12.2007 31.12.2006 US$’000 US$’000

Deferred tax assets 1,351 1,245

Deferred tax liabilities (1,657 ) (1,780 )

Deferred tax assets

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

THE GROUPAt 1 January 2007 1,124 121 1,245Currency realignment 73 – 73Credit (charge) to profit and loss statement for the year (15 ) 48 33

At 31 December 2007 1,182 169 1,351


93


25. DEFERRED TAXATION (Continued)

Deferred tax liabilities

Accelerated tax depreciation US$’000

THE GROUPAt 1 January 2007 (1,780 )Currency realignment 6Credit to profit and loss statement for the year 117

At 31 December 2007 (1,657 )

Subject to the agreement by the tax authorities, at the balance sheet date, the Group has unutilised tax losses of US$15.84 million (2006: US$6.80 million) available for offset against future profits. As at 31 December 2007, no deferred tax asset has been recognised (2006: Nil) of such losses due to the unpredictability of future profit streams.

26. SHARE CAPITAL AND TREASURY SHARES

THE GROUP AND THE COMPANY 31.12.2007 31.12.2006 No. of No. of Shares US$’000 Shares US$’000

Issued and fully paid: At beginning of financial year/period 178,854,462 97,069 178,844,862 97,050 Issue pursuant to the exercise of share options 780,600 1,587 9,600 19

179,635,062 98,656 178,854,462 97,069 Purchase of treasury shares (487,000 ) (896 ) – –

At end of financial year/period 179,148,062 97,760 178,854,462 97,069

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. The new shares issued during the financial year rank pari passu to existing ordinary shares.

The Company acquired 487,000 (six months ended 31 December 2006: Nil) shares of its own shares through on market purchases on the Singapore Exchange Securities Trading Limited during the financial year. Such shares were held as treasury shares, with no voting rights and dividend entitlements, for future application. The total consideration paid to acquire the shares was US$896,056 and this was deducted against shareholders’ equity.


94


26. SHARE CAPITAL AND TREASURY SHARES (Continued)

Details of the outstanding options to subscribe for unissued ordinary shares of the Company are set out in Note 27.

As at the end of the financial year, there are options outstanding granted to directors and employees of the Group to subscribe for unissued shares totaling 10,687,000 (2006: 11,906,400) ordinary shares each as described in the report of the directors.

27. SHARE-BASED PAYMENTS

The Company has granted share options to eligible employees under the 2002 Elec & Eltek Employees’ Share Option Scheme (the “Scheme”). The Scheme was approved by the shareholders at the Extraordinary General Meeting held on 8 November 2002 and was adopted and took effect from 12 November 2002 upon fulfilment of all the conditions precedent as set out in Rule 3 of the Scheme.

The 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 Scheme entitles the option holders to exercise their options and subscribe for new ordinary shares in the Company either at a “Subscription Price”, equal to the average of the last dealt price of the Company’s shares for the last five market days immediately preceding the relevant date of grant, or at a “Discounted Subscription Price”, whereby the discount shall not exceed 20% of the Subscription Price as defined earlier.

Options granted at the Subscription Price may be exercised commencing on a date not earlier than the first anniversary date of the date of grant and ending on a date not later than five years after the date of grant. Options granted at the Discounted Subscription Price may only be exercised commencing on a date not earlier than the second anniversary date of the date of grant and ending on a date not later than five years after the date of grant.

The duration of the Scheme is five years and the total number of shares that may be issued shall not exceed 10% of the issued share capital of the Company as at the adoption date or subject to certain conditions being satisfied, 15% of the issued share capital of the Company as at the adoption date. The Scheme has accordingly terminated in November 2007 without affecting the rights of holders of any options granted and outstanding under the Scheme.

The Company did not grant any share option during the current financial year. During the six months ended 31 December 2006, the Company granted 1,020,000 share options to the full-time employees of the Group, to subscribe for 1,020,000 ordinary shares in the Company at a Subscription Price of US$2.40 per share pursuant to the Scheme.


95


27. SHARE-BASED PAYMENTS (Continued)

Information with respect to the movement of share options of the Company during the current financial year are as follows:

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

24.6.2005 10,706,400 (346,800 ) (780,600 ) 9,579,000 2.033 24.5.201029.9.2005 180,000 – – 180,000 2.375 4.9.201012.12.2006 1,020,000 (92,000 ) – 928,000 2.400 12.11.2011

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

Information with respect to the movement of share options of the Company during the last financial period are as follows:

Balance Balance as at as at 31 December SubscriptionDate of grant 1 July 2006 Granted Lapsed Exercised 2006 price Expiry date US$

24.6.2005 11,190,000 – (474,000 ) (9,600 ) 10,706,400 2.033 24.5.201029.9.2005 180,000 – – – 180,000 2.375 4.9.201012.12.2006 – 1,020,000 – – 1,020,000 2.400 12.11.2011

11,370,000 1,020,000 (474,000 ) (9,600 ) 11,906,400

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 2006Estimated fair value per option US$0.2033 US$0.1997 US$0.3293


96


27. SHARE-BASED PAYMENTS (Continued)

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$2.74Subscription price US$2.033 * US$2.375 * US$2.40Expected volatility 25.4% 21.2% 36.6%Expected life (years) 5 5 5Risk free interest rate 3.7% 4.2% 3.7%Expected dividend yield 7.5% 7.5% 7.5%

* The subscription prices reflected are after adjustment made to effect the bonus issue of shares on the basis of one bonus share for every five ordinary shares held in the capital of the Company on 13 October 2005.

Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous five years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non transferability, exercise restrictions and behavioral considerations.

The Group recognised total expenses of US$570,000 (six months ended 31 December 2006: US$423,000) related to equity-settled share-based payment transactions during the year.

28. RETIREMENT BENEFIT OBLIGATIONS

Defined contribution plansThe employees of Elec & Eltek International Company Limited and its subsidiaries that are located in Singapore, the PRC and Hong Kong are members of the Central Provident Fund Board in Singapore, a state-sponsored retirement benefit plan in the PRC and Mandatory Provident Fund Scheme in Hong Kong, operated by the Government of Singapore, the PRC and Hong Kong, respectively. The Company and the subsidiary companies are required to contribute a specified percentage of payroll costs to the retirement benefit schemes to fund the benefits. The only obligation of the Group with respect to the retirement benefit plans is to make the specified contributions.

The total expense recognised in the profit and loss statement of US$3,044,000 (six months ended 31 December 2006: US$1,626,000) represents contributions payable to these plans by the Group at rates specified in the rules of the plans.


97


29. CONTINGENT LIABILITIES


Bank guarantees given to third parties 793 793 – –

Corporate guarantees given by the Company to secure bank credit facilities granted to subsidiary companies (unsecured) – – 272,377 214,779

30. CAPITAL COMMITMENTS

THE GROUP 31.12.2007 31.12.2006 US$’000 US$’000

Capital expenditure not provided for in the financial statements:

Commitments for capital contributions in subsidiary companies 17,697 41,885Commitments in respect of contracts placed for plant expansion 26,629 9,986

44,326 51,871

31. OPERATING LEASES ARRANGEMENT


Minimum lease payments under operating leases recognised as an expense in the current year/period 628 322


98


31. OPERATING LEASES ARRANGEMENT (Continued)

At the balance sheet date, the Group had outstanding commitments under non-cancellable operating leases, when fall due as follows:

THE GROUP 31.12.2007 31.12.2006 US$’000 US$’000

Within one year 430 534In two to five years 341 410

Total 771 944

Operating lease payments represent rental payable by the Group of certain of its office properties and leases are negotiated for an average of 2 years.

32. INFORMATION BY SEGMENT ON GROUP’S OPERATIONS

The Group operates principally in one business segment, the manufacture and distribution of PCBs. All the Group’s productive assets are employed in Asia with plants located in Hong Kong, Thailand and the PRC. The analyses of the Group’s revenue, results, assets and liabilities are set out in the consolidated profit and loss account and consolidated balance sheet.

Revenue by geographical areaThe sale of goods of the Group by geographical area segments, which is based upon the shipment locations, are provided below:


Asia The People’s Republic of China (including Hong Kong) 291,300 133,228 South East Asia 114,793 60,254 Others 21,973 12,670

428,066 206,152Europe 104,331 52,621North and Central America 35,011 24,112Rest of the World 4,866 2,224

572,274 285,109


99


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

Assets and capital expenditure by geographical areaThe following table showing the carrying amount of segment assets and capital expenditure by geographical area (based on location of assets):

The People’s Republic of China (including Hong31.12.2007 Kong and Macao) Thailand Others Total US$’000 US$’000 US$’000 US$’000

Segment assets 580,359 67,284 685 648,328Investment in an associate – – 8,169 8,169

Total assets 656,497

Capital expenditure Property, plant & equipment 46,326 547 127 47,000

The People’s Republic of China (including Hong31.12.2006 Kong and Macao) Thailand Others Total US$’000 US$’000 US$’000 US$’000

Segment assets 535,908 71,222 488 607,618Investment in an associate – – 6,110 6,110

Total assets 613,728

Capital expenditure Property, plant & equipment 33,576 1,233 – 34,809

33. SUBSEQUENT EVENTS

Share Buy-BackSubsequent to the end of the financial year, the Company purchased 261,000 ordinary shares amounting to US$458,974 pursuant to the shareholders’ mandate approved by the shareholders of the Company at the extraordinary general meeting held on 12 April 2007. These shares are acquired via on-market share purchases by the Company and will be held as treasury shares, with no voting rights and dividend entitlement.


100

Statement of Directors

In the opinion of the directors, the consolidated financial statements of the Group and the balance sheet and statement of changes in equity of the Company as set out on pages 45 to 99 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 2007 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.




5 March 2008


SGX Listing Manual Requirements

1. Directors’ Remuneration

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

Number of Directors in remuneration bands

The Group 12 months 6 months 31.12.2007 31.12.2006

S$500,000 (US$333,556 equivalent) and above 3 –S$250,000 to S$499,999 (US$166,778 to US$333,555 equivalent) 2 3Below S$250,000 (US$166,778 equivalent) 3 4

Total 8 7

The four directors nominated from Kingboard Chemical Holdings Limited, namely, Messrs Cheung Kwok Wing, Chadwick Mok Cham Hung, Chan Wing Kwan and Chang Wing Yiu did not receive any remuneration from the Company or from any of its subsidiaries.

Summary of Directors’ remuneration (in percentage terms) for the financial year ended 31 December 2007

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

Chadwick Mok Cham Hung – – – – –Sammy Leung Tin Po 45 53 – 2 100Li Muk Kam 47 51 – 2 100Philip Chan Sai Kit 42 56 – 2 100Clement Sun 59 38 – 3 100Claudia Heng Nguan Leng 62 27 – 11 100Cheung Kwok Wing – – – – –Chan Wing Kwan – – – – –Chang Wing Yiu – – – – –Philip Wong Yu Hong – – 100 – 100Ann Chiang Lai Wan – – 100 – 100Larry Lai Chong Tuck – – 100 – 100

# subject to approval by the shareholders at each annual general meeting.* excluding share options which are disclosed in the Report of the Directors.


102


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$270,000 (US$180,120 equivalent) to S$522,000 (US$348,232 equivalent) for the financial year ended 31 December 2007.

During the financial year under review, no employee whose annual remuneration exceeded S$150,000 (US$100,067 equivalent) 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 2007 are as follows:

Aggregate value of all interested person transactions during the financial year (including transactions less than S$100,000) Excluding transactions conducted under Conducted under shareholders’ mandate shareholders’ mandateName of Interested Person pursuant to Rule 920 pursuant to Rule 920 12 months 6 months 12 months 6 monthsUS$’000 31.12.2007 31.12.2006 31.12.2007 31.12.2006

Sale of plant and equipmentTechwise (Macao Commercial Offshore) Circuits Limited 161 – – –

161 – – –

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

8,308 – – –

Elec & Eltek International Company LimitedAnnual Report 2007103 SGX Listing Manual Requirements

3. Interested Person Transactions (Continued)

Aggregate value of all interested person transactions during the financial year (including transactions less than S$100,000) Excluding transactions conducted under Conducted under shareholders’ mandate shareholders’ mandateName of Interested Person pursuant to Rule 920 pursuant to Rule 920 12 months 6 months 12 months 6 monthsUS$’000 31.12.2007 31.12.2006 31.12.2007 31.12.2006

Purchases of goods and servicesHong Kong Fibre Glass Company Limited – – 5,976 2,311Heng Yang Kingboard Chemical Co., Ltd – – 5,648 915Kingboard Copper Foil (Macao Commercial Offshore) Limited – – 51,784 24,877Kingboard Laminates (Macao Commercial Offshore) Limited – – 50,313 19,262Kingboard Investments Limited 410 – – –Techwise Circuits Co. Ltd. 6 – – –Techwise (Macao Commercial Offshore) Circuits Limited – – 75 –Top Faith PCB Co. Ltd. – – 284 –Elec & Eltek Corporate Services Limited 372 – – 141Elec & Eltek Display Technology (Qingyuan) Company Limited 118 – – –Joyful Source Group Limited 2,416 – – –Kingboard (Lian Zhou) Electronic Materials Ltd – – 10,209 –

3,322 – 124,289 47,506

Provision of goods and servicesJiangmen Glory Faith PCB Co. Ltd. 3 – 2,819 1,122Techwise (Macao Commercial Offshore) Circuits Limited 7 – 1,230 1,754Techwise Circuits Co. Ltd. – – – 12Top Faith PCB Co. Ltd. 1 – 2 –Smark Foundate (H.K.) Ltd. 1 – – –Topsearch Printed Circuits (H.K.) Ltd. 10 – – –Wing Fung PCB Company Limited 1 – 118 –Elec & Eltek Display Technology Limited 45 – – 22E & E Magnetic Products Limited 13 – – 8

81 – 4,169 2,918


104


4. Shareholding Statistics as at 10 March 2008

Number of shares in issue : 178,887,062 (excluding treasury shares)Class of Shares : Ordinary SharesVoting Rights : One vote per share

Distribution of Shareholdings

No. ofSize of Shareholdings Shareholders % No. of Shares %

1 – 999 143 6.48 43,790 0.021,000 – 10,000 1,700 77.06 5,775,318 3.2310,001 – 1,000,000 351 15.91 11,743,948 6.571,000,001 and above 12 0.55 161,324,006 90.18

Total 2,206 100.00 178,887,062 100.00

As at 10 March 2008, 18.80% 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. ofName of substantial shareholders Shares held

Hallgain Management Limited (“HML”)(1) 126,782,165Kingboard Chemical Holdings Limited (“Kingboard”)(2) 126,782,165Cheung Kwok Wing(1) 126,842,165Ease Ever Investments Limited (“Ease Ever”)(3) 90,741,550Elec & Eltek International Holdings Limited (“EEIH”) 90,741,550Elitelink Holdings Limited (“Elitelink”) 34,321,615Cheah Cheng Hye(4) 16,781,800To Hau Yin(4) 16,781,800Hang Seng Bank Trustee International Limited (“HSBTIL”)(4) 16,781,800Cheah Company Limited (“CCL”)(4) 16,781,800Cheah Capital Management Limited (“CCML”)(4) 16,781,800Value Partners Group Limited (“VPGL”)(4) 16,781,800Value Partners Limited (“VPL”)(5) 16,781,800

Elec & Eltek International Company LimitedAnnual Report 2007105 SGX Listing Manual Requirements

4. Shareholding Statistics as at 10 March 2008 (Continued)

(1) HML’s deemed interest arises from its direct shareholding interest in Kingboard of 31.01% 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 virture of them being the founder and beneficiary respectively of a discretionary trust, The C H Cheah Family Trust, with HSBTIL as the Trustee. HSBTIL owns 100% in CCL which in turn owns 100% in CCML which in turn owns 35.65% in VPGL which in turn owns 100% in VPL.

(5) VPL, a fund manager, is deemed interested by virtue of shares held directly by the funds under its management.

Twenty Largest Shareholders

No. Name No. of Shares %

1 Elec & Eltek International Holdings Limited 90,741,550 50.732 Elitelink Holdings Limited 34,321,615 19.193 HSBC (Singapore) Nominees Pte Ltd 12,978,266 7.254 DBS Nominees Pte Ltd 5,001,169 2.805 Citibank Nominees Singapore Pte Ltd 4,261,240 2.386 Morgan Stanley Asia (Singapore) Securities Pte Ltd 3,468,600 1.947 Raffles Nominees Pte Ltd 2,149,920 1.208 DBS Vickers Securities (S) Pte Ltd 1,930,197 1.089 Merrill Lynch (S'pore) Pte Ltd 1,902,084 1.0610 DBSN Services Pte Ltd 1,810,889 1.0111 CLSA Singapore Pte Ltd 1,722,600 0.9612 Li Muk Kam 1,035,876 0.5813 UOB Kay Hian Pte Ltd 641,440 0.3614 Heng Nguan Leng 322,800 0.1815 Phillip Securities Pte Ltd 277,168 0.1516 Cosmic Insurance Corporation Limited - SIF 275,712 0.1517 Leap International Pte Ltd 240,000 0.1418 Tok Ching Ka 215,000 0.1219 OCBC Securities Private Ltd 207,732 0.1220 Tan Ah Chai 180,000 0.10

Total 163,683,858 91.50

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 10 March 2008. The percentage of issued ordinary shares is calculated based on the number of issued ordinary shares of the Company as at 10 March 2008, excluding treasury shares.


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 21 April 2008, 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 2007 with the Auditors’ Report thereon.

2. To declare a one-tier tax exempt final dividend of 4.5 United States cents per share and a one-tier tax exempt special dividend of 8.0 United States cents per share for the financial year ended 31 December 2007.

3. To re-elect Mr. Philip Chan Sai Kit, 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 Dr. Philip Wong Yu Hong, retiring by rotation in accordance with Articles 95(2) and 95(4) of the Articles, as Director of the Company. [see Note (1) below]

5. To re-elect Mr. Larry Lai Chong Tuck, retiring by rotation in accordance with Articles 95(2) and 95(4) of the Articles, as Director of the Company. [see Note (2) below]

6. To re-elect Mr. Li Chiu Cheuk, retiring in accordance with Article 77 of the Articles, as Director of the Company.

7. To re-elect Mr. Chan Wai Leung, retiring in accordance with Article 77 of the Articles, as Director of the Company.

8. To re-elect Mr. Raymond Leung Hai Ming, retiring in accordance with Article 96 of the Articles, as Director of the Company. [see Note (3) below]

9. To approve Directors’ fees of HK$300,000 for the financial year ending 31 December 2008 [see Note (4) below].

10. To re-appoint Deloitte & Touche as Auditors of the Company and authorise the Directors to fix their remuneration.

Elec & Eltek International Company LimitedAnnual Report 2007107Notice of Annual General Meeting

SPECIAL BUSINESSES:

11. To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modification:

11.1 Authority to issue shares pursuant to the exercise of share options granted under the “2002 Elec & Eltek Employees’ Share Option Scheme” (the “2002 Scheme”) [see Note (5) 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 2002 Scheme in accordance with the provisions of the 2002 Scheme; PROVIDED ALWAYS that the aggregate number of new ordinary shares to be issued pursuant to the 2002 Scheme shall not exceed fifteen per cent. (15%) of the issued share capital of the Company for the time being.

11.2 Authority to issue new shares and convertible securities [see Note (6) below]

That pursuant to Section 161 of the Companies Act (Chapter 50, Singapore Statutes) and Rule 806 of the Listing Manual of Singapore Exchange Securities Trading Limited, the Directors be and are hereby authorised to allot and issue whether by way of rights, bonus or otherwise (i) shares, (ii) convertible securities, (iii) additional convertible securities issued pursuant to rights, bonus or other capitalisation issues (notwithstanding that such authority may have ceased to be in force at the time the securities are issued, provided that the adjustment does not give the holder of the convertible securities a benefit that a shareholder does not receive), and (iv) shares arising from the conversion of securities in (ii) above and additional convertible securities in (iii) above, notwithstanding that such authority may have ceased to be in force at the time the shares are to be issued, upon such terms and conditions and for such purposes as the Directors may in their absolute discretion deem fit;

PROVIDED THAT

(i) the aggregate number of shares and convertible securities to be issued pursuant to this resolution shall not exceed 50% of the total number of issued shares excluding treasury shares of the Company; and

(ii) the aggregate number of shares and convertible securities issued other than on a pro-rata basis to existing shareholders shall not exceed 20% of the total number of issued shares excluding treasury shares of the Company;

and for the purpose of this resolution, the total number of issued shares excluding treasury shares shall be based on the Company’s total number of issued shares excluding treasury shares at the time this resolution is passed after adjusting for (a) new


Notice of Annual General Meeting

shares arising from the conversion or exercise of convertible securities, exercise of share options or vesting of share awards which are outstanding or subsisting at the time this resolution is passed, and (b) any subsequent bonus issue, consolidation or subdivision of the Company’s shares; and, unless revoked or varied by the Company in general meeting, such authority shall continue in force until the conclusion of the next annual general meeting of the Company or the date by which the next annual general meeting of the Company is required by law to be held, whichever is the earlier.

BY ORDER OF THE BOARD

CLAUDIA HENG NGUAN LENGCompany Secretary

Singapore, 4 April 2008

Notes:

(1) Dr. Philip Wong Yu Hong will, upon re-election as a Director, remain as a member and as the Chairman of the Remuneration Committee and the Nominating Committee, and as a member of the Audit Committee of the Company.

(2) Mr. Larry Lai Chong Tuck will, upon re-election as a Director, remain as a member and as the Chairman of the Audit Committee, and as a member of the Remuneration Committee and the Nominating Committee of the Company.

(3) Mr. Raymond Leung Hai Ming will, upon re-election as a Director, remain as a member of the Remuneration Committee, the Nominating Committee and the Audit Committee of the Company.

(4) For the financial year ended 31 December 2007, the approved Directors’ fees was also HK$300,000.

(5) Resolution 11.1, 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 2002 Scheme, up to and not exceeding in total 15% of the issued share capital of the Company for the time being.

(6) Resolution 11.2, if passed, will authorise the Directors of the Company to allot and issue shares and convertible securities up to 50% of the Company’s total number of issued shares excluding treasury shares with an aggregate sub-limit of 20% of the Company’s total number of issued shares excluding treasury shares for any allotments and issues of shares and convertible securities not made on a pro-rata basis to shareholders of the Company.

(7) 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, 80 Raffles Place, #33-00 UOB Plaza 1, Singapore 048624, not less than 48 hours before the time of the meeting.

AN

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Elec & Eltek In

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www.eleceltek.com

ANNUAL REPORT 2007

Paving an open road for

the Brighter Future

Documents

Paving an open road for the Brighter Future · Paving an open road for the Brighter Future. 2 Corporate Profile 3 Financial Highlights and Calendar 6 Production and Market Information