Upload
hoangcong
View
220
Download
3
Embed Size (px)
Citation preview
ANN
UAL REPORT 2008
Elec & Eltek International Company Lim
ited
ANNUAL REPORT 2008
Towards Excellence and Beyond
www.eleceltek.com
2 Corporate Profi le
3 Financial Highlights and Calendar
6 Production and Market Information
7 Five Years’ Financial Summary
8 Corporate Information
9 Structure of the Group
11 Chairman’s Letter
14 Statement on Corporate Governance
26 Profi les of Board of Directors and Core Management
34 Report of the Directors
43 Independent Auditors’ Report
45 Consolidated Profi t and Loss Statement
46 Balance Sheets
48 Statements of Changes in Equity
50 Consolidated Cash Flow Statement
52 Notes to the Financial Statements
105 Statement of Directors
106 SGX Listing Manual Requirements
111 Notice of Annual General Meeting
Annual General Meeting – Proxy Form
Contents
Elec & Eltek International Company Limited
Annual Report 2008
02
Corporate Profi le
Elec & Eltek International Company Limited (“Elec & Eltek”), which was listed on the Mainboard of
Singapore Exchange in 1994, is principally engaged in the fabrication and distribution of double-
sided, multi-layer and high density interconnect (“HDI”) printed circuit boards (“PCB”).
The Group has an annual production capacity of over 56 million square feet, with 8 offices worldwide
and 16 plants in Asia – 1 in Hong Kong, 2 in Thailand and 13 in Mainland China. In addition to the
mass production of HDI, backplanes, high-end servers and up to 40-layer PCBs, Quick-Turn Around
(QTA) service with lead time as short as 3 days is also provided. The customer base encompasses
global market leaders in various electronics sectors with main focus on Computer & Computer
Peripherals, High-end Communication & Networking, Consumer Electronics and Automotive.
With over 36 years of experience in manufacturing PCB, Elec & Eltek nowadays has become the
largest PCB enterprise in China, together with other PCB manufacturing sites under the umbrella of
our parent company, Kingboard Chemical Holdings Limited. Thanks to the ongoing supports from
customers, the Group also ranked as one of the top ten independent PCB companies worldwide in
terms of sales revenue.
With particular positioning of its different production facilities, Elec & Eltek strives to provide
customers with one-stop solution. On the upstream, through vertical integration, the prepreg and
laminate supply from parent company has sharpened the competitive edge on quality, cost and
delivery.
In this era of keen competition and global economic uncertainty, Elec & Eltek is still running at the
forefront of the industry. Building on solid and strong business foundations, the Group is in a sound
and resilient position to weather the financial storm, and ready to grasp every new opportunity that
come along. The Group will continue to strive for superiority and further advancement in its products
and services and provide excellent values to all stakeholders.
Elec & Eltek’s mission is to be a leading PCB manufacturer that supplies high quality and high technology PCBs in mass volume at competitive prices with excellent services.
Elec & Eltek International Company Limited
Annual Report 2008
03
Financial Highlights and Calendar31 December 2008
2008 2007
US$ million US$ million
Profit and Loss Account
Turnover 518 572
Profit before taxation 45 37
Profit after taxation and minority interests 43 35
Per Share
Net earnings (US cents) – Basic 23.83 19.39
Net earnings (US cents) – Diluted 23.83 19.27
Net tangible assets (US$) 1.95 1.96
Balance Sheet
Shareholders’ funds 340 342
Total assets 650 656
Financial Ratios
Current assets: Current liabilities (ratio) 1.18 1.06
Inventory turnover period (month) 1.10 1.47
Gearing ratio 0.25 0.29
2008 2007
Financial Calendar
Financial year results announced on 26 February 2009 27 February 2008
Annual Report and Accounts issued on 31 March 2009 4 April 2008
Annual General Meeting held on 16 April 2009 21 April 2008
Registers of Shareholders closed on 5:00 pm 23 April 2009 5:00 pm 25 April 2008
Dividend paid/payable on
Interim 29 August 2008 13 September 2007
Final 8 May 2009 7 May 2008
Elec & Eltek International Company Limited
Annual Report 2008
04
Financial Highlights and Calendar31 December 2008
TURNOVER BY GEOGRAPHICAL LOCATIONS
Financial year 2008
Others (1%)
South East Asia
(20%)
Mainland
China
(including
Hong Kong)
(58%)
Other Asian
countries
(3%)
Europe
(13%)
North & Central
America
(5%)
Financial year 2007
Others (1%)
South East Asia
(20%)
Other Asian
countries
(4%)
Europe
(18%)
North & Central
America
(6%)
Mainland
China
(including
Hong Kong)
(51%)
TURNOVER BY LAYER COUNT
% TURNOVER CONTRIBUTION BY MANUFACTURING LOCATIONS
Financial year 2008
Microvia (3%)
8, 10 &
12-Layer
(16%)
14-Layer
& up
(14%)
Financial year 2007
Financial year 2008
Thailand
(12%)
Financial year 2007
2, 4 &
6-Layer
(67%)
Mainland
China
(including
Hong Kong)
(88%)
Microvia (4%)
8, 10 &
12-Layer
(16%)
14-Layer
& up
(10%)
2, 4 &
6-Layer
(70%)
Thailand
(14%)
Mainland
China
(including
Hong Kong)
(86%)
Elec & Eltek International Company Limited
Annual Report 2008
05
Financial Highlights and Calendar
US$ Million
700
600
500
400
300
200
100
0
US$ Million
60
50
40
30
20
10
0
TURNOVER
EARNINGS & DIVIDEND PAYOUT TREND
PROFIT TREND
COMPARE TOTAL ASSETS WITHSHAREHOLDERS’ FUNDS
US$ Million
700
600
500
400
300
200
100
0
US$ Million
60
50
40
30
20
10
02004 2005 2006 2007 2008
Financial Year
Profit after taxation & minority interests
(excluding exceptional items)
Profit after taxation but before minority interests
(excluding exceptional items)
Financial Year
Dividend payout
Profi t after taxation & minority interests
411.0464.6
515.8
572.3
517.9 47.249.8 48.0
51.0
57.859.6
34.8 34.9
42.0 41.9
27.6
46.3
31.9
47.2
42.1
56.5
36.734.8
36.7
42.6 509.3
253.8
553.9
274.4
613.7
315.2
656.5
341.8
649.7
339.9
Financial Year
2004 2005 2006 2007 2008
2004 2005 2006 2007 2008 2004 2005 2006 2007 2008
Financial Year
Total assets
Shareholders’ funds
Elec & Eltek International Company Limited
Annual Report 2008
06
Production and Market Information
PRODUCTION CAPACITY AS AT 31 DECEMBER 2008
PCBs with
Mass Lamination
Pathumthani1 Plant
PCB Raw
Materials
Shenzhen1 Plant
PCB Raw
Materials
Kaiping1 Plant
PCBs with
Mass Lamination
Nanjing1 Plant
PCBs with
Mass Lamination
Huangpu4 Plants
PCBs with
Mass Lamination
Kaiping6 Plants
PCBs with
Mass Lamination
Hong Kong1 Plant
PCB Raw
Materials
Rojana1 Plant
Thailand11.5 million sq.ft. (21%)
Mainland China and Hong Kong44.5 million sq.ft. (79%)
Current Total PCB Production Capacity56.0 million sq.ft. per annum
2009 WORLDWIDE PROJECTED PCB MARKET 2008 2009 2013
Projected World PCB Production USD Billion 48.1 40.2 57.7
Projected World Rigid PCB Production USD Billion 34.2 28.4 40.5
Regional Value Growth Forecast CAAGR (2008-2013) %
Projected PCB Production By Area M m2 269.9 244.0 315.3
Projected Rigid PCB Production By Area M m2 239.2 216.5 274.7
Regional Area Growth Forecast CAAGR (2008-2013) %
Americas $4.1 Bn
$3.7 Bn
7.3 M m2
0.9%
-2.1%Europe $2.8 Bn
$2.7 Bn
8.6 M m2
-0.4%
-0.7%$17.4 Bn
187.2 M m2
5.4%
3.9%
Asia (excl. Japan)$24.8 Bn Japan $8.5 Bn
$4.6 Bn
13.4 M m2
1.1%
-1.2%
Source: Prismark Partners LCC, The Printed Circuit Report,
Fourth Quarter, February 2009
CAAGR: Compounded Annual Average Growth Rate
Elec & Eltek International Company Limited
Annual Report 2008
07
Five Years’ Financial Summary
2008 2007 2006 2005 2004
US$’000 US$’000 US$’000 US$’000 US$’000
Consolidated Results
Turnover 517,931 572,274 515,845 464,550 410,993
Profit before taxation 45,137 37,163 65,108 56,566 53,324
Taxation (2,626 ) (2,272 ) (6,826 ) (6,327 ) (4,376 )
Profit after taxation 42,511 34,891 58,282 50,239 48,948
Minority interests 117 (94 ) (1,747 ) (3,000 ) (2,627 )
Profit for the year 42,628 34,797 56,535 47,239 46,321
Financial Positions
Property, plant and equipment 379,905 357,299 356,158 313,586 294,951
Non-current deposits 1,664 3,825 1,557 4,715 5,587
Intangible assets – – 2 7 20
Investment in an associate 8,388 8,169 6,110 5,060 –
Investment properties 15,756 8,733 – – –
Deferred tax assets 1,446 1,351 1,245 1,496 1,592
Current assets 242,503 277,120 248,656 229,074 207,120
Total assets 649,662 656,497 613,728 553,938 509,270
Non-current liabilities 94,534 52,178 94,795 65,129 55,219
Current liabilities 205,652 252,827 193,473 200,083 186,537
Total liabilities 300,186 305,005 288,268 265,212 241,756
Net assets 349,476 351,492 325,460 288,726 267,514
Represented by:
Shareholders’ funds 339,870 341,815 315,243 274,391 253,757
Minority interests 9,606 9,677 10,217 14,335 13,757
349,476 351,492 325,460 288,726 267,514
Elec & Eltek International Company Limited
Annual Report 2008
08
Corporate Information
BOARD OF DIRECTORS
Executive DirectorsMr. Chadwick Mok Cham Hung
Vice-Chairman
Mr. Li Muk Kam
Mr. Philip Chan Sai Kit
Mr. Clement Sun
Ms. Claudia Heng Nguan Leng
Mr. Li Chiu Cheuk
Mr. Chan Wai Leung
Non-executive DirectorsMr. Cheung Kwok Wing
Chairman
Mr. Chan Wing Kwan
Mr. Chang Wing Yiu
Independent Non-executive DirectorsDr. Philip Wong Yu Hong
Mr. Larry Lai Chong Tuck
Dr. Raymond Leung Hai Ming
AUDIT COMMITTEEMr. Larry Lai Chong Tuck (Chairman)
Dr. Philip Wong Yu Hong
Dr. Raymond Leung Hai Ming
NOMINATING COMMITTEEDr. Philip Wong Yu Hong (Chairman)
Mr. Larry Lai Chong Tuck
Dr. Raymond Leung Hai Ming
REMUNERATION COMMITTEEDr. Philip Wong Yu Hong (Chairman)
Mr. Larry Lai Chong Tuck
Dr. Raymond Leung Hai Ming
EMPLOYEES’ SHARE OPTION SCHEME COMMITTEEMr. Cheung Kwok Wing
Mr. Chan Wing Kwan
Mr. Chang Wing Yiu
SECRETARIESMs. Claudia Heng Nguan Leng
Ms. Marian Ho Wui Mee
REGISTERED OFFICE80 Raffles Place #33–00
UOB Plaza 1
Singapore 048624
Tel: 6225 2626
Fax: 6225 1838
PRINCIPAL OFFICE4 Leng Kee Road
#03-02 SiS Building
Singapore 159088
Tel: 6226 0488
Fax: 6220 2377
Website: www.eleceltek.com
SHARE REGISTRARBoardroom Corporate & Advisory
Services Pte. Ltd.
3 Church Street #08-01
Samsung Hub
Singapore 049483
STATUTORY AUDITORSDeloitte & Touche LLP
Public Accountants and
Certified Public Accountants
Partner: Mr. Kee Cheng Kong Michael
(appointed since the financial year ended
31 December 2007)
SOLICITORSRodyk & Davidson LLP
Chang See Hiang & Partners
PRINCIPAL BANKERSThe Hongkong and Shanghai
Banking Corporation Limited
Citibank, N.A.
DBS Bank Ltd
Bank of America, N.A.
Rabobank International
Standard Chartered Bank
Elec & Eltek International Company Limited
Annual Report 2008
09
Structure of the Group31 December 2008
The People’s Republic of China (“China”)/Hong Kong /Macao
Elec & Eltek International Company Limited Singapore
Investment Holdings
Overseas China
Kaiping Pacifi c Insulating Material
Company Limited
China (100%)
Elec & Eltek
(Thailand) Limited
Thailand (100%)
Kai Ping Elec & Eltek
Company Limited
(95%)
Nanjing Elec & Eltek
Electronic Co., Ltd.
China (100%)
Pacifi c Insulating Material
(Thailand) Limited
Thailand (100%)
Kaiping Elec & Eltek
No.3 Company Limited
(95%)
Elec & Eltek Company
(Macao Commercial Offshore) Limited
Macao (100%)
Elec & Eltek Technology
Research & Marketing Pte. Ltd.
Singapore (100%)
Kaiping Elec & Eltek
No.5 Company Limited
(95%)
Elec & Eltek Multilayer PCB Limited
Hong Kong (100%)
Elec & Eltek (Guangzhou)
Electronic Company Limited
(98%)
Guangzhou Elec & Eltek
Microvia Technology Limited
(98%)
Guangzhou Elec & Eltek
High Density Interconnect Technology
No. 1 Company Limited (98%)
Shenzhen Pacifi c
Insulating Material Co., Ltd.
(93.5%)
Major Subsidiaries Major Joint Ventures
Remarks: Percentages represent the Group’s effective shareholdings in the respective companies.
Elec & Eltek International Company Limited
Annual Report 2008
11
Chairman’s Letter
Dear Shareholders,
It gives me great pleasure to present you the 2008 Annual Report for the financial year ended
31 December 2008 (“CY2008”) of Elec & Eltek International Company Limited and its subsidiary
companies (the “Group”).
BUSINESS REVIEW
The financial performance of the Group for the financial year just ended reflects the difficult global
business environment as experienced by the Group in the last quarter of CY2008. The Group saw its
lowest bookings and recorded the lowest shipments from its customers in last two months of CY2008
following the spillover effect of the deepening financial crisis to the global economic activity.
As a result of the unprecedented rate of decline in the electronics demand worldwide, the Group’s
sales revenue for the fourth quarter of CY2008 declined by 41.5% to US$97.4 million over the
corresponding period of last financial year and by 31.0% compared to the September 2008 quarter.
Supported by the good performance of the past three financial quarters, the Group’s sales revenue
for CY2008 declined 9.5% to US$517.9 million from US$572.3 million in the financial year ended 31
December 2007 (“CY2007”). Shipment volume has declined by 16.2% on a year-on-year basis.
Sales revenue from the Automotive and Consumer Electronics sectors declined by 30.1% and
26.6% to US$40.9 million and US$73.1 million in CY2008 respectively as compared to CY2007.
Telecommunication sector also show a decline of 27.3%. However, sales revenue from the Computer
and Peripherals sector increased by 8.2% to US$248.7 million in CY2008 as the Group continued to
gain a strong foothold in the computer industry.
The proportion of sales from 2- to 6- layers printed circuit boards (“PCBs”) lowered to 66.6% in
CY2008 as compared to 69.9% a year ago whilst the proportion of 8-layer and above as well as
microvia PCBs, increased to 33.4% in CY2008 from 30.1% in CY2007. The Group’s fledging efforts in
penetrating the HDI product range help to stabilize the average selling price amidst the soften order
intake.
The lower revenue translated into lower gross profit of US$87.7 million in CY2008, a 4.8% decline
from CY2007. However, gross profit margins improved marginally from 16.1% in CY2007 to 16.9% in
CY2008. The improved margin was due mainly to changes in product mix and more effective control
of materials costs.
Share Passion Create Harmony
Elec & Eltek International Company Limited
Annual Report 2008
12
Chairman’s Letter
In spite of the decrease in sales revenue, and
lower gross profit, the Group’s net profit after tax
climbed by US$7.6 million or 21.8% to US$42.5
million in CY2008, exhibiting our continued focus
on quality, increased productivity and costs
control.
The Group’s operations generated strong net
operating cash flow of approximately US$132.8
million in CY2008, enabling us to finance with our
own internal resources, the capital expenditure
of US$77.6 million and dividend payments of
US$40.6 million in the financial year just ended.
Overall, cash and cash equivalent increased by
US$37.1 million in CY2008 to US$68.7 million
as at 31 December 2008 and net gearing ratio
has further improved to 25.4% in CY2008 from
29.1% in CY2007. Our strong cash and liquidity
position have put us in a better position to
counter the tight credit market. Other aspects
of balance sheet remained solid in tandem with
ongoing working capital management.
In the opinion of the Directors, no i tem,
transaction or event of material or unusual nature
has occurred during the period from 1 January
2009 to the date of this report that would
materially affect the results of the Company and/
or the Group for CY2008.
FUTURE PROSPECTS
Rising unemployment in the midst of the global
economic crisis is expected to affect demand
for consumer electronics products, therefore,
orders visibility for the next few quarters remain
uncertain. This predicates a cautious approach
by businesses across sectors, as customers shall
continue to deal with excessive inventory and
manage high business costs. Under the current
challenging market conditions, the Group expects
further consolidation of PCB manufacturing
facilities globally as weaker competitors may exit
business altogether.
Elec & Eltek International Company Limited
Annual Report 2008
13
Chairman’s Letter
In the recent weeks, we saw some orders pickup with shorter lead time requirements. We remain
cautious that this uptrend may be temporary with customers’ excessively downward inventory
adjustments in the previous quarter. Nevertheless, the Group will deploy more resources in sales and
marketing in order to increase our market share. Other than the aforesaid, preserving our cash and
liquidity position remain critical in preparing for early demand recovery. The management is confident
that our focus on these areas will gradually offset adverse impact of uncertainties in the world
economy.
As HDI technologies are finding their way into a wide full range of data communication, computer
and industrial equipment, the Group’s new HDI facilities in Kaiping is well equipped to serve existing
and new customers, particularly in the high value-added sectors. This new plant is likely to be fully
ramped up in next 12 months. The Group is ready to further invest in manufacturing capacity in HDI
PCBs as there are increasing applications for these products in the years ahead.
The Group will continue to review and fortify our extensive business, and further sharpen our
competitive edge when the opportunities arise. Barring unforeseen circumstances, the Group is
cautiously optimistic about the financial performance for the March 2009 quarter.
The Board of Directors is recommending a one-tier tax exempt final dividend of 10.5 US cents per
share, comprising a one-tier tax exempt final dividend of 5.0 US cents per share and a one-tier tax
exempt special dividend of 5.5 US cents per share which shall be subject to shareholders’ approval
at the forthcoming annual general meeting of the Company. This together with the one-tier tax exempt
interim dividend of 10.0 US cents per share represents 86.0% of the net earnings for CY2008.
At the close of the challenging year, we want to acknowledge the resolve and commitment of our
employees around the world who came through this period of change with their hardwork and
dedication.
Not least of all, we thank our many loyal customers, suppliers, shareholders and business associates
for their continued support over the years.
On behalf of the Board
Cheung Kwok WingChairman
26 February 2009
Elec & Eltek International Company Limited
Annual Report 200814
Statement on Corporate Governance
INTRODUCTION
The Board of Directors (the “Board”) and management of Elec & Eltek International Company Limited
(the “Company”) continues to be committed to complying with the Code of Corporate Governance
2005 (the “2005 Code”) issued by the Corporate Governance Committee so as to promote greater
corporate transparency and protection of shareholders’ interests.
This Statement describes the corporate governance practices of the Company during the financial
year ended 31 December 2008 with reference to the 2005 Code. The Board is pleased to confirm
that the Company has generally adhered to the principles and guidelines as set out in the 2005
Code, save for Guideline 2.1 (There should be strong and independent element on the Board, with
independent directors making up at least one-third of the Board), the reason for which deviation is
explained below.
BOARD MATTERS
Board’s Conduct of Its Affairs
Principle 1: Effective board to lead and control the company
The Board oversees the business of the Company and every Director is expected to exercise objective
judgment on the Company’s affairs and to always consider the interests of the Company and its
subsidiary companies (the “Group”). The Board reviews and discusses reports by management on
the performance, plans and prospects of the Group.
In addition to general oversight of management, the Board also performs a number of specific
functions, including:
(i) reviewing, approving and monitoring fundamental financial and business strategies and major
corporate actions;
(ii) approving major acquisitions or disposals, corporate or financial restructuring, issuance of
shares and other equity or debt instruments, payment of dividends and other distribution to
shareholders;
(iii) assessing risks facing the Group and reviewing and implementing appropriate measures to
manage such risks;
(iv) selecting and evaluating the performance and compensation of key management executives;
(v) approving nominations to the Board;
(vi) reviewing and endorsing the recommended framework of remuneration for the Board and key
management executives by the Remuneration Committee; and
(vii) assuming overall responsibility for corporate governance.
Elec & Eltek International Company Limited
Annual Report 200815Statement on Corporate Governance
To give effect to the discharge of its responsibilities, the Board has established four Board
Committees, namely, the Nominating Committee, the Remuneration Committee, the Employees’
Share Option Scheme Committee and the Audit Committee. These committees have written mandates
and operating procedures which are reviewed periodically. The Chairman of the respective Board
Committees will report to the Board the outcome of the Board Committee meetings.
The Board conducts scheduled meetings on a quarterly basis to coincide with the announcement of
the Group’s quarterly and year end results and as warranted by particular circumstances. The Articles
of Association of the Company (the “Articles”) provides for directors to convene meetings by means of
telephone conference or other methods of simultaneous communication by electronic or telegraphic
means. The number of Board meetings and Board Committee meetings held from the date of last
annual report to the date of this annual report, as well as the attendance of each Board member at
these meetings are disclosed below:
Board Committee
Audit Nominating Remuneration Board Committee Committee Committee
Total number of meetings held 4 4 1 1
Cheung Kwok Wing 4 – – –
Chadwick Mok Cham Hung 4 – – –
Li Muk Kam 4 – – –
Philip Chan Sai Kit 4 – – –
Clement Sun 4 – – –
Claudia Heng Nguan Leng 4 – – –
Li Chiu Cheuk [1] 4 – – –
Chan Wai Leung [1] 4 – – –
Chan Wing Kwan 4 – – –
Chang Wing Yiu 4 – – –
Philip Wong Yu Hong 3 3 – –
Larry Lai Chong Tuck 4 4 1 1
Raymond Leung Hai Ming [1] 4 4 1 1
[1] Appointed on 1 January 2008
The Board adopts an internal framework whereby a formal letter is sent to the newly appointed
director explaining their statutory duties and responsibilities as director. All newly appointed
directors shall receive an orientation kit comprising, but not limited to, the Articles, directors’ code of
professional conduct, directors’ duties on notification, internal code for securities transactions, code
of corporate governance and other relevant materials.
Elec & Eltek International Company Limited
Annual Report 200816
Statement on Corporate Governance
Board Composition and Guidance
Principle 2: Strong and independent element on the board
Presently, the Board comprises thirteen Directors as follows:
(i) seven Executive Directors;
(ii) three Non-executive Directors; and
(iii) three Independent Non-executive Directors.
The Board considers that the present Board size and the number of Board Committees facilitate
effective decision making and are appropriate for the nature and scope of the Group’s operation.
The Board will continuously examine its size, and Board composition with a view to ensure effective
decision-making be made from time to time.
The Board examines the independence of its Directors based on the criterion of independence
defined in the 2005 Code. An independent Director is one who has no relationship with the Company,
its related companies or its officers that could interfere, or be reasonably perceived to interfere with
the exercise of the Director’s independent business judgment with a view to the best interests of the
Company.
Chairman and Chief Executive Officer
Principle 3: Chairman and Chief Executive Officer to be separate persons to ensure appropriate balance of power, increased accountability and greater capacity of the board for independent decision making
The Chairman and the Vice-Chairman bear responsibility for the workings of the Board and ensure
the integrity and effectiveness of the governance process of the Board. Whilst the Chairman sets
the strategic direction for the Board, the Vice-Chairman is responsible for ensuring the execution
of strategic goals and has since assumed the role and responsibilities of the Chief Executive Officer
(“CEO”) with the departure of the former CEO in February 2008.
Elec & Eltek International Company Limited
Annual Report 200817Statement on Corporate Governance
Board Membership
Principle 4: Formal and transparent process for the appointment of new directors to the board
The Board endeavours to ensure that there is an appropriate mix of core competencies and collective
expertise to provide the necessary knowledge and objective judgment to meet its responsibilities.
The Board benefits from the depth and breath of expertise each Director possesses, collectively
providing core competencies in finance, industry, business and management.
Nominating Committee
The current Nominating Committee members comprise Dr. Philip Wong Yu Hong (Chairman), Mr.
Larry Lai Chong Tuck and Dr. Raymond Leung Hai Ming, all of whom are Independent Non-executive
Directors.
The Nominating Committee is responsible for the following functions:
(i) evaluate the independence of the Directors on an annual basis and was satisfied that
notwithstanding that less than one-third of the current Board is made up of independent
Directors, the Board is able to exercise any judgment on corporate affairs objectively and
independently;
(ii) review and recommend to the Board, the retirement and re-election of Directors in accordance
with the Articles and the re-appointment of Directors in accordance with the Companies Act,
Chapter 50 of Singapore Statutes (the “Act”), at each annual general meeting;
(iii) evaluate the Board’s performance as a whole as well as contribution of each Director to the
effectiveness of the Board; and
(iv) where a Director has multiple board representations, to assess if such Director is able to and
has been adequately carrying out his duties as a Director of the Company.
Where it is considered that the Board would benefit from the services of a new director with particular
skills, the Nominating Committee would, in consultation with the Board, determines the selection
criteria and identifies candidates with the appropriate expertise for the position. The Nominating
Committee then nominates the most suitable candidates to the Board.
Elec & Eltek International Company Limited
Annual Report 200818
Statement on Corporate Governance
In accordance with the 2005 Code and the Articles, each Director is required to retire at least once
every three years by rotation and all newly appointed Directors are required to retire at next annual
general meeting. The retiring Directors are eligible to offer themselves for re-election. Directors of or
over 70 years of age are required to be re-appointed every year at the annual general meeting under
Section 153(6) of the Act before they can continue to act as a Director. The Nominating Committee
(save that a member shall abstain from recommendation in respect of their own re-appointment)
has recommended to the Board, the re-appointment of four Directors, Mr. Cheung Kwok Wing, Mr.
Chan Wing Kwan, Mr. Chadwick Mok Cham Hung and Ms. Claudia Heng Nguan Leng, retiring by
rotation pursuant to the Articles and the re-appointment of Dr. Philip Wong Yu Hong pursuant to
Section 153(6) of the Act, at the forthcoming Annual General Meeting. The Board has accepted the
Nominating Committee’s recommendation, and all the abovementioned Directors have accepted the
Company’s invitation for re-election, will be offering themselves for re-election at the forthcoming
Annual General Meeting.
The profiles of the Directors and their shareholding in the Company and its subsidiaries are set forth
on pages 26 to 30 and 35 to 37 respectively of this Annual Report. The date of initial appointment
and last re-election of each director, together with their directorships in listed companies are set out
below:
Date of initial Date of last Directorships in Name of director Appointment appointment re-election listed companies
Cheung Kwok Wing Non-executive/ 13 December 2004 13 October 2006 KBCHL
non-independent KBCFHL
Chan Wing Kwan Non-executive/ 13 December 2004 12 April 2007 KBCHL
non-independent KBCFHL
Chang Wing Yiu Non-executive/ 13 December 2004 12 April 2007 KBCHL
non-independent
Chadwick Mok Executive/ 13 December 2004 13 October 2006 KBCHL
Cham Hung non-independent
Li Muk Kam Executive/ 18 January 2005 12 April 2007 Nil
non-independent
Philip Chan Sai Kit Executive/ 18 January 2005 21 April 2008 Nil
non-independent
Clement Sun Executive/ 15 January 2007 12 April 2007 Nil
non-independent
Claudia Heng Executive/ 17 July 1995 13 October 2006 Nil
Nguan Leng non-independent
Li Chiu Cheuk Executive/ 1 January 2008 21 April 2008 Nil
non-independent
Chan Wai Leung Executive/ 1 January 2008 21 April 2008 Nil
non-independent
Elec & Eltek International Company Limited
Annual Report 200819Statement on Corporate Governance
Date of initial Date of last Directorships in Name of director Appointment appointment re-election listed companies
Philip Wong Yu Hong Non-executive/ 26 February 2005 21 April 2008 Hop Hing (Holdings) Ltd.
independent Asia Financial
Holdings Ltd.
Qin Jia Yuan Media
Services Co. Ltd.
Larry Lai Chong Tuck Non-executive/ 26 February 2005 21 April 2008 Nil
independent
Raymond Leung Non-executive/ 1 January 2008 21 April 2008 China State Construction
Hai Ming independent International
Holdings Ltd.
Continental Holdings Ltd.
KBCHL – Kingboard Chemical Holdings Limited
KBCFHL – Kingboard Copper Foil Holdings Limited
Board Performance
Principle 5: Formal assessment of the effectiveness of the board as a whole and the contribution by each director to the effectiveness of the board
The Board uses its best efforts to ensure that each Director appointed to the Board possesses the
background and expertise in technology, business, finance and management skills critical to the
Group’s business to enable the Board to make sound and well-considered decisions.
The Nominating Committee has identified a set of performance criteria that is linked to long-
term shareholders’ value, to be used for evaluating the effectiveness of the Board as well as the
performance of each Director. The set of performance criteria includes qualitative and quantitative
factors but is not limited to the performance of principal functions and fiduciary duties, level of
participation at meetings, guidance provided to the management and attendance records. Other
performance criteria that may be used include return on assets, return on equity, return on
investment and the comparison of the Company’s share price performance against appropriate
indices of the Singapore Exchange Securities Trading Limited (“SGX-ST”).
Elec & Eltek International Company Limited
Annual Report 200820
Statement on Corporate Governance
Access to Information
Principle 6: Board members to have complete, adequate and timely information
The management provides the Board and its various Board Committees with adequate and timely
information and reports prior to their respective meetings and on an on-going basis.
Directors have separate and independent access to the Company’s senior management and the
company secretaries for additional information. In addition, should Directors, whether as a group or
individually, need independent professional advice relating to the Company’s affairs, the Management
will, upon direction by the Board, appoint a professional advisor selected by the group or the
individual Director, to render the advice. The cost of such professional advice will be borne by the
Company.
At least one of the company secretaries will attend Board meetings, particularly the meetings for
reviewing the draft announcements of the Group’s quarterly and full year results, and is responsible
for ensuring that Board procedures are followed. Together with the management, the company
secretaries are responsible for ensuring compliance with the Act and all other SGX-ST rules and
regulations applicable to the Company.
The Articles provide that the appointment and removal of the company secretaries are subject to the
approval of the Board.
REMUNERATION MATTERS
Principle 7: Formal and transparent procedure for developing policy on executive remuneration and for fixing remuneration packages of individual directors
Principle 8: Remuneration of directors should be adequate but not excessive
Principle 9: Disclosure on remuneration policy, level and mix of remuneration, and procedure for setting remuneration
Remuneration Committee
The current Remuneration Committee members comprise Dr. Philip Wong Yu Hong (Chairman), Mr.
Larry Lai Chong Tuck and Dr. Raymond Leung Hai Ming, all of whom are Independent Non-executive
Directors.
Elec & Eltek International Company Limited
Annual Report 200821Statement on Corporate Governance
The Remuneration Committee will review and recommend remuneration policies and packages
for key management executives. The review will cover all aspects of remuneration, including but
not limited to salaries, allowances, bonuses, share options and benefits-in-kind. In conducting its
review, the Remuneration Committee will give due regard to the financial and commercial health and
business needs of the Group. Where appropriate, external consultants will be appointed to assist the
Remuneration Committee in the review. The Remuneration Committee’s recommendations will be
submitted for endorsement by the entire Board.
The Remuneration Committee has a set of terms of reference defining its scope of authority, and is
responsible for the following functions:
(i) ensure the Remuneration Committee’s recommendations have been made in consultation with
the Chairman of the Board and submitted for endorsement by the entire Board; and
(ii) liaise with the Board in relation to the preparation of executive compensation for inclusion in
the Company’s Annual Report as required.
The Group’s remuneration policy is to provide compensation packages at rates which reward
successful performance and the enhancement of shareholder value and to attract, retain and
motivate the Directors and employees. Details of remuneration and benefits of Directors and top five
key management executives are disclosed in the section “SGX Listing Manual Requirements” on
pages 106 to 107.
Employees’ Share Option Scheme Committee
The Employees’ Share Option Scheme Committee comprises Mr. Cheung Kwok Wing, Mr. Chan Wing
Kwan and Mr. Chang Wing Yiu, all of whom are Non-executive Directors.
The Employees’ Share Option Scheme Committee is authorised to administer the 2002 Elec & Eltek
Employees’ Share Option Scheme (the “2002 Scheme”), including but not limited to, offer and grant
of share options to eligible participants in accordance to the rules of the 2002 Scheme, to modify
and/or amend the 2002 Scheme from time to time; and to take such steps, to complete and do all
such acts and things and to enter into such transactions, arrangements and agreements as may be
necessary or expedient to give full effect to the 2002 Scheme.
Information on the 2002 Scheme are disclosed on pages 38 to 40 in the Report of the Directors and
pages 97 to 99 in Note 26 to the financial statements.
The 2002 Scheme had since been terminated in November 2007 following the expiration of the
maximum period of 5 years commencing on the adoption date. During the financial year, a new share
option scheme, namely, the 2008 Elec & Eltek Employees’ Share Option Scheme was adopted by the
Company on 9 May 2008.
Elec & Eltek International Company Limited
Annual Report 200822
Statement on Corporate Governance
ACCOUNTABILITY AND AUDIT
Accountability
Principle 10: The Board should present a balanced and understandable assessment of the Company’s performance, position and prospects
The Board is responsible for providing a balanced and understandable assessment of the Company’s
performance, position and prospects, including interim and other price sensitive public reports
and reports to regulators (if required). In presenting the quarterly and annual financial statements
to shareholders, it is the aim of the Board to provide the shareholders with a balanced and
comprehensible assessment of the Group’s position and prospects. Management will provide the
Board with appropriately detailed management accounts of the Group’s performance, position and
prospects.
Audit Committee
Principle 11: Establishment of Audit Committee with written terms of reference
The current Audit Committee members comprise Mr. Larry Lai Chong Tuck (Chairman), Dr. Philip
Wong Yu Hong and Dr. Raymond Leung Hai Ming, all of whom are Independent Non-executive
Directors.
The Audit Committee has written terms of reference approved by the Board. During the financial year
and up to the date of this report, the Audit Committee met with the management, internal auditor and
statutory auditors of the Company and performed, inter alia, the following functions:
(i) reviewed the annual audit plan of the Company’s statutory auditors and the results of their
examination of the financial statements of the Company and the consolidated financial
statements of the Group;
(ii) recommended to the Board, subject to shareholders’ approval, the re-appointment of the
Company’s statutory auditors;
(iii) reviewed the internal audit plans, the results of internal audits and evaluation of the Group’s
systems of internal accounting controls, and the effectiveness of actions or policies taken by
management on the recommendations and observation;
(iv) reviewed the Group’s interested person transactions;
(v) reviewed the quarterly and annual financial statements as well as the content of the results
announcements before their submission to the Board; and
(vi) reviewed the co-operation and assistance given by the management to the Group’s statutory
auditors.
Elec & Eltek International Company Limited
Annual Report 200823Statement on Corporate Governance
In addition, the Audit Committee reviewed all non-audit services provided by the statutory auditors
during the financial year and is of the opinion that the provision of such services will not prejudice the
independence and objectivity of the statutory auditors.
The Audit Committee has full access to and co-operation from the Company’s management and
the statutory and internal auditors and has full discretion to invite any Director or executive officer
to attend its meeting. The statutory and internal auditors have unrestricted access to the Audit
Committee.
The Company has adopted a whistleblower policy which allows the staff of the Group to raise
concerns, in confidence, about suspected improper conduct or incident in matters of financial
reporting, internal accounting controls, auditing and other matters or potential violations of the laws;
and for the independent investigation of such matters and appropriate follow-up action.
Internal Controls
Principle 12: Sound system of internal controls
The Group’s system of internal controls are designed to provide reasonable assurance that assets
are safeguarded, that proper accounting records are maintained, and that financial information used
within the business and for publication are reliable.
The statutory auditors, in the course of conducting their annual audit procedures on the statutory
financial statements, also reviewed the Group’s significant internal financial controls to the extent of
their scope as laid out in their audit plan. Any material non-compliance and internal financial control
weaknesses noted by the auditors and their recommendations are reported to the Audit Committee.
The management would then take action to rectify the weaknesses highlighted.
The Audit Committee, in the course of their review of the reports presented by the internal auditors
and statutory auditors, also reviewed the effectiveness of the Group’s system of internal controls and
is satisfied that there are adequate internal controls to meet the needs of the Group in its current
business environment.
Internal Audit
Principle 13: Independent internal audit function
The Group has an adequately resourced internal audit function to conduct regular review of the
systems of internal controls and to report independently the findings and recommendations of any
internal control weakness to the Audit Committee and to senior management for remedial action.
The internal audit function would report to the Audit Committee and assist the Board in monitoring,
and managing business risks and internal controls. The Audit Committee reviews and approves
the internal audit plan. Reports from the internal auditors containing the summary of findings and
recommendations are tabled and discussed at meetings of the Audit Committee quarterly.
Elec & Eltek International Company Limited
Annual Report 200824
Statement on Corporate Governance
COMMUNICATION WITH SHAREHOLDERS
Principle 14: Regular, effective and fair communication with shareholders
Principle 15: Greater shareholder participation at Annual General Meeting
The Board is mindful of its obligation to provide timely and fair disclosure of material information to
its shareholders. Financial results, annual reports, circulars and other announcements are released
through SGXNET, and annual reports and circulars are sent to all shareholders by post.
Price sensitive information is first publicly released, either before the Company meets with any group
of investors or investment analysts or simultaneously with such meetings, if necessary.
All materials on the Company’s quarterly financial results and other announcements are available on
the Company’s website.
Notices of shareholders’ meetings are advertised in the newspapers. Shareholders are encouraged
to communicate their views and ask questions regarding the Group and resolutions being proposed
during shareholders’ meetings.
At shareholders’ meetings, each distinct issue is proposed as a separate resolution.
Under the Articles, a shareholder of the Company is allowed to appoint one or two proxies to attend
and vote at all shareholders’ meetings on his/her behalf. The Articles currently do not allow a
shareholder to vote in absentia such as voting via mail, e-mail or facsimile due to security, integrity
and other pertinent issues.
The statutory auditors and the members of the Audit Committee, Nominating Committee and/or
Remuneration Committee are present at shareholders’ meetings to assist the Directors in addressing
any queries by shareholders.
INTERESTED PERSON TRANSACTIONS
The Company has adopted an internal policy in respect of any transaction with interested persons and
has set out the procedures for review and approval of the Company’s interested person transactions.
For the current financial year, the amount of interested person transactions to be disclosed pursuant
to Rule 920(1)(a)(ii) of the Listing Manual of SGX-ST are disclosed in the section “SGX Listing Manual
Requirements” on pages 107 to 108.
Elec & Eltek International Company Limited
Annual Report 200825Statement on Corporate Governance
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
26 February 2009
Elec & Eltek International Company Limited
Annual Report 2008
26
Profi les of Board of Directors and Core Management
MR. CHADWICK MOK CHAM HUNG
Mr. Chadwick Mok Cham Hung has been the Executive Director since 13 December 2004 and
became the Vice-Chairman of the Company on 18 January 2005. He is responsible for developing
overall business directions and management strategies of the Elec & Eltek Group. He is currently
assuming the role and responsibilities of the Chief Executive Officer.
Mr. Mok holds a MA in Electrical and Information Engineering from the University of Cambridge and
a MBA Degree with distinction from Imperial College, the University of London and has over 11 years’
experience in the financial services industry. Mr. Mok is an associate member of the Institute of
Chartered Accountants in England & Wales and a fellow member of Hong Kong Institute of Certified
Public Accountants.
Mr. Mok is the executive director of Kingboard Chemical Holdings Limited.
MR. LI MUK KAM
Mr. Li Muk Kam joined the Elec & Eltek Group in 1982 and served in various senior positions in
different operations such as manufacturing, marketing & sales and corporate strategy, finance &
administration. He was appointed the Executive Director of the Company on 18 January 2005 and
is responsible for all activities in relation to the operations of the Kaiping Site and coordination with
Kingboard PCB Group.
Mr. Li holds a Higher Certificate in Mechanical Engineering from The Hong Kong Polytechnic
University and a Master Degree in Manufacturing Systems Engineering from the University of
Warwick.
MR. PHILIP CHAN SAI KIT
Mr. Philip Chan Sai Kit joined the Elec & Eltek Group in 1989 and served as the regional sales head
firstly responsible for the Europe and then America region. He was appointed the Executive Director
of the Company on 18 January 2005 and is responsible for all activities in relation to business
development, supply chain management and market research functions of the Elec & Eltek Group.
Mr. Chan holds a Bachelor Degree in Civil Engineering from Coventry (Lanchester) Polytechnic in the
UK and a Master Degree in Business Administration from the Bulacan State University, Republic of
the Philippines.
Elec & Eltek International Company Limited
Annual Report 2008
27
Profiles of Board of Directors and Core Management
MR. CLEMENT SUN
Mr. Clement Sun joined the Elec & Eltek Group in 1983 and served in various senior positions in
the manufacturing operations in Hong Kong and Mainland China. He was appointed the Executive
Director of the Company on 15 January 2007 and is responsible for all activities in relation to the
strategic business unit of the Guangzhou, Hong Kong, Shenzhen and Thailand manufacturing
facilities of the Elec & Eltek Group.
Mr. Sun holds a Diploma in Production and Industrial Engineering from The Hong Kong Polytechnic
University and a Master Degree in Business Administration from the Bulacan State University,
Republic of the Philippines.
MS. CLAUDIA HENG NGUAN LENG
Ms. Claudia Heng Nguan Leng joined the Elec & Eltek Group in 1994 and has been the Executive
Director since July 1995. In her current capacity as Vice President – Group Finance, and Company
Secretary of the Company, she has the overall responsibility for the corporate financial affairs of the
Group, including treasury, tax planning and compliance functions. She also oversees the Group’s
information systems, human resource matters, legal and secretariat and investor relations functions.
Ms. Heng holds a Master in Business Administration from Manchester Business School and a Master
in Applied Finance from Macquarie University. She is a Fellow Certified Public Accountant of the
Institute of Certified Public Accountants in Singapore and a Fellow Certified Public Accountant of CPA
Australia. She is also a member of the Singapore Institute of Directors.
MR. LI CHIU CHEUK
Mr. Li Chiu Cheuk is appointed the Executive Director of the Company with effect from 1 January
2008. He is responsible for all activities in relation to the strategic business unit of the Guangzhou
manufacturing facilities of the Elec & Eltek Group.
Mr. Li joined the Elec & Eltek Group in 1986 and served in various senior positions in the
manufacturing operations in Hong Kong and Mainland China. Apart from his appointment as
Executive Director of the Company, he is also the General Manager – Guangzhou plants, responsible
for the overall operational management of the Guangzhou strategic business unit.
Mr. Li holds a Higher Diploma in Production & Industrial Engineering from The Hong Kong
Polytechnic University and a Master Degree in Business Administration from the Bulacan State
University, Republic of the Philippines.
Elec & Eltek International Company Limited
Annual Report 2008
28
Profi les of Board of Directors and Core Management
MR. CHAN WAI LEUNG
Mr. Chan Wai Leung is appointed the Executive Director of the Company with effect from 1 January
2008. Mr. Chan is responsible for the overall management of the Elec & Eltek Group’s operation in
Kaiping site. Mr. Chan is the son of Mr. Chan Wing Kwan, Non-executive Director of the Company.
Prior to joining the Elec & Eltek Group, Mr. Chan has over 5 years’ working experience in group
procurement and corporate development.
Mr. Chan graduated in 1998 with a Bachelor of Applied Science in Engineering Science from the
University of Toronto and obtained a Master of Philosophy in Electronic Engineering from The Chinese
University of Hong Kong in 2004. After completing his undergraduate degree, Mr. Chan involved
himself in advanced electronic engineering design in Canada.
MR. CHEUNG KWOK WING
Mr. Cheung Kwok Wing has been the Non-executive Director since 13 December 2004 and was
appointed the Chairman of the Company on 3 February 2005. He is a member of the Employees’
Share Option Scheme Committee of the Company. Mr. Cheung is the brother-in-law of Mr. Chang
Wing Yiu, Non-executive Director of the Company.
Mr. Cheung won the Young Industrialist Award of Hong Kong 1993, which was organized by the
Federation of Hong Kong Industries and was described as “far-sighted, enterprising, and having
insight in the business”. In 2006, he won the Hong Kong Business Owner-Operator Award 2006,
which was organised by DHL and South China Morning Post. Mr. Cheung had over 13 years’
experience in the sales and distribution of electronic components including laminates prior to the
establishment of the Kingboard Group.
Mr. Cheung is the chairman, executive director and co-founder of Kingboard Chemical Holdings
Limited.
MR. CHAN WING KWAN
Mr. Chan Wing Kwan has been the Non-executive Director of the Company since 13 December 2004.
He is a member of the Employees’ Share Option Scheme Committee of the Company. Mr. Chan is the
father of Mr. Chan Wai Leung, Executive Director of the Company.
Mr. Chan acquired a Degree of Doctor of Business Science from Pacific Western University, L.A..
Prior to the setting up of the Kingboard Group, Mr. Chan had over 22 years’ experience in the sales
and distribution of electronic components, industrial chemicals and printed circuit boards.
Mr. Chan is the managing director, executive director and co-founder of Kingboard Chemical Holdings
Limited.
Elec & Eltek International Company Limited
Annual Report 2008
29
Profiles of Board of Directors and Core Management
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.
Elec & Eltek International Company Limited
Annual Report 2008
30
Profi les of Board of Directors and Core Management
MR. LARRY LAI CHONG TUCK (Continued)
Mr. Lai presently manages his own business consulting firm, Asteri Consulting Private Limited.
Prior to this, he was a senior career expatriate banker with over 20 years of diverse international
banking expertise that spans investment banking, corporate banking, structured commodity finance,
international trade finance and operations. Mr. Lai was an active member of the business community.
He served in the EXCO of the Dutch Business Group in Vietnam and the Shanghai Singapore
Business Group in China during his career posting and today is still active in local community work.
DR. RAYMOND LEUNG HAI MING
Dr. Raymond Leung Hai Ming is appointed the Independent Non-executive Director of the Company
on 1 January 2008. He is also a member of the Audit Committee, Nominating Committee and the
Remuneration Committee of the Company.
Dr. Leung is a qualified Fellow Engineer of the Institute of Civil Engineers, the American Society of
Civil Engineers (“ASCE(HK)”), The Hong Kong Institute of Engineers, Society of Builders, the Hong
Kong Institute of Construction Managers (“HKICM”), Senior Member of the Institute of Electricity
and Electronics Engineers, with a Doctor of Philosophy in Information Engineering from the Chinese
University of Hong Kong and a Master Degree in Construction Management from the University of
Toronto, Canada. He is a member to the Appeal Tribunal Panel of HKSAR Building Department, the
Past President of HKICM, Vice Governor of HKAARECT and Founding President of ASCE(HK).
Dr. Leung is presently the Chief Executive Officer of C & L Holdings Ltd., whose business activities
comprise of Project Management, Direct Investment, Financial Services and China Business
Consultancy.
VICE PRESIDENT – BUSINESS DEVELOPMENT, AMERICA
Mr. Aaron Cheng Bo Tak has more than 23 years of experience in the PCB industry. He joined
the Elec & Eltek Group in April 2008 and in his current capacity as Vice President – Business
Development, America, he is responsible for the market research, liaison activities and business
development in the Amercian region.
Mr. Cheng holds a Master Degree in Business Administration from Preston University, U.S.A..
Elec & Eltek International Company Limited
Annual Report 2008
31
Profiles of Board of Directors and Core Management
VICE PRESIDENT – BUSINESS DEVELOPMENT, EUROPE
Mr. Simon Michael Geeson joined the Elec & Eltek Group since 1992. He had 8 years of experience
in the electronics industry working primarily in purchasing and material control before joining the
Elec & Eltek Group.
In his current capacity as Vice President – Business Development, Europe, he is responsible for the
market research, liaison activities and business development in the European region.
VICE PRESIDENT – BUSINESS DEVELOPMENT, NORTH ASIA
Mr. Jason Ho King Man joined the Elec & Eltek Group in 1995. Over the years Mr. Ho has worked in
the Sales and Marketing Department with contribution in various regions. Including his employment
with the Elec & Eltek Group, Mr. Ho has over 20 years of experience in PCB industry. He is currently
the Vice President – Business Development, North Asia, responsible for the market research, liaison
activities and business development in Japan and Korea.
Mr. Ho holds a Higher Diploma in Production and Industrial Engineering from The Hong Kong
Polytechnic University and a Master Degree in Engineering Business Management from the University
of Warwick.
VICE PRESIDENT – BUSINESS DEVELOPMENT, SOUTH ASIA AND PACIFIC
Ms. Sherran Chan King Chiu joined the Elec & Eltek Group since 1995 and has over 13 years of
experience in the electronics industry working primarily in marketing. In her current capacity as
Vice President – Business Development, South Asia and Pacific, she is responsible for the market
research, liaison activities and business development in the Southeast Asia markets.
Ms. Chan holds a Bachelor of Science Degree in Chemical Engineering from National Taiwan
University.
VICE PRESIDENT – QUALITY ASSURANCE
Mr. Oscar Cheung Yiu Wai has more than 25 years of relevant experience in the manufacturing
industry, 16 years of which was with PCB industry. He joined the Elec & Eltek Group in April 2007 as
Vice President – Quality Assurance, responsible for the development of quality system, improvement
of quality performance and formulation of quality assurance directions for the Group.
Mr. Cheung holds a Master of Science Degree in Manufacturing Systems Engineering from the
University of Warwick.
Elec & Eltek International Company Limited
Annual Report 2008
32
Profi les of Board of Directors and Core Management
CHIEF INTERNAL AUDIT OFFICER
Ms. Anna Cheung Po King first joined the Elec & Eltek Group in January 2003 as the Chief Financial
Officer. As part of strengthening the Group’s enterprise-wide risk management process, Ms. Cheung
was appointed as the Chief Internal Audit Officer from January 2005 and is fully responsible for
internal audit function of the Group.
Prior to joining the Elec & Eltek Group, Ms. Cheung had over 11 years of experience in financial
planning and general management in manufacturing and trading enterprises.
Ms. Cheung holds a Bachelor of Science Degree from the University of East Anglia in the U.K.. She
is an associate member with the Institute of Chartered Accountants of England & Wales and a fellow
member of Hong Kong Institute of Certified Public Accountants.
GENERAL MANAGER – THAILAND PLANT
Ms. Sumarn Jermsawasdipong joined the Elec & Eltek Group since 1990 as Accounting Manager.
Prior to joining the Elec & Eltek Group, she had over 9 years of experiences in Finance, Auditing and
Management in the electronics industry. Ms. Sumarn now serves as the General Manager – Thailand
plant, responsible for the overall operational management of the PCB plant in Thailand.
Ms. Sumarn holds a Bachelor Degree (1st Class Honour) in Accounting from Chulalongkorn
University and a Master Degree in Business Administration from Thammasart University. She is a
Certified Public Accountant of The Institute of Certified Accountants and Auditors of Thailand.
GENERAL MANAGER – KAIPING SOUTH REGION
Mr. Paul Barlow has extensive experience in the high-end PCB industry holding various senior
executive positions with key European PCB manufacturers located in the U.K. and Shanghai. He
joined the Elec & Eltek Group in August 2007 and currently he is the General Manager of Kaiping
South Region responsible for development projects and overseas market promotion projects.
Mr. Barlow graduated from the University of Lancaster, U.K. with a Degree of Doctor of Philosophy in
Physics.
Elec & Eltek International Company Limited
Annual Report 2008
33
Profiles of Board of Directors and Core Management
GENERAL MANAGER – NANJING PLANT
Mr. Chan Chi Hong joined the Elec & Eltek Group since 1983. He was the Manager – Products
Engineering since 2002 before taking up plant management function in 2006. In his current capacity
as General Manager – Nanjing Plant, Mr. Chan is responsible for the overall operational management
of the PCB plant in Nanjing.
Mr. Chan holds a Higher Diploma in Mechanical Engineering from The Hong Kong Polytechnic
University and a Master Degree in Business Administration from the Bulacan State University,
Republic of the Philippines.
GENERAL MANAGER – HONG KONG PLANT CUM ACTING VICE PRESIDENT – GROUP TECHNOLOGY
Ms. Condia Yu Yuk Ying joined the Elec & Eltek Group since 1984 and served in various positions
relating to production and engineering over the years. She is currently the General Manager – Hong
Kong Plant cum Acting Vice President – Group Technology. She is responsible for all the technology
advancement of our PCB products and the overall operational management of the PCB plant in Hong
Kong.
Ms. Yu holds a Bachelor of Science Degree from the University of British Columbia and a Master
Degree in Engineering Business Management from the University of Warwick. She is also a Chartered
Engineer of the Engineering Council and a member with the Institute of Engineering and Technology
in the United Kingdom.
Elec & Eltek International Company Limited
Annual Report 2008
34
Report of the Directors
The directors present their report together with the audited consolidated financial statements of the
Group and balance sheet and statement of changes in equity of the Company for the financial year
ended 31 December 2008.
DIRECTORS
The directors of the Company in office as at the date of this Report are:
Cheung Kwok Wing
Chadwick Mok Cham Hung
Li Muk Kam
Philip Chan Sai Kit
Clement Sun
Claudia Heng Nguan Leng
Li Chiu Cheuk
Chan Wai Leung
Chan Wing Kwan
Chang Wing Yiu
Philip Wong Yu Hong
Larry Lai Chong Tuck
Raymond Leung Hai Ming
ARRANGEMENTS TO ENABLE DIRECTORS TO ACQUIRE BENEFITS BY MEANS OF THE ACQUISITION OF SHARES AND DEBENTURES
Except as disclosed in this Report, neither as at the end of the financial year nor at any time during
the financial year did there subsist any arrangement whose object is to enable the directors of the
Company to acquire benefits by means of the acquisition of shares or debentures in the Company or
any other body corporate.
Elec & Eltek International Company Limited
Annual Report 2008
35
Report of the Directors
DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES
Save as disclosed below, the directors of the Company who held office as at the end of the financial
year had no other interests in the share capital and debentures of the Company, its ultimate holding
company, Kingboard Chemical Holdings Limited (“Kingboard”), and related corporations (other
than wholly-owned subsidiaries) as recorded in the register of directors’ shareholdings kept by the
Company under Section 164 of the Companies Act (Cap. 50, Singapore Statutes) (the “Act”), either as
at the beginning of the financial year (or date of appointment, if later) or as at the end of the financial
year:
Shareholdings Shareholdings in which registered in name of or directors are deemedNames of directors beneficially held by directors to have an interest and companies in As at 31.12.2008 As at As at As at As atwhich interests are held and 21.1.2009 31.12.2007 21.1.2009 31.12.2008 31.12.2007
The Company(Ordinary shares)
Cheung Kwok Wing 60,000 60,000 128,278,165 127,987,165 126,782,165 @
Chadwick Mok Cham Hung 74,000 74,000 – – –
Li Muk Kam 1,035,876 1,035,876 – – –
Philip Chan Sai Kit 156,481 156,481 – – –
Clement Sun 40,000 40,000 – – –
Claudia Heng Nguan Leng 322,800 322,800 – – –
Sammy Leung Tin Po + – 232,000 – – –
The Company(Options to subscribe for the
Company’s ordinary shares)
At subscription price of US$2.033
Cheung Kwok Wing 973,200 973,200 – – –
Chadwick Mok Cham Hung 973,200 973,200 – – –
Li Muk Kam 768,000 768,000 – – –
Philip Chan Sai Kit 912,000 912,000 – – –
Clement Sun 240,000 240,000 – – –
Claudia Heng Nguan Leng 192,000 192,000 – – –
Li Chiu Cheuk ++ 162,000 – – – –
Chan Wing Kwan 973,200 973,200 – – –
Chang Wing Yiu 973,200 973,200 – – –
Sammy Leung Tin Po + – 960,000 – – –
At subscription price of US$2.375
Philip Wong Yu Hong 60,000 60,000 – – –
Larry Lai Chong Tuck 60,000 60,000 – – –
Ann Chiang Lai Wan +++ – 60,000 – – –
Elec & Eltek International Company Limited
Annual Report 2008
36
Report of the Directors
DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (Continued)
Shareholdings Shareholdings in which registered in name of or directors are deemedNames of directors beneficially held by directors to have an interest and companies in As at As at As at As at As at As atwhich interests are held 21.1.2009 31.12.2008 31.12.2007 21.1.2009 31.12.2008 31.12.2007
Kingboard(Ordinary shares of
HK$0.10 each)
Cheung Kwok Wing 2,451,725 2,451,725 3,880,685 261,131,929 261,131,929 259,968,929 #
Chan Wing Kwan 1,320,250 945,250 731,000 60,000 60,000 60,000
Chang Wing Yiu 2,677,074 2,302,074 1,928,974 678,200 678,200 840,200
Chadwick Mok Cham Hung 1,510,000 1,510,000 960,000 – – –
Philip Chan Sai Kit 18,000 18,000 10,000 – – –
Chan Wai Leung++ – – – 500 500 –
Kingboard(Options to subscribe for
unissued ordinary shares
of HK$0.10 each)
Cheung Kwok Wing – – 210,600 – – –
Chan Wing Kwan 966,600 1,341,600 2,558,800 – – –
Chang Wing Yiu 859,800 1,234,800 3,175,800 – – –
Kingboard Laminates Holdings Limited
(fellow subsidiary)(Ordinary shares of
HK$0.10 each)
Cheung Kwok Wing 1,141,500 1,141,500 934,500 2,244,550,500 2,244,550,500 2,244,550,500 δ
Chan Wing Kwan – – – 100,000 100,000 100,000
Chang Wing Yiu – – – 100,000 100,000 100,000
Li Muk Kam 33,000 33,000 33,000 – – –
Philip Chan Sai Kit 27,500 27,500 27,500 25,000 25,000 35,000
Clement Sun 30,000 30,000 30,000 – – –
Claudia Heng Nguan Leng 21,000 21,000 21,000 760,250 760,250 768,250
Li Chiu Cheuk ++ – – – 20,000 20,000 –
Chan Wai Leung ++ 22,000 22,000 – – – –
Sammy Leung Tin Po + – – 30,000 – – –
Elec & Eltek International Company Limited
Annual Report 2008
37
Report of the Directors
DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (Continued)
Shareholdings Shareholdings in which registered in name of or directors are deemedNames of directors beneficially held by directors to have an interest and companies in As at As at As at As at As at As atwhich interests are held 21.1.2009 31.12.2008 31.12.2007 21.1.2009 31.12.2008 31.12.2007
Kingboard Copper Foil Holdings Limited
(fellow subsidiary)(Ordinary shares of
US$0.10 each)
Cheung Kwok Wing – – – 462,059,000 459,972,000 449,002,000 ̂
@ 90,741,550 (2007: 90,741,550) shares are held by Elec & Eltek International Holdings Limited (“EEIH”).
34,321,615 (2007: 34,321,615) shares are held by Elitelink Holdings Limited (“Elitelink”). The balance of
2,924,000 (2007: 1,719,000) shares are held by Kingboard Investments Limited (“KBIL”). EEIH, Elitelink
and KBIL are wholly-owned subsidiaries of Kingboard. As at 21 January 2009, 90,741,550, 34,321,615
and 3,215,000 shares are held by EEIH, Elitelink and KBIL respectively.
+ Mr. Sammy Leung Tin Po resigned from his directorship on 1 February 2008.
++ Mr. Li Chiu Cheuk and Mr. Chan Wai Leung were appointed as executive directors on 1 January 2008.
+++ Ms. Ann Chiang Lai Wan resigned from her directorship on 1 January 2008.
# These shares are held by Hallgain Management Limited (“HML”). As at the balance sheet date, HML
holds approximately 30.97% interests in the issued share capital of Kingboard and in turn Mr. Cheung
Kwok Wing holds approximately 23% shareholding interests in HML.
δ 2,175,000,000 (2007: 2,175,000,000) shares are held by Jamplan (BVI) Limited, 54,667,500 (2007:
61,582,000) shares are held by KBIL, 13,383,000 (2007: 6,468,500) shares are held by Kingboard
and 1,500,000 (2007: 1,500,000) shares are held by HML. Jamplan (BVI) Limited is a wholly-owned
subsidiary of Kingboard.
^ 449,002,000 (2007: 449,002,000) shares are held by Excel First Investments Limited (“Excel”),
10,970,000 (2007: nil) shares are held by Kingboard Laminates Limited (“KLL”). Both Excel and KLL are
wholly-owned subsidiaries of Kingboard. As at 21 January 2009, 449,002,000 and 13,057,000 shares
are held by Excel and KLL respectively.
By virtue of Section 7 of the Act, Mr. Cheung Kwok Wing is deemed to have interests in the
subsidiaries of the Company.
Save as disclosed above, there were no other changes in any of the above-mentioned interests
between the end of the financial year and 21 January 2009.
Elec & Eltek International Company Limited
Annual Report 2008
38
Report of the Directors
DIRECTORS’ RECEIPT AND ENTITLEMENT TO CONTRACTUAL BENEFITS
Since the beginning of the financial year, no director has received or become entitled to receive a
benefit which is required to be disclosed under Section 201(8) of the Act, by reason of a contract
made by the Company or a related corporation with the director or with a firm of which he is a
member, or with a company in which he has a substantial financial interest except for salaries,
bonuses and other benefits as disclosed in the financial statements. Certain directors received
remuneration from related corporations in their capacity as directors and/or executives of those
related corporations.
SHARE OPTIONS
(a) Options to take up unissued sharesThe 2002 Elec & Eltek Employee’s Share Option Scheme (the “2002 Scheme”) was approved
by the shareholders of the Company at an Extraordinary General Meeting held on 8 November
2002 and was adopted and took effect from 12 November 2002 upon fulfilment of all the
conditions precedent as set out in Rule 3 of the 2002 Scheme. The duration of the 2002
Scheme was five years and it had accordingly terminated in November 2007 without affecting
the rights of holders of any options granted and outstanding under the 2002 Scheme.
Particulars of the options granted under the 2002 Scheme are set out below in this Report and
in Note 26 to the financial statements.
The 2002 Scheme is administered by the Employee’s Share Options Scheme Committee whose
members are:
Cheung Kwok Wing
Chan Wing Kwan
Chang Wing Yiu
Under the 2002 Scheme, options granted to the directors and employees may, except in
certain special circumstances, be exercised at any time after one or two years from the date
of grant but no later than the expiry date. The options may be exercised in full or in respect of
1,000 ordinary shares of the Company (“Shares”) or a multiple thereof, on the payment of the
aggregate subscription price. The subscription price is based on the average of the last dealt
prices of the Shares on the Singapore Exchange Securities Trading Limited for the last five
market days immediately preceding the date of grant. The Employees’ Share Option Scheme
Committee may at its discretion fix the subscription price at a discount not exceeding 20
percent to the above price.
Elec & Eltek International Company Limited
Annual Report 2008
39
Report of the Directors
SHARE OPTIONS (Continued)
(a) Options to take up unissued shares (Continued)
During the financial year, a new share option scheme, the 2008 Elec & Eltek Employees’ Share
Option Scheme (the “2008 Scheme”) was approved by the shareholders at the Extraordinary
General Meeting held on 21 April 2008 and was adopted by the Company on 9 May 2008 upon
fulfilment of all the conditions precedent as set out in Rule 2 of the 2008 Scheme. No option
was granted by the Company pursuant to the 2008 Scheme during the financial year.
(b) Unissued shares under option and options exercisedThe number of Shares available under the 2002 Scheme, subject to certain conditions being
satisfied, shall not exceed 15% of the issued share capital of the Company. The number of
outstanding share options under the 2002 Scheme is as follows:
Number of options to subscribe for ordinary shares Balance as at Balance as at Subscription 1 January 31 December priceDate of grant 2008 Lapsed 2008 per share Exercisable period US$
24.6.2005 9,579,000 (1,198,200 ) 8,380,800 2.033 26.11.2006 to 24.5.2010
29.9.2005 180,000 (60,000 ) 120,000 2.375 5.9.2006 to 4.9.2010
12.12.2006 928,000 (95,000 ) 833,000 2.400 13.11.2008 to 12.11.2011
10,687,000 (1,353,200 ) 9,333,800
There were no share options granted to full time employees of the Group during the financial year. A
total of 15,714,000 options were granted under the 2002 Scheme since the commencement of the
2002 Scheme to the expiry of the 2002 Scheme, to subscribe for unissued ordinary shares in the
Company.
Elec & Eltek International Company Limited
Annual Report 2008
40
Report of the Directors
SHARE OPTIONS (Continued)
The information on directors of the Company participating in the 2002 Scheme is as follows:
Aggregate Aggregate Aggregate options options options granted since exercised since lapsed since commencement commencement commencement Aggregate Options of the of the of the options granted 2002 Scheme 2002 Scheme 2002 Scheme outstanding during the to the end of to the end of to the end of as at the end ofName of director financial year financial year financial year financial year financial year
Cheung Kwok Wing – 973,200 – – 973,200
Chadwick Mok Cham Hung – 973,200 – – 973,200
Li Muk Kam – 960,000 (192,000 ) – 768,000
Philip Chan Sai Kit – 960,000 (48,000 ) – 912,000
Clement Sun – 240,000 – – 240,000
Claudia Heng Nguan Leng – 240,000 (48,000 ) – 192,000
Li Chiu Cheuk – 162,000 – – 162,000
Chan Wing Kwan – 973,200 – – 973,200
Chang Wing Yiu – 973,200 – – 973,200
Philip Wong Yu Hong – 60,000 – – 60,000
Larry Lai Chong Tuck – 60,000 – – 60,000
Save for (as disclosed above) Messrs. Cheung Kwok Wing, Chadwick Mok Cham Hung, Li Muk
Kam, Philip Chan Sai Kit, Chan Wing Kwan and Chang Wing Yiu, none of the participants under the
2002 Scheme have received more than 5% of the total number of options available under the 2002
Scheme.
Save as disclosed above, there have been no other options granted to the eligible employees,
directors and the Company’s substantial shareholders and their associates pursuant to the 2002
Scheme which had since been terminated in November 2007 without affecting the rights of holders of
any options granted and outstanding under the 2002 Scheme.
Elec & Eltek International Company Limited
Annual Report 2008
41
Report of the Directors
AUDIT COMMITTEE
The Audit Committee of the Company is chaired by Mr. Larry Lai Chong Tuck, an independent non-
executive director, and includes Dr. Philip Wong Yu Hong and Dr. Raymond Leung Hai Ming, both of
whom are independent non-executive directors. The Audit Committee has met on a quarterly basis
since the last Annual General Meeting (“AGM”) and has reviewed the following, where relevant, with
the executive directors and statutory and internal auditors of the Company:
(a) the annual audit plan of the Company’s statutory auditors and the results of their examination
of the financial statements of the Company and the consolidated financial statements of the
Group;
(b) the re-appointment of the Company’s statutory auditors;
(c) the internal audit plans and results of the internal audits and evaluation of the Group’s
systems of internal accounting controls and management’s responses to the internal auditors’
recommendations;
(d) the Group’s interested person transactions;
(e) the quarterly and annual financial statements as well as the content of the results
announcements before their submission to the directors of the Company; and
(f) the co-operation and assistance given by the management to the Group’s statutory auditors.
In addition, the Audit Committee reviewed all non-audit services provided by the statutory auditors
during the financial year and is of the opinion that the provision of such services will not affect the
independence of the statutory auditors.
The Audit Committee has full access to and has the co-operation of the management and has been
given the resources required for it to discharge its function properly. It also has full discretion to invite
any director and executive officer to attend its meetings. The statutory and internal auditors have
unrestricted access to the Audit Committee.
The Audit Committee has recommended to the directors the nomination of Deloitte & Touche LLP for
re-appointment as statutory auditors of the Group at the forthcoming AGM of the Company.
Elec & Eltek International Company Limited
Annual Report 2008
42
Report of the Directors
AUDITORS
The auditors, Deloitte & Touche LLP, have expressed their willingness to accept re-appointment.
On behalf of the Board
Chadwick Mok Cham HungVice-Chairman
Chan Wing KwanDirector
26 February 2009
Elec & Eltek International Company Limited
Annual Report 2008
43
Independent Auditors’ Report
TO THE MEMBERS OF ELEC & ELTEK INTERNATIONAL COMPANY LIMITED AND ITS SUBSIDIARIES
We have audited the accompanying financial statements of Elec & Eltek International Company
Limited (the “Company”) and its subsidiaries (the “Group”) which comprise the balance sheets of
the Group and the Company as at 31 December 2008, the profit and loss statement, statement of
changes in equity and cash flow statement of the Group and the statement of changes in equity of
the Company for the year then ended, and a summary of significant accounting policies and other
explanatory notes as set out on pages 45 to 104.
Management’s responsibility for the financial statements
Management is responsible for the preparation and fair presentation of these financial statements
in accordance with the provisions of Singapore Companies Act, Cap. 50 (the “Act”) and Singapore
Financial Reporting Standards. This responsibility includes: devising and maintaining a system of
internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded
against loss from unauthorised use or disposition; and transactions are properly authorised and that
they are recorded as necessary to permit the preparation of true and fair profit and loss accounts
and balance sheets and to maintain accountability of assets; selecting and applying appropriate
accounting policies; and making accounting estimates that are reasonable in the circumstances.
Auditors’ responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with Singapore Standards on Auditing. Those standards require
that we comply with ethical requirements and plan and perform the audit to obtain reasonable
assurance whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the financial statements. The procedures selected depend on the auditor’s judgement, including
the assessment of the risks of material misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the auditor considers internal control relevant to
the entity’s preparation and fair presentation of the financial statements in order to design audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit
opinion.
Elec & Eltek International Company Limited
Annual Report 2008
44
Independent Auditors’ Report
Opinion
In our opinion,
(a) the consolidated financial statements of the Group and the balance sheet and statement of
changes in equity of the Company are properly drawn up in accordance with the provisions of
the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the
state of affairs of the Group and of the Company as at 31 December 2008 and of the results,
changes in equity and cash flows of the Group and changes in equity of the Company for the
year ended on that date; and
(b) the accounting and other records required by the Act to be kept by the Company and by those
subsidiaries incorporated in Singapore of which we are the auditors have been properly kept in
accordance with the provisions of the Act.
Deloitte & Touche LLPPublic Accountants and Certified Public Accountants
Singapore
Michael Kee Cheng KongPartner
26 February 2009
Elec & Eltek International Company Limited
Annual Report 2008
45
Consolidated Profit and Loss StatementFor the year ended 31 December 2008
THE GROUP NOTES 2008 2007
US$’000 US$’000
Revenue 517,931 572,274
Cost of sales (430,231 ) (480,174 )
Gross profit 87,700 92,100
Interest income 1,332 234
Distribution and selling costs (13,839 ) (17,508 )
Administrative expenses (27,677 ) (28,931 )
Other operating income (expenses) 891 (2,651 )
Finance costs 6 (4,820 ) (7,507 )
Share of profits of an associate 1,550 1,426
Profit before taxation 45,137 37,163
Income tax expense 7 (2,626 ) (2,272 )
Profit for the year 8 42,511 34,891
Attributable to:
Equity holders of the Company 42,628 34,797
Minority interests (117 ) 94
42,511 34,891
United States United States
cents cents
Earnings per share: 10
– basic 23.83 19.39
– diluted 23.83 19.27
See accompanying notes to financial statements
Elec & Eltek International Company Limited
Annual Report 2008
46
Balance SheetsAs at 31 December 2008
THE GROUP THE COMPANY NOTES 2008 2007 2008 2007
US$’000 US$’000 US$’000 US$’000
ASSETS
Current assets Cash and bank balances 11 68,672 26,478 36 37
Trade receivables 12 110,513 152,432 – –
Bills receivables 4,061 4,265 – –
Other receivables and deposits 13 19,675 19,346 3 6
Amounts due from subsidiary
companies 14 – – 106,973 117,448
Inventories 15 39,582 58,978 – –
242,503 261,499 107,012 117,491
Assets classified as held for sale 27 – 15,621 – –
242,503 277,120 107,012 117,491
Non-current assets Property, plant and equipment 16 379,905 357,299 26 11
Deposits for acquisition of plant
and equipment 1,664 3,825 – –
Investment properties 17 15,756 8,733 – –
Intangible assets 18 – – – –
Subsidiary companies 19 – – 22,671 24,571
Interest in an associate 20 8,388 8,169 – –
Deferred tax assets 24 1,446 1,351 – –
407,159 379,377 22,697 24,582
Total assets 649,662 656,497 129,709 142,073
Elec & Eltek International Company Limited
Annual Report 2008
47
Balance Sheets
THE GROUP THE COMPANY NOTES 2008 2007 2008 2007
US$’000 US$’000 US$’000 US$’000
LIABILITIES AND EQUITY
Current liabilities Bank overdrafts and loans 21 65,063 83,223 – –
Trade payables 22 88,250 119,233 – –
Bills payables 12,957 2,981 – –
Other payables 23 38,620 32,654 304 757
Amounts due to subsidiary
companies 14 – – 2,031 1,366
Provision for taxation 762 2,189 – 1
205,652 240,280 2,335 2,124
Liabilities associated with assets
classified as held for sale 27 – 12,547 – –
205,652 252,827 2,335 2,124
Non-current liabilities Bank loans 21 92,536 50,521 – –
Deferred tax liabilities 24 1,998 1,657 – –
94,534 52,178 – –
Capital and reserves Share capital 25 98,656 98,656 98,656 98,656
Treasury shares (1,356 ) (896 ) (1,356 ) (896 )
Reserves 242,570 244,055 30,074 42,189
Equity attributable to equity
holders of the Company 339,870 341,815 127,374 139,949
Minority interests 9,606 9,677 – –
349,476 351,492 127,374 139,949
Total liabilities and equity 649,662 656,497 129,709 142,073
See accompanying notes to financial statements
Elec & Eltek International Company Limited
Annual Report 2008
48
Statements of Changes in EquityFor the year ended 31 December 2008
Attributable to equity holders of the Company Foreign currency Share Share Treasury Capital Statutory Revaluation Other Revenue translation option Minority Total capital shares reserve reserve reserve reserve reserve reserve reserve Total interests equity US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 (Note)
THE GROUPBalance at 1 January 2007 97,069 – 2,597 2,234 – 166 217,591 (5,671 ) 1,257 315,243 10,217 325,460
Profit for the financial year – – – – – – 34,797 – – 34,797 94 34,891Foreign currency translation – – – – – – – 23,801 – 23,801 430 24,231
Total recognised income for the financial year – – – – – – 34,797 23,801 – 58,598 524 59,122
Shares issued pursuant to the exercise of share options 1,587 – – – – – – – – 1,587 – 1,587Purchase of treasury shares – (896 ) – – – – – – – (896 ) – (896 )Transfer from revenue reserve to statutory reserve – – – 463 – – (463 ) – – – – –Transfer to capital reserve upon exercise of share options – – 105 – – – – – (105 ) – – –Transfer to revenue reserve upon lapse of share options – – – – – – 68 – (68 ) – – –Grant of share options to employees (Note 26) – – – – – – – – 570 570 – 570Arising from revaluation of property, plant and equipment – – – – 844 – – – – 844 – 844Capital injection from minority shareholders – – – – – – – – – – 1,511 1,511Dividends paid (Note 9) – in respect of previous financial period – – – – – – (19,760 ) – – (19,760 ) (2,575 ) (22,335 ) – in respect of current financial year – – – – – – (14,371 ) – – (14,371 ) – (14,371 )
1,587 (896 ) 105 463 844 – (34,526 ) – 397 (32,026 ) (1,064 ) (33,090 )
Balance at 31 December 2007 98,656 (896 ) 2,702 2,697 844 166 217,862 18,130 1,654 341,815 9,677 351,492
Profit (loss) for the financial year – – – – – – 42,628 – – 42,628 (117 ) 42,511Foreign currency translation – – – – – – – (4,827 ) – (4,827 ) 432 (4,395 )
Total recognised income (expenses) for the financial year – – – – – – 42,628 (4,827 ) – 37,801 315 38,116
Purchase of treasury shares – (460 ) – – – – – – – (460 ) – (460 )Transfer from revenue reserve to statutory reserve – – – 909 – – (909 ) – – – – –Transfer to revenue reserve upon lapse of share options – – – – – – 251 – (251 ) – – –Grant of share options to employees (Note 26) – – – – – – – – 361 361 – 361Arising from revaluation of property, plant and equipment – – – – 603 – – – – 603 – 603Dividends paid (Note 9) – in respect of previous financial year – – – – – – (22,361 ) – – (22,361 ) (386 ) (22,747 ) – in respect of current financial year – – – – – – (17,889 ) – – (17,889 ) – (17,889 )
– (460 ) – 909 603 – (40,908 ) – 110 (39,746 ) (386 ) (40,132 )
Balance at 31 December 2008 98,656 (1,356 ) 2,702 3,606 1,447 166 219,582 13,303 1,764 339,870 9,606 349,476
Elec & Eltek International Company Limited
Annual Report 2008
49
Statements of Changes in Equity
Share Share Treasury Revenue option Total capital shares reserve reserve equity US$’000 US$’000 US$’000 US$’000 US$’000
THE COMPANYBalance at 1 January 2007 97,069 – 61,053 612 158,734
Shares issued pursuant to
the exercise of share options 1,587 – – – 1,587
Purchase of treasury shares – (896 ) – – (896 )
Grant of share options to
employees (Note 26) – – – 232 232
Profit for the financial year – – 14,423 – 14,423
Dividends paid (Note 9)
– in respect of previous
financial period – – (19,760 ) – (19,760 )
– in respect of current
financial year – – (14,371 ) – (14,371 )
Balance at 31 December 2007 98,656 (896 ) 41,345 844 139,949
Purchase of treasury shares – (460 ) – – (460 )
Grant of share options to
employees (Note 26) – – – 146 146
Transfer to revenue reserve
upon lapse of share options – – 11 (11 ) –
Profit for the financial year – – 27,989 – 27,989
Dividends paid (Note 9)
– in respect of previous
financial year – – (22,361 ) – (22,361 )
– in respect of current
financial year – – (17,889 ) – (17,889 )
Balance at 31 December 2008 98,656 (1,356 ) 29,095 979 127,374
Note:
The capital reserve relates to amounts set aside by subsidiary companies operating in Thailand for declaration of
dividends as required under the laws of Thailand and the amounts transferred from share option reserve upon
the exercise of share options.
See accompanying notes to financial statements
Elec & Eltek International Company Limited
Annual Report 2008
50
Consolidated Cash Flow StatementFor the year ended 31 December 2008
NOTES 2008 2007
US$’000 US$’000
OPERATING ACTIVITIESProfit before taxation 45,137 37,163
Adjustments for:
Allowance for doubtful debts 1,749 3,783
Finance costs 4,820 7,507
Amortisation of intangible assets – 2
Depreciation of property, plant and equipment 47,989 46,055
Gain on disposal of a subsidiary 27 (590 ) –
Loss on disposal of property, plant and equipment – 805
Loss on fair value change of investment properties 4 –
(Reversal of) Allowance for inventory obsolescence (1,191 ) 2,154
Share-based payment expense 361 570
Interest income (1,332 ) (234 )
Share of profits of an associate (1,550 ) (1,426 )
Operating income before reinvestment in
working capital 95,397 96,379
Decrease in inventories 20,587 6,417
Decrease (Increase) in trade and other receivables 40,045 (23,524 )
(Decrease) Increase in trade and other payables (16,044 ) 29,094
Net cash generated from operations 139,985 108,366
Interest income received 1,332 234
Interest paid (4,820 ) (7,507 )
Income taxes paid (3,738 ) (2,089 )
NET CASH FROM OPERATING ACTIVITIES 132,759 99,004
INVESTING ACTIVITIESProceeds from disposal of property,
plant and equipment 371 333
Purchase of property, plant and equipment (77,609 ) (47,000 )
Decrease (Increase) in deposits paid for acquisition
of property, plant and equipment 2,161 (2,268 )
Disposal of a subsidiary 27 (469 ) –
Dividend received from an associate 682 –
Proceeds received in advance related to
assets held for sale – 8,308
Acquisition of equity interest in an associate – (441 )
Payment of consideration for acquisition of equity
interest in a subsidiary company in prior year – (3,692 )
NET CASH USED IN INVESTING ACTIVITIES (74,864 ) (44,760 )
Elec & Eltek International Company Limited
Annual Report 2008
51
Consolidated Cash Flow Statement
NOTES 2008 2007
US$’000 US$’000
FINANCING ACTIVITIESProceeds from bank borrowings 108,227 136,046
Repayment of bank borrowings (84,299 ) (152,941 )
Proceeds from share issue pursuant to
the exercise of share options – 1,587
Payment for share buy-back (460 ) (896 )
Capital injection from minority shareholders – 1,511
Dividends paid by the Company (40,250 ) (34,131 )
Dividends paid by subsidiary companies to
minority shareholders (386 ) (2,575 )
NET CASH USED IN FINANCING ACTIVITIES (17,168 ) (51,399 )
NET INCREASE IN CASH AND CASH EQUIVALENTS 40,727 2,845
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE FINANCIAL YEAR 31,539 24,072
EFFECT OF FOREIGN EXCHANGE RATE CHANGES, NET (3,596 ) 4,622
CASH AND CASH EQUIVALENTS AT END OF THE FINANCIAL YEAR 68,670 31,539
CASH AND CASH EQUIVALENTS CONSIST OF
Fixed deposits 11 17,941 943
Cash at bank and on hand 11 50,731 25,535
68,672 26,478
Cash and bank balances classified as held for sale 27 – 5,136
Bank overdrafts – unsecured 21 (2 ) (75 )
68,670 31,539
See accompanying notes to financial statements
Elec & Eltek International Company Limited
Annual Report 2008
52
Notes to the Financial StatementsFor the year ended 31 December 2008
1. GENERAL
Elec & Eltek International Company Limited (Registration Number 199300005H) (the
“Company”) is a limited liability company incorporated and domiciled in Singapore. The
Company’s ultimate holding company is Kingboard Chemical Holdings Limited, incorporated
in Cayman Islands. Related companies in these financial statements refer to the ultimate
holding company and its subsidiary companies. Related parties in these financial statements
refer to entities with common directors or shareholders of the ultimate holding company and its
subsidiary companies.
The Company is listed on the Main Board of the Singapore Exchange Securities Trading
Limited. The financial statements are expressed in United States Dollars, which is the
functional currency of the Company.
The Company’s principal office is located at 4 Leng Kee Road, #03-02 SiS Building, Singapore
159088 and its registered office is located at 80 Raffles Place, #33-00 UOB Plaza 1, Singapore
048624.
The Group’s manufacturing operations are located in Hong Kong, Thailand and the People’s
Republic of China (“the PRC”).
The principal activity of the Company is investment holding. Its subsidiary companies are
primarily engaged in the fabrication and distribution of double-sided, multi-layer and high
density interconnect (“HDI”) printed circuit boards. Details of the principal activities of the
subsidiaries are disclosed in Note 19. There have been no significant changes in the nature of
these activities during the financial year.
The consolidated financial statements of the Group and balance sheet and statement of
changes in equity of the Company for the year ended 31 December 2008 were authorised for
issuance by the Board of Directors on 26 February 2009.
Elec & Eltek International Company Limited
Annual Report 2008
53
Notes to the Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of accountingThe financial statements have been prepared in accordance with the historical cost basis,
except for the revaluation of certain non-current assets, and are drawn up in accordance with
the provisions of the Singapore Companies Act and Singapore Financial Reporting Standards
(“FRS”).
Adoption of new and revised standards in the current financial yearIn the current financial year, the Group has adopted all the new and revised FRSs and
Interpretations of FRS (“INT FRS”) that are relevant to its operations and effective for annual
periods beginning on or after 1 January 2008. The adoption of these new/revised FRSs and
INT FRS does not result in changes to the Group’s and Company’s accounting policies and has
no material effect on the amounts reported for the current or prior years.
At the date of authorisation of these financial statements, the following FRSs, INT FRSs and
amendments to FRS that are relevant to the Group and the Company were issued but not
effective:
FRS 1 Presentation of Financial Statements (Revised)
FRS 23 Borrowing Costs (Revised)
FRS 108 Operating Segments
INT FRS 113 Customer Loyalty Programmes
Consequential amendments were also made to various standards as a result of these new/
revised standards.
The management anticipates that the adoption of the above FRSs, INT FRSs and amendments
to FRS in future periods will not have a material impact on the financial statements of the
Group and of the Company in the period of their initial adoption except for the following:
FRS 1 – Presentation of Financial Statements (Revised)FRS 1(Revised) will be effective for annual periods beginning on or after 1 January 2009, and
will change the basis for presentation and structure of the financial statements. It does not
change the recognition, measurement or disclosure of specific transactions and other events
required by other FRSs.
FRS 108 – Operating SegmentsFRS 108 will be effective for annual periods beginning on or after 1 January 2009 and
supersedes FRS 14 – Segment Reporting. FRS 108 requires operating segments to be
identified on the basis of internal reports about components of the Group that are regularly
reviewed by the management in order to allocate resources to the segment and to assess
its performance. In contrast, FRS 14 requires an entity to identify two sets of segments
(business and geographical), using a risks and rewards approach, with the entity’s ‘system of
internal financial reporting to key management personnel’ serving only as the starting point
for the identification of such segments. The impact of this FRS is still to be determined. As
this is relating to disclosure, it will not have any impact on the financial position or financial
performance of the Group.
Elec & Eltek International Company Limited
Annual Report 2008
54
Notes to the Financial StatementsFor the year ended 31 December 2008
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Basis of consolidationThe consolidated financial statements incorporate the financial statements of the Company
and entities (including special purpose entities) controlled by the Company (its subsidiaries).
Control is achieved where the Company has the power to govern the financial and operating
policies of an entity so as to obtain benefits from its activities.
The results of subsidiaries acquired or disposed of during the period are included in the
consolidated profit and loss statement from the effective date of acquisition or up to the
effective date of disposal, as appropriate.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring
their accounting policies in line with those used by other members of the Group.
All intra-group transactions, balances, income and expenses are eliminated on consolidation.
Minority interests in the net assets of consolidated subsidiaries are identified separately from
the Group’s equity therein. Minority interests consist of the amount of those interests at the
date of the original business combination (see below) and the minority’s share of changes in
equity since the date of the combination. Losses applicable to the minority in excess of the
minority’s interest in the subsidiary’s equity are allocated against the interests of the Group
except to the extent that the minority has a binding obligation and is able to make an additional
investment to cover its share of those losses.
In the Company’s financial statements, investments in subsidiaries and associates are carried
at cost less any impairment in net recoverable value that has been recognised in the profit and
loss statement.
Business combinationsThe acquisition of subsidiaries is accounted for using the purchase method. The cost of the
acquisition is measured at the aggregate of the fair values, at the date of exchange, of assets
given, liabilities incurred or assumed, and equity instruments issued by the Group in exchange
for control of the acquiree, plus any costs directly attributable to the business combination. The
acquiree’s identifiable assets, liabilities and contingent liabilities that meet the conditions for
recognition under FRS 103 are recognised at their fair values at the acquisition date, except for
non-current assets (or disposal groups) that are classified as held for sale in accordance with
FRS 105 Non-Current Assets Held for Sale and Discontinued Operations, which are recognised
and measured at fair value less costs to sell.
Goodwill arising on acquisition is recognised as an asset and initially measured at cost, being
the excess of the cost of the business combination over the Group’s interest in the net fair value
of the identifiable assets, liabilities and contingent liabilities recognised. If, after reassessment,
the Group’s interest in the net fair value of the acquiree’s identifiable assets, liabilities and
contingent liabilities exceeds the cost of the business combination, the excess is recognised
immediately in the profit and loss statement.
The interest of minority shareholders in the acquiree is initially measured at the minority’s
proportion of the net fair value of the assets, liabilities and contingent liabilities recognised.
Elec & Eltek International Company Limited
Annual Report 2008
55
Notes to the Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instrumentsFinancial assets and financial liabilities are recognised on the Group’s balance sheet when the
Group becomes a party to the contractual provisions of the instrument.
Effective interest methodThe effective interest method is a method of calculating the amortised cost of a financial
instrument and of allocating interest income or expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated future cash receipts or payments
through the expected life of the financial instrument, or where appropriate, a shorter period.
Income and expense are recognised on an effective interest basis for debt instruments.
Financial assets
Investments are recognised and derecognised on a trade date basis where the purchase or
sale of an investment is under a contract whose terms require delivery of the investment within
the timeframe established by the market concerned, and are initially measured at fair value,
net of transaction costs except for those financial assets classified as at fair value through profit
or loss which are initially measured at fair value.
Other financial assets are classified as “loans and receivables”.
Loans and receivablesTrade receivables, bill receivables and other receivables that have fixed or determinable
payments that are not quoted in an active market are classified as “loans and receivables”.
Loans and receivables are measured at amortised cost using the effective interest method less
impairment. Interest is recognised by applying the effective interest method, except for short-
term receivables when the recognition of interest would be immaterial.
Impairment of financial assetsFinancial assets are assessed for indicators of impairment at each balance sheet date.
Financial assets are impaired where there is objective evidence that, as a result of one or more
events that occurred after the initial recognition of the financial asset, the estimated future cash
flows of the investment have been impacted.
For financial assets carried at amortised cost, the amount of the impairment is the difference
between the asset’s carrying amount and the present value of estimated future cash flows,
discounted at the original effective interest rate.
The carrying amount of the financial asset is reduced by the impairment loss directly for all
financial assets with the exception of trade receivables where the carrying amount is reduced
through the use of an allowance account. When a trade receivable is uncollectible, it is written
off against the allowance account. Subsequent recoveries of amounts previously written off
are credited against the allowance account. Changes in the carrying amount of the allowance
account are recognised in profit and loss statement.
Elec & Eltek International Company Limited
Annual Report 2008
56
Notes to the Financial StatementsFor the year ended 31 December 2008
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial assets (Continued)
Impairment of financial assets (Continued)
If, in a subsequent period, the amount of the impairment loss decreases and the decrease
can be related objectively to an event occurring after the impairment loss was recognised,
the previously recognised impairment loss is reversed through profit or loss to the extent the
carrying amount of the investment at the date the impairment is reversed does not exceed what
the amortised cost would have been had the impairment not been recognised.
Derecognition of financial assetsThe Group derecognises a financial asset only when the contractual rights to the cash flows
from the asset expire, or it transfers the financial asset and substantially all the risks and
rewards of ownership of the asset to another entity. If the Group neither transfers nor retains
substantially all the risk and rewards of ownership and continues to control the transferred
financial asset, the Group recognises its retained interest in the asset and an associate liability
for amounts it may have to pay. If the Group retains substantially all the risks and rewards of
ownership of a transferred financial asset, the Group continues to recognise the financial asset
and also recognises a collateralised borrowing for the proceeds received.
Financial liabilities and equity instruments
Classification as debt or equityFinancial liabilities and equity instruments issued by the Group are classified according to
the substance of the contractual arrangements entered into and the definitions of a financial
liability and an equity instrument.
Equity instrumentsAn equity instrument is any contract that evidences a residual interest in the assets of the
Group after deducting all of its liabilities. Equity instruments are recorded at the proceeds
received, net of direct issue costs.
Treasury sharesWhen the Company purchases the Company’s equity share capital, the consideration paid,
including any directly attributable costs, is taken against “Treasury Shares” within equity. When
the shares are subsequently disposed, the realised gains or losses on disposal of the treasury
shares are recognised in equity.
Elec & Eltek International Company Limited
Annual Report 2008
57
Notes to the Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Financial instruments (Continued)
Financial liabilities and equity instruments (Continued)
Financial liabilitiesTrade and other payables and bill payables are initially measured at fair value, net of
transaction costs, and are subsequently measured at amortised cost, using the effective
interest method, with interest expense recognised on an effective yield basis.
Interest-bearing bank loans and overdrafts are initially measured at fair value, and are
subsequently measured at amortised cost, using the effective interest method. Any difference
between the proceeds (net of transaction costs) and the settlement or redemption of borrowings
is recognised over the term of the borrowings in accordance with the Group’s accounting policy
for borrowing costs.
Financial guarantee contract liabilities are measured initially at their fair values and
subsequently at the higher of the amount of obligation under the contract recognised as a
provision in accordance with FRS 37 Provisions, Contingent Liabilities and Contingent Assets
and the amount initially recognised less accumulated amortisation in accordance with FRS 18
Revenue.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are
discharged, cancelled or expired.
LeasesLeases are classified as finance leases whenever the terms of the lease transfer substantially
all the risks and rewards of ownership to the lessee. All other leases are classified as operating
leases.
The Group as lesseeRentals payable under operating leases are charged to profit or loss on a straight-line basis
over the term of the relevant lease. Benefits received and receivable as an incentive to enter
into an operating lease are also spread on a straight-line basis over the lease term.
InventoriesInventories are stated at the lower of cost and net realisable value. Cost comprises direct
materials and, where applicable, direct labour costs and those overheads that have been
incurred in bringing the inventories to their present location and condition. Cost is calculated
using the first-in, first-out method. Net realisable value represents the estimated selling price
less all estimated costs of completion and costs to be incurred in marketing, selling and
distribution.
Elec & Eltek International Company Limited
Annual Report 2008
58
Notes to the Financial StatementsFor the year ended 31 December 2008
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property, plant and equipmentProperty, plant and equipment are stated at cost less accumulated depreciation and any
accumulated impairment losses.
Construction-in-progress are stated at cost. No depreciation is provided until the construction is
completed and the asset are available for use.
Depreciation is charged so as to write off the cost of assets, other than freehold land and
construction-in-progress, over their estimated useful lives, using the straight-line method, on
the following bases:
Freehold buildings 20 years
Leasehold land and buildings 50 – 75 years
Leasehold improvements lower of 10 years or lease terms
Furniture and fixtures 5 years
Plant and equipment 5 – 10 years
Motor vehicles and yacht 5 – 7 years
No depreciation is provided on freehold land.
Fully depreciated assets are retained in the financial statements until they are no longer in use.
The estimated useful lives, residual values and depreciation method are reviewed at each
period end, with the effect of any changes in estimate accounted for on a prospective basis.
The gain or loss arising on disposal or retirement of an item of property, plant and equipment is
determined as the difference between the sales proceeds and the carrying amounts of the asset
and is recognised in the profit and loss statement.
Non-current assets held for saleNon-current assets and disposal groups are classified as held for sale if their carrying amount
will be recovered through a sale transaction rather than through continuing use. This condition
is regarded as met only when the sale is highly probable and the asset (or disposal group) is
available for immediate sale in its present condition. Management must be committed to the
sale, which should be expected to qualify for recognition as a completed sale within one year
from the date of classification.
Non-current assets (and disposal groups) classified as held for sale are measured at the lower
of the assets’ previous carrying amount and fair value less costs to sell.
Elec & Eltek International Company Limited
Annual Report 2008
59
Notes to the Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Investment propertiesInvestment property, which is property held to earn rentals and/or for capital appreciation, is
measured initially at its cost, including transaction costs. Subsequent to initial recognition,
investment property is measured at fair value. Gains or losses arising from changes in the fair
value of investment property are included in the profit and loss statement for the period in
which they arise.
Intangible assets
Technical know-howTechnical know-how is technical knowledge acquired from third parties and stated at purchase
cost less accumulated amortisation and any accumulated impairment losses.
The intangibles with finite useful lives are amortised on a straight-line basis over their estimated
useful lives of over 5 years. The estimated useful life and amortisation method are reviewed at
the end of each annual reporting period, with the effect of any changes in estimate accounted
for on a prospective basis.
Impairment of tangible and intangible assetsAt each balance sheet date, the Group reviews the carrying amounts of its tangible and
intangible assets to determine whether there is any indication that those assets have suffered
an impairment loss. If any such indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment loss (if any). Where it is not
possible to estimate the recoverable amount of an individual asset, the Group estimates the
recoverable amount of the cash-generating unit to which the asset belongs.
Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present value using a pre-
tax discount rate that reflects current market assessments of the time value of money and the
risks specific to the asset.
If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than
its carrying amount, the carrying amount of the asset (cash-generating unit) is reduced to
its recoverable amount. An impairment loss is recognised immediately in the profit and loss
statement.
Where an impairment loss subsequently reverses, the carrying amount of the asset (cash-
generating unit) is increased to the revised estimate of its recoverable amount, but so that
the increased carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognised for the asset (cash-generating unit) in
prior years. A reversal of an impairment loss is recognised immediately in the profit and loss
statement.
Elec & Eltek International Company Limited
Annual Report 2008
60
Notes to the Financial StatementsFor the year ended 31 December 2008
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
AssociatesAn associate is an entity over which the Group has significant influence and that is neither a
subsidiary nor an interest in a joint venture. Significant influence is the power to participate in
the financial and operating policy decisions of the investee but is not control or joint control
over those policies.
The results and assets and liabilities of associates are incorporated in these financial
statements using the equity method of accounting, except when the investment is classified as
held for sale, in which case it is accounted for under FRS 105 Non-current Assets Held for Sale
and Discontinued Operations. Under the equity method, investments in associates are carried
in the consolidated balance sheet at cost as adjusted for post-acquisition changes in the
Group’s share of the net assets of the associate, less any impairment in the value of individual
investments. Losses of an associate in excess of the Group’s interest in that associate (which
includes any long-term interests that, in substance, form part of the Group’s net investment
in the associate) are not recognised, unless the Group has incurred legal or constructive
obligation or made payments on behalf of the associate.
Any excess of the cost of acquisition over the Group’s share of the net fair value of the
identifiable assets, liabilities and contingent liabilities of the associate recognised at the date
of acquisition is recognised as goodwill. The goodwill is included within the carrying amount
of the investment and is assessed for impairment as part of the investment. Any excess of the
Group’s share of the net fair value of the identifiable assets, liabilities and contingent liabilities
over the cost of acquisition, after reassessment, is recognised immediately in the profit and loss
statement.
Where a group entity transacts with an associate of the Group, profits and losses are eliminated
to the extent of the Group’s interest in the relevant associate.
ProvisionsProvisions are recognised when the Group has a present obligation (legal or constructive) as a
result of a past event, it is probable that the Group will be required to settle the obligation, and
a reliable estimate can be made of the amount of the obligation.
The amount recognised as a provision is the best estimate of the consideration required
to settle the present obligation at the balance sheet date, taking into account the risks and
uncertainties surrounding the obligation. Where a provision is measured using the cash flows
estimated to settle the present obligation, its carrying amount is the present value of those cash
flows.
When some or all of the economic benefits required to settle a provision are expected to be
recovered from a third party, the receivable is recognised as an asset if it is virtually certain that
reimbursement will be received and the amount of the receivable can be measured reliably.
Elec & Eltek International Company Limited
Annual Report 2008
61
Notes to the Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Share-based paymentsThe Group issues equity-settled share-based payment to certain employees.
Equity-settled share-based payments are measured at fair value of the equity instruments
(excluding the effect of non market-based vesting conditions) at the date of grant. Details
regarding the determination of the fair value of equity-settled share-based transactions are
set out in Note 26. The fair value determined at the grant date of the equity-settled share-
based payments is expensed on a straight-line basis over the vesting period, based on the
Group’s estimate of the number of equity instruments that will eventually vest and adjusted
for the effect of non market-based vesting conditions. At each balance sheet date, the Group
revises the estimate of the number of equity instruments expected to vest. The impact of the
revision of the original estimates, if any, is recognised over the remaining vesting period with a
corresponding adjustment to the equity-settled employee benefits reserve.
The policy described above is applied to all equity-settled share-based payments that were
granted after 22 November 2002 that vested after 1 January 2005. No amount has been
recognised in the financial statements in respect of other equity-settled share-based payments.
Fair value is measured using the Trinomial Lattice model. The expected life used in the model
has been adjusted, based on management’s best estimate, for the effects of non-transferability,
exercise restrictions and behavioral considerations.
Statutory reserveThe People’s Republic of China’s laws and regulations require Sino-foreign cooperative joint
ventures to provide for certain statutory reserves, mainly reserve fund and enterprise expansion
fund, which are appropriated from net income as reported in the statutory financial statements.
The use of these reserves are at the discretion of the respective entities’ board of directors. The
reserve fund can only be used, upon approval by the relevant authority, to offset accumulated
losses or increase capital. The enterprise expansion fund can only be used to increase capital
upon approval by the relevant authority.
Revenue recognitionRevenue is measured at the fair value of the consideration received or receivable. Revenue is
reduced for estimated customer returns, rebates and other similar allowances.
Revenue from the sale of manufactured goods is recognised when all the following conditions
are satisfied:
• the Group has transferred to the buyer the significant risks and rewards of ownership of
the goods;
Elec & Eltek International Company Limited
Annual Report 2008
62
Notes to the Financial StatementsFor the year ended 31 December 2008
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Revenue recognition (Continued)
• the Group retains neither continuing managerial involvement to the degree usually
associated with ownership nor effective control over the goods sold;
• the amount of revenue can be measured reliably;
• it is probable that the economic benefits associated with the transaction will flow to the
entity; and
• the costs incurred or to be incurred in respect of the transaction can be measured
reliably.
Interest income is accrued on a time basis, by reference to the principal outstanding and at the
effective interest rate applicable.
Dividend income from investments is recognised when the shareholders’ rights to receive
payment have been established.
Borrowing costsBorrowing costs directly attributable to the acquisition, construction or production of qualifying
assets, which are assets that necessarily take a substantial period of time to get ready for their
intended use or sale, are added to the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale. Investment income earned on the temporary
investment of specific borrowings pending their expenditure on qualifying assets is deducted
from the borrowing costs eligible for capitalisation.
All other borrowing costs are recognised in the profit and loss statement in the period in which
they are incurred.
Retirement benefit costsPayments to defined contribution retirement benefit plans are charged as an expenses as they
fall due. Payments made to state-managed retirement benefit schemes, such as the Singapore
Central Provident Fund, state-sponsored retirement benefit scheme in the PRC and Mandatory
Provident Fund in Hong Kong, are dealt with as payments to defined contribution plans where
the Group’s obligations under the plans are equivalent to those arising in a defined contribution
retirement benefit plan.
Employee leave entitlementEmployee entitlements to annual leave are recognised when they accrue to employees. A
provision is made for the estimated liability for annual leave as a result of services rendered by
employees up to the balance sheet date.
Elec & Eltek International Company Limited
Annual Report 2008
63
Notes to the Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income taxIncome tax expense represents the sum of the tax currently payable and deferred tax.
The tax currently payable is based on taxable profit for the period. Taxable profit differs from
profit as reported in the profit and loss statement because it excludes items of income or
expense that are taxable or deductible in other periods and it further excludes items that
are not taxable or tax deductible. The Group’s liability for current tax is calculated using tax
rates (and tax laws) that have been enacted or substantively enacted in countries where the
Company and its subsidiaries operate by the balance sheet date.
Deferred tax is recognised on differences between the carrying amounts of assets and liabilities
in the financial statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities
are generally recognised for all taxable temporary differences and deferred tax assets are
recognised to the extent that it is probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and liabilities are not recognised
if the temporary difference arises from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a transaction that affects neither the
taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments
in subsidiary companies and associates, except where the Group is able to control the reversal
of the temporary difference and it is probable that the temporary difference will not reverse in
the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced
to the extent that it is no longer probable that sufficient taxable profits will be available to allow
all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the
liability is settled or the asset realised based on the tax rates (and tax laws) that have been
enacted or substantively enacted by the balance sheet date.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off
current tax assets against current tax liabilities and when they relate to income taxes levied by
the same taxation authority and the Group intends to settle its current tax assets and liabilities
on a net basis.
Current and deferred tax are recognised as an expense or income in profit or loss, except
when they relate to items credited or debited directly to equity, in which case the tax is also
recognised directly in equity, or where they arise from the initial accounting for a business
combination. In the case of a business combination, the tax effect is taken into account in
calculating goodwill or determining the excess of the acquirer’s interest in the net fair value of
the acquiree’s identifiable assets, liabilities and contingent liabilities over cost.
Elec & Eltek International Company Limited
Annual Report 2008
64
Notes to the Financial StatementsFor the year ended 31 December 2008
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Foreign currency transactions and translationThe individual financial statements of each group entity are measured and presented in the
currency of the primary economic environment in which the entity operates (its functional
currency). The consolidated financial statements of the Group and the balance sheet of the
Company are presented in United States dollars, which is the functional currency of the
Company, and the presentation currency for the consolidated financial statements.
In preparing the financial statements of the individual entities, transactions in currencies other
than the entity’s functional currency are recorded at the rates of exchange prevailing on the
date of the transaction. At each balance sheet date, monetary items denominated in foreign
currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary
items carried at fair value that are denominated in foreign currencies are retranslated at the
rates prevailing on the date when the fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency are not retranslated.
Exchange differences arising on the settlement of monetary items, and on retranslation of
monetary items are included in profit or loss for the period. Exchange differences arising on
the retranslation of non-monetary items carried at fair value are included in profit or loss for
the period except for differences arising on the retranslation of non-monetary items in respect
of which gains and losses are recognised directly in equity. For such non-monetary items, any
exchange component of that gain or loss is also recognised directly in equity.
For the purpose of presenting consolidated financial statements, the assets and liabilities of
the Group’s foreign operations (including comparatives) are expressed in United States dollars
using exchange rates prevailing on the balance sheet date. Income and expense items (including
comparatives) are translated at the average exchange rates for the period, unless exchange
rates fluctuated significantly during that period, in which case the exchange rates at the dates
of the transactions are used. Exchange differences arising, if any, are classified as equity and
transferred to the Group’s foreign currency translation reserve. Such translation differences are
recognised in profit or loss in the period in which the foreign operation is disposed of.
On consolidation, exchange differences arising from the translation of the net investment in
foreign entities (including monetary items that, in substance, form part of the net investment in
foreign entities) are taken to the foreign currency translation reserve.
Cash and cash equivalentsCash and cash equivalents comprise cash on hand and demand deposits, bank overdrafts and
other short term highly liquid investments that are readily convertible to a known amount of
cash and are subject to an insignificant risk of changes in value.
Elec & Eltek International Company Limited
Annual Report 2008
65
Notes to the Financial Statements
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
Critical judgements in applying the Group’s accounting policiesIn the application of the Group’s accounting policies, which are described in Note 2,
management is required to make judgements, estimates and assumptions about the carrying
amounts of assets and liabilities that are not readily apparent from other sources. The estimates
and associated assumptions are based on historical experience and other factors that are
considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the estimate is revised if the
revision affects only that period, or in the period of the revision and future periods if the revision
affects both current and future periods.
Key sources of estimation uncertaintyThe key assumptions concerning the future and other key sources of estimation uncertainty
at the balance sheet date, that have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next financial year are discussed below:
(i) Depreciation of property, plant and equipmentProperty, plant and equipment are depreciated on a straight-line basis over their
estimated useful lives. Management estimates the useful lives of property, plant and
equipment to be within 5 to 75 years. The carrying amount of the Group’s property, plant
and equipment at 31 December 2008 was US$379,905,000 (2007: US$357,299,000).
Changes in the expected level of usage and technological developments could impact
the economic useful lives and the residual values of these assets, and therefore future
depreciation charges could be revised.
(ii) Investment propertiesThe fair value of each investment property is individually determined at each balance
sheet date by independent valuers based on a market value assessment, on an existing
use basis. The valuers have relied on the discounted cash flow analysis and the
capitalisation of income approach as their primary methods, supported by the direct
comparison method. These methodologies are based upon estimates of future results
and a set of assumptions specific to each property to reflect its tenancy and cashflow
profile. The fair value of each investment property reflects, among other things, rental
income from current leases and assumptions about rental income from future leases in
the light of current market conditions. The fair value also reflects, on a similar basis, any
cash outflows that could be expected in respect of the property.
Elec & Eltek International Company Limited
Annual Report 2008
66
Notes to the Financial StatementsFor the year ended 31 December 2008
3. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued)
Key sources of estimation uncertainty (Continued)
(iii) Income and deferred taxesThe Group has exposure to income taxes in several jurisdictions. Significant judgement
is involved in determining the group-wide provision for income taxes. There are certain
transactions and computations for which the ultimate tax determination is uncertain
during the ordinary course of business. The Group recognises liabilities for expected tax
issues based on estimates of whether additional taxes will be due. Where the final tax
outcome of these matters is different from the amounts that were initially recognised,
such differences will impact the income tax and deferred tax provisions in the period in
which such determination is made. The Group’s tax payable amounts at 31 December
2008 was US$762,000 (2007: US$2,189,000). The Group’s deferred tax assets and
deferred tax liabilities at 31 December 2008 were US$1,446,000 (2007: US$1,351,000)
and US$1,998,000 (2007: US$1,657,000), respectively.
(iv) Allowance for doubtful debtsThe policy for allowance for doubtful debts of the Group is based on the evaluation
of collectability and aging analysis of accounts and on management’s judgement.
The allowances as at 31 December 2008 amounted to US$10,189,000 (2007:
US$9,491,000). A considerable amount of judgement is required in assessing the
ultimate realisation of these receivables, including the current creditworthiness and the
past collection history of each customer. If the financial conditions of customers of the
Group were to deteriorate, resulting in an impairment of their ability to make payments,
additional allowances may be required. The carrying amount of the trade receivables is
disclosed on Note 12.
(v) Allowance for inventory obsolescenceThe management of the Group reviews an aging analysis at each balance sheet date,
and makes allowance for inventory obsolescence for items that are identified to be
obsolete and slow-moving. The allowance for inventories as at 31 December 2008
amounted to US$4,861,000 (2007: US$5,728,000). The management estimates the
net realisable value for goods for resale based primarily on the latest selling prices and
current market conditions. The carrying amount of the inventories is disclosed in Note
15.
Elec & Eltek International Company Limited
Annual Report 2008
67
Notes to the Financial Statements
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT
Categories of financial instrumentsThe following table sets out the financial instruments as at the balance sheet date:
THE GROUP THE COMPANY 2008 2007 2008 2007
US$’000 US$’000 US$’000 US$’000
Financial assets Loans and receivables (including
cash and bank balances) 201,853 207,085 107,010 117,491
Financial liabilities Amortised cost 282,278 270,694 2,031 1,419
Financial risk management policies and objectivesThe Group’s major financial instruments include bank balances and cash, bank borrowings,
trade and other receivables and bills receivables, trade and other payables and bills payables.
Details of these financial instruments are disclosed in respective notes. The risks associated
with these financial instruments and the policies on how to mitigate these risks are set out
below. The management manages and monitors these exposures to ensure appropriate
measures are implemented on a timely and effective manner.
Foreign exchange risk managementSeveral subsidiaries of the Company have foreign currency sales/purchases denominated in
currencies other than the entity’s functional currencies, which expose the Group to foreign
currency risk.
Whenever possible, the Group seeks to maintain a natural hedge through the matching of
liabilities, including borrowings, against assets in the same currency or against the entity’s
functional currency, in particular its future revenue stream. Transactional exposures in
currencies other than entities’ functional currency are kept to minimal level.
When necessary, foreign exchange forward contracts are used by the Group to manage its
foreign currency exposure arising from its operating activities.
Elec & Eltek International Company Limited
Annual Report 2008
68
Notes to the Financial StatementsFor the year ended 31 December 2008
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Continued)
Foreign exchange risk management (Continued)
The carrying amounts of monetary assets and monetary liabilities at the reporting date that are
not denominated in the functional currencies of group entities are as follows:
THE GROUP THE COMPANY Liabilities Assets Liabilities Assets 2008 2007 2008 2007 2008 2007 2008 2007
US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
USD 1,015 11,706 9,332 11,895 – – – –
HKD 102,830 33,924 21,920 3,607 – 126 2,156 14,788
RMB 58,898 – 34,231 – – – – –
SGD 197 242 30 34 119 179 102 658
GBP 39 109 26 69 – – – –
EUR 4,678 284 8,381 7,811 – – – –
JPY 10,665 20 4 318 – – – –
The following table details the sensitivity to a 5% increase and decrease in the Chinese
Renminbi against the United States Dollars. 5% is the sensitivity rate used when reporting
foreign currency risk internally to key management personnel and represents management’s
assessment of the possible change in foreign exchange rates. The sensitivity analysis includes
only outstanding foreign currency denominated monetary items and adjusts their translation at
the period end for a 5% change in foreign currency rates.
If the Chinese Renminbi strengthens by 5% against the United States Dollars, profit or loss will
increase (decrease) by:
THE GROUP 2008 2007
US$’000 US$’000
Profit or lossUnited States Dollars (1,557 ) (213 )
For a 5% weakening of the Chinese Renminbi against the United States Dollars, there would be
an equal and opposite impact on the profit and loss. This is mainly attributable to the exposure
outstanding on receivables and payables denominated in Chinese Renminbi at year end.
Elec & Eltek International Company Limited
Annual Report 2008
69
Notes to the Financial Statements
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Continued)
Foreign exchange risk management (Continued)
Under the Linked Exchange Rate System, the financial exposure on exchange rate fluctuation
between Hong Kong Dollars and United States Dollars is considered by the management to be
insignificant, and therefore no sensitivity analysis has been prepared for Hong Kong Dollars.
In management’s opinion, the sensitivity analysis is unrepresentative of the inherent foreign
exchange risk as the year end exposure does not reflect the exposure during the year.
Interest rate risk managementThe Group’s primary interest rate risk relates to its borrowings from banks. The interest rates
and terms of repayment of the term loan and revolving loans, trust receipt loans and other
short-term bank loans of the Group are disclosed in Note 21.
Interest rate sensitivityThe sensitivity analyses below have been determined based on the exposure to interest rates
for both derivatives and non-derivative instruments at the balance sheet date and the stipulated
change taking place at the beginning of the financial year and held constant throughout the
reporting period in the case of instruments that have floating rates. A 50 basis point increase or
decrease is used when reporting interest rate risk internally to key management personnel and
represents management’s assessment of the possible change in interest rates.
If interest rates had been 50 basis points higher or lower and all other variables were held
constant, the Group’s profit for the year ended 31 December 2008 would decrease/ increase
by US$795,000 (2007: decrease/increase by US$743,000). This is mainly attributable to the
Group’s exposure to interest rates on its variable rate borrowings.
Credit riskCredit risk is the risk that counterparties are unable to meet their obligations resulting in
financial loss to the Group. It is the Group’s policy to enter into transactions with a diversity of
credit-worthy parties to mitigate any significant concentration of credit risk. The Group ensures
that sales of products are rendered to customers with appropriate credit history and has
internal mechanisms to monitor the granting of credit and management of credit exposures.
The Group has made provisions for potential losses on credits extended. Surplus funds are
placed with reputable financial institutions. The Group’s maximum exposure to credit risk in the
event the counterparties fail to perform their obligations in relation to each class of recognised
financial assets is the carrying amount of those assets as indicated in the balance sheet. As
at financial year end, there was no significant concentration of credit risk to the Group or the
Company.
Further details of credit risks on trade receivables is disclosed in Note 12.
Elec & Eltek International Company Limited
Annual Report 2008
70
Notes to the Financial StatementsFor the year ended 31 December 2008
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Continued)
Liquidity riskThe Group’s cash and short term deposits, operating cash flow and availability of banking
facilities are actively managed to ensure that there is adequate working capital and that
repayment and funding needs are met.
Liquidity risk analysis
Non-derivative financial liabilitiesThe following tables detail the remaining contractual maturity for non-derivative financial
liabilities. The tables have been drawn up based on the undiscounted cash flows of financial
liabilities based on the earliest date on which the Group and the Company can be required to
pay.
Weighted average effective On demand Within Total Total interest rate or within 6 months After undiscounted carrying p.a. 6 months to 1 year 1 year amount amount % US$’000 US$’000 US$’000 US$’000 US$’000
THE GROUP
2008
Bank overdrafts
and loans 3.38 36,703 29,380 95,678 161,761 157,599
Trade and
other payables – 122,511 2,168 – 124,679 124,679
159,214 31,548 95,678 286,440 282,278
2007
Bank overdrafts
and loans 5.23 69,445 15,328 53,163 137,936 133,819
Trade and
other payables – 136,143 732 – 136,875 136,875
205,588 16,060 53,163 274,811 270,694
Elec & Eltek International Company Limited
Annual Report 2008
71
Notes to the Financial Statements
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Continued)
Liquidity risk analysis (Continued)
Non-derivative financial liabilities (Continued)
Weighted
average
effective On demand Within Total Total
interest rate or within 6 months After undiscounted carrying
p.a. 6 months to 1 year 1 year amount amount
% US$’000 US$’000 US$’000 US$’000 US$’000
THE COMPANY
2008
Amount due to subsidiary
companies – 2,031 – – 2,031 2,031
2007
Other payables – 53 – – 53 53
Amount due to subsidiary
companies – 1,366 – – 1,366 1,366
1,419 – – 1,419 1,419
Non-derivative financial assetsThe following table details the expected maturity for non-derivative financial assets. The tables
below have been drawn up based on the undiscounted contractual maturities of the financial
assets including interest that will be earned on those assets except where the Group and the
Company anticipates that the cash flow will occur in a different period.
Elec & Eltek International Company Limited
Annual Report 2008
72
Notes to the Financial StatementsFor the year ended 31 December 2008
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Continued)
Liquidity risk analysis (Continued)
Non-derivative financial assets (Continued)
Weighted average effective On demand Within Total Total interest rate or within 6 months After undiscounted carrying p.a. 6 months to 1 year 1 year amount amount % US$’000 US$’000 US$’000 US$’000 US$’000
THE GROUP
2008
Cash and bank balances 1.90 68,998 – – 68,998 68,672
Trade and other receivables – 130,300 2,881 – 133,181 133,181
199,298 2,881 – 202,179 201,853
2007
Cash and bank balances 1.02 31,695 – – 31,695 31,614
Trade and other receivables – 175,190 281 – 175,471 175,471
206,885 281 – 207,166 207,085
THE COMPANY
2008
Cash and bank balances – 36 – – 36 36
Trade and other receivables – 1 – – 1 1
Amount due from subsidiary
companies – 106,973 – – 106,973 106,973
107,010 – – 107,010 107,010
2007
Cash and bank balances – 37 – – 37 37
Trade and other receivables – 6 – – 6 6
Amount due from subsidiary
companies – 117,448 – – 117,448 117,448
117,491 – – 117,491 117,491
Elec & Eltek International Company Limited
Annual Report 2008
73
Notes to the Financial Statements
4. FINANCIAL INSTRUMENTS, FINANCIAL RISKS AND CAPITAL RISKS MANAGEMENT (Continued)
Fair value of financial assets and financial liabilitiesFair value is defined as the amount at which the instrument could be exchanged in a current
transaction between knowledgeable willing parties in an arm’s length transaction, other than in
a forced or liquidation sale. Fair values are obtained through quoted market prices, discounted
cash flow models and option pricing models as appropriate.
Financial instruments whose carrying amounts approximate fair valuesManagement has determined that the carrying amounts of cash and bank balances, fixed
deposits with banks, trade and other receivables, amounts due from (to) subsidiary companies,
bank overdrafts, trade and other payables and interest bearing loans and borrowings, based on
their notional amounts, reasonably approximate their fair values because these are mostly short
term in nature or are repriced frequently.
Capital risk management policies and objectivesThe Group manages its capital to ensure that the entities in the Group will be able to continue
as a going concern while maximising the return to stakeholders through the optimisation of the
debt and equity balance. The Group’s overall strategy remains unchanged from prior year.
The capital structure of the Group consists of debt, cash and cash equivalents and equity
attributable to equity holders of the Company, comprising issued capital, reserves and retained
earnings.
5. HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS
The Company is a subsidiary of Kingboard Chemical Holdings Limited, incorporated in Cayman
Islands, which is also the Company’s ultimate holding company. Related companies in these
financial statements refer to members of the holding company’s group of companies.
Some of the Group’s transactions and arrangements are between members of the Group and
the effect of these on the basis determined between the parties is reflected in these financial
statements. The intercompany balances are unsecured, interest-free and repayable on demand
unless otherwise stated.
Transactions between the Company and its subsidiaries, which are related companies of the
Company, have been eliminated on consolidation and are not disclosed in this note. Details of
transactions between the Group and other related companies are disclosed below.
Elec & Eltek International Company Limited
Annual Report 2008
74
Notes to the Financial StatementsFor the year ended 31 December 2008
5. HOLDING COMPANY AND RELATED COMPANY TRANSACTIONS (Continued)
Trading transactionsThe significant transactions between the Group and its related parties and the effects of these
transactions on terms agreed among the companies are as follows:
THE GROUP 2008 2007
US$’000 US$’000
Income Sales to related companies 5,777 4,411
Rental income from a related company – 85
Management fee income from a related company 259 –
Expenses Purchases from related companies 113,706 124,467
Purchases from a related party 220 179
Consultation fees paid to related parties 72 395
Construction fee paid to a related party 105 1,918
Management fee paid to related companies 2,739 3,144
In addition, directors and key management executives received remuneration for services
rendered during the financial year. Non-cash benefits including share options were also
granted.
Total compensation paid to Company’s directors and key management executives, as well as
fees paid to the Company’s directors and directors of subsidiaries are as follows:
THE GROUP 2008 2007
US$’000 US$’000
Directors Salaries, bonuses and other costs 1,620 2,127
Provident fund and other defined contributions 58 54
Share-based payments 192 241
1,870 2,422
Key management executives (excluding executive directors) Salaries, bonuses and other costs 1,734 1,956
Provident fund and other defined contributions 48 73
Share-based payments 32 73
1,814 2,102
Elec & Eltek International Company Limited
Annual Report 2008
75
Notes to the Financial Statements
6. FINANCE COSTS
THE GROUP 2008 2007
US$’000 US$’000
Interest on bank loans 4,796 7,405
Interest on bank overdrafts 24 102
4,820 7,507
7. INCOME TAX EXPENSE
THE GROUP 2008 2007
US$’000 US$’000
Current:
Singapore income tax
Current income taxation 5 –
Foreign income tax
Current income taxation 2,306 2,422
2,311 2,422
Deferred tax 315 (150 )
2,626 2,272
Income tax for the Group is calculated at the rate prevailing for the respective jurisdiction.
It materially differs from the amount determined by applying the Singapore income tax rate
of 18% (2007: 18%) to pre-tax profits mainly due to tax privileges granted to the subsidiary
companies in the PRC and Thailand. Certain subsidiary companies in the PRC are only liable
for 50% of normal corporate profits tax and a subsidiary company in Thailand is exempted from
corporate profits tax till 2011 with effect from the date the operating income is first earned.
Elec & Eltek International Company Limited
Annual Report 2008
76
Notes to the Financial StatementsFor the year ended 31 December 2008
7. INCOME TAX EXPENSE (Continued)
The average effective tax rate based on the income tax expense varied from the domestic tax
rates applicable to the profit in the country concerned as a result of the following differences:
THE GROUP 2008 2007
% %
Tax at Singapore income tax rate 18.0 18.0
Lower statutory tax rates and tax incentives in
other countries (16.7 ) (15.3 )
Tax benefits not recognised 8.7 6.0
Adjust in respect of current tax of previous year – (3.5 )
Others (4.2 ) 0.9
Effective tax rate 5.8 6.1
8. PROFIT FOR THE YEAR
THE GROUP 2008 2007
US$’000 US$’000
Profit for the year has been arrived at after charging
(crediting):
Directors’ emoluments
– Remuneration 1,581 2,089
– Fees 39 38
– Contributions to defined contribution plans 58 54
Staff costs (excluding directors’ emoluments)
– Salaries and employees benefits 62,128 59,159
– Contributions to defined contribution plans 2,814 2,990
Depreciation of property, plant and equipment 47,989 46,055
Statutory auditor’s emoluments
– Audit fees paid to auditor 331 357
– Non-audit fees paid to auditor 158 132
Amortisation of intangible assets – 2
Share-based payment expense 361 570
Gain on disposal of a subsidiary (590 ) –
Loss on disposal of property, plant and equipment – 805
Loss on fair value change of investment properties 4 –
Allowance for doubtful debts 1,749 3,783
(Reversal of) Allowance for inventory obsolescence (1,191 ) 2,154
Loss on foreign exchange 1,116 1,704
Elec & Eltek International Company Limited
Annual Report 2008
77
Notes to the Financial Statements
9. DIVIDENDS
The amount and the rates of dividends paid are:
THE GROUP AND THE COMPANY 2008 2007
US$’000 US$’000
In respect of previous financial year/period
Ordinary dividend:
– Final one-tier tax exempt dividend United States
4.5 cents (2007: United States 5.0 cents)
per share 8,050 8,982
Special dividend:
– Final one-tier tax exempt dividend United States
8.0 cents (2007: United States 6.0 cents)
per share 14,311 10,778
22,361 19,760
In respect of current financial year
Ordinary dividend:
– Interim one-tier tax exempt dividend United States
10.0 cents (2007: United States 8.0 cents)
per share 17,889 14,371
The Directors have proposed a one-tier tax exempt final dividend of United States 5.0 cents
(2007: 4.5 cents) per share and a one-tier tax-exempt special dividend of United States 5.5
cents (2007: 8.0 cents) per share, totalling US$18,783,000 (2007: US$22,361,000) to be
payable in respect of the current financial year. This dividend will be recorded as a liability on
the balance sheets of the Company and of the Group upon approval by the shareholders of the
Company at the forthcoming Annual General Meeting of the Company.
Elec & Eltek International Company Limited
Annual Report 2008
78
Notes to the Financial StatementsFor the year ended 31 December 2008
10. EARNINGS PER SHARE
The calculation of the basic and diluted earning per share attributable to shareholders of the
Company is based on the following:
THE GROUP 2008 2007
Basic Diluted Basic Diluted
US$’000 US$’000 US$’000 US$’000
Profit attributable to equity
holders of the Company 42,628 42,628 34,797 34,797
2008 2007
Number of shares Number of shares
’000 ’000 ’000 ’000
Weighted average number of
ordinary shares (for
computing basic earnings
per share) 178,911 178,911 179,498 179,498
Adjustment for assumed
conversion of share options – – – 1,112
Adjusted weighted average
number of ordinary shares
(for computing diluted
earnings per share) 178,911 178,911 179,498 180,610
Earnings per share (US cents) 23.83 23.83 19.39 19.27
No diluted earnings per share has been presented in 2008 because the subscription price of
the Company’s outstanding share options was higher than the average market price for 2008.
Elec & Eltek International Company Limited
Annual Report 2008
79
Notes to the Financial Statements
11. CASH AND BANK BALANCES
THE GROUP THE COMPANY 2008 2007 2008 2007
US$’000 US$’000 US$’000 US$’000
Fixed deposits 17,941 943 – –
Cash at bank and on hand 50,731 25,535 36 37
68,672 26,478 36 37
Cash and bank balances comprise cash held by the Group and short term bank deposits.
Fixed deposits bear interest at average effective interest rate of 1.90% (2007: 1.02%) per
annum and for a tenure of less than three months.
The Group and the Company’s cash and bank balances that are not denominated in the
functional currencies of the respective entities are as follows:
THE GROUP THE COMPANY 2008 2007 2008 2007
US$’000 US$’000 US$’000 US$’000
Denominated in:
Euro 6,832 1,123 – –
Hong Kong Dollars 20,667 1,227 – –
Chinese Renminbi 12,506 – – –
Singapore Dollars 27 28 27 25
United States Dollars 6,039 2,468 – –
12. TRADE RECEIVABLES
THE GROUP 2008 2007
US$’000 US$’000
Third parties 107,479 151,141
Related companies 3,034 1,291
110,513 152,432
An allowance has been made for estimated irrecoverable amounts from the sales of goods to
third parties of US$10,189,000 (2007: US$9,491,000). This allowance has been determined
by reference to past default experience and assessment of recoverability by management.
Elec & Eltek International Company Limited
Annual Report 2008
80
Notes to the Financial StatementsFor the year ended 31 December 2008
12. TRADE RECEIVABLES (Continued)
The amount due from related companies are unsecured, interest-free and are subject to credit
terms of 90 to 120 days.
Trade receivables are non-interest bearing and generally on 90 to 120 days’ terms. They
are recognised at their original invoice amounts which approximate their fair values on initial
recognition.
The Group has made substantial provision for all receivables which are over due more than 180
days because historical experience is that such receivables are generally not fully recoverable.
Included in the Group’s trade receivable balance are debtors with a carrying amount of
US$41.0 million (2007: US$25.9 million) which are past due at the reporting date for which
the Group has not provided as there has not been a significant change in credit quality and the
amounts are still considered recoverable. The Group does not hold any collateral over these
balances. The average age of these receivables are 78 days (2007: 97 days).
In determining the recoverability of a trade receivable, the Group considers any change in
the credit quality of the trade receivable from the date credit was initially granted up to the
reporting date. The concentration of credit risk is limited due to the customer base being large
and unrelated. Accordingly, the management believes that there is no further credit provision
required in excess of the allowance for doubtful debts.
Included in the allowance for doubtful debts are specific trade receivables with a balance
of US$4.3 million (2007: US$4.3 million) for which the customers have been placed under
liquidation. The impairment recognition represents the difference between the carrying amount
of the specific trade receivable and present value of expected liquidation proceeds.
Movement in the allowance for doubtful debts:
THE GROUP 2008 2007
US$’000 US$’000
Balance at beginning of the year 9,491 5,705
Currency realignment 28 3
Amounts written off during the year (1,079 ) –
Increase in allowance recognised in profit and
loss statement 1,749 3,783
Balance at end of the year 10,189 9,491
Elec & Eltek International Company Limited
Annual Report 2008
81
Notes to the Financial Statements
12. TRADE RECEIVABLES (Continued)
The Group’s trade receivables that are not denominated in the functional currencies of the
respective entities are as follows:
THE GROUP 2008 2007
US$’000 US$’000
Denominated in:
Chinese Renminbi 4,881 –
Hong Kong Dollars 1,218 1,906
Euro 1,181 3,843
13. OTHER RECEIVABLES AND DEPOSITS
THE GROUP THE COMPANY 2008 2007 2008 2007
US$’000 US$’000 US$’000 US$’000
Deposits 483 459 – –
Prepaid expenses 1,068 942 2 6
Tax refundable 14,295 14,393 – –
Others 3,829 3,552 1 –
19,675 19,346 3 6
The Group’s other receivables that are not denominated in the functional currencies of the
respective entities are as follows:
THE GROUP THE COMPANY 2008 2007 2008 2007
US$’000 US$’000 US$’000 US$’000
Denominated in:
Euro 367 2,845 – –
Hong Kong Dollars 34 473 – –
Japanese Yen – 314 – –
Chinese Renminbi 16,567 – – –
Singapore Dollars – – 3 6
United States Dollars – 7 – –
Elec & Eltek International Company Limited
Annual Report 2008
82
Notes to the Financial StatementsFor the year ended 31 December 2008
14. AMOUNTS DUE FROM (TO) SUBSIDIARY COMPANIES
The amounts due from (to) subsidiary companies are unsecured, interest free and repayable
on demand. The Company has not made any allowance as the directors are of the view that
these receivables are collectible.
The Company’s amount due from (to) subsidiary companies that are not denominated in the
functional currencies are as follows:
THE COMPANY 2008 2007
US$’000 US$’000
Amount due from subsidiary companies
Denominated in:
Hong Kong Dollars 2,156 14,788
Singapore Dollars 72 627
Amount due to subsidiary companies
Denominated in:
Hong Kong Dollars – 126
15. INVENTORIES
THE GROUP 2008 2007
US$’000 US$’000
Raw materials 14,263 18,195
Work-in-progress 12,713 26,484
Finished goods 12,606 14,299
39,582 58,978
The cost of inventories recognised as an expense of US$430.2 million (2007: US$480.2
million) includes US$1.2 million in respect of reversal of allowance for inventory obsolescence
(2007: US$2.2 million in respect of write-downs of inventory to net realisable value).
The reversal of the allowance for inventory obsolescence was related to the progressive
consumption of slow moving inventories provided in the previous financial years.
Elec & Eltek International Company Limited
Annual Report 2008
83
Notes to the Financial Statements
16. PROPERTY, PLANT AND EQUIPMENT
Furniture Plant Motor Freehold Freehold Leasehold Leasehold Leasehold and and vehicles Construction- land buildings land buildings improvements fixtures equipment and yacht in-progress Total US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000 US$’000
THE GROUPCost
At 1 January 2007 7,783 6,414 24,344 83,261 42,517 13,241 440,380 2,525 5,358 625,823
Currency realignment 315 260 725 4,572 2,172 728 25,036 133 278 34,219
Reclassifications – – – 3,262 1,804 63 26 – (5,155 ) –
Additions – – 65 13,735 1,910 301 16,642 364 13,983 47,000
Disposals – – – (20 ) (654 ) (2,552 ) (15,041 ) (342 ) – (18,609 )
Revaluation – – – 844 – – – – – 844
Transfer to investment
properties – – – (8,733 ) – – – – – (8,733 )
Transfer to assets held
for sale – – (2,062 ) – – – – – (8,053 ) (10,115 )
At 31 December 2007 8,098 6,674 23,072 96,921 47,749 11,781 467,043 2,680 6,411 670,429
Currency realignment (311 ) (245 ) (41 ) (277 ) (75 ) (25 ) (842 ) (66 ) (64 ) (1,946 )
Reclassifications – – – 182 1,807 – 41,365 – (43,354 ) –
Additions – – – 1,204 3,327 259 20,179 152 52,488 77,609
Disposals – – – – (54 ) (354 ) (8,807 ) (203 ) – (9,418 )
Revaluation – – – 603 – – – – – 603
Transfer to investment
properties – – – (7,027 ) – – – – – (7,027 )
At 31 December 2008 7,787 6,429 23,031 91,606 52,754 11,661 518,938 2,563 15,481 730,250
Accumulated
Depreciation
At 1 January 2007 – 4,612 3,771 13,366 21,431 10,586 214,134 1,765 – 269,665
Currency realignment – 188 74 714 1,073 576 12,151 105 – 14,881
Charge for the financial
year – 348 453 1,872 3,600 859 38,664 259 – 46,055
Disposals – – – (2 ) (642 ) (2,547 ) (14,042 ) (238 ) – (17,471 )
At 31 December 2007 – 5,148 4,298 15,950 25,462 9,474 250,907 1,891 – 313,130
Currency realignment – (218 ) (9 ) (91 ) (65 ) (18 ) (1,318 ) (8 ) – (1,727 )
Charge for the financial
year – 339 463 2,101 4,049 884 39,899 254 – 47,989
Disposals – – – – (52 ) (352 ) (8,469 ) (174 ) – (9,047 )
At 31 December 2008 – 5,269 4,752 17,960 29,394 9,988 281,019 1,963 – 350,345
Carrying Amount
At 31 December 2008 7,787 1,160 18,279 73,646 23,360 1,673 237,919 600 15,481 379,905
At 31 December 2007 8,098 1,526 18,774 80,971 22,287 2,307 216,136 789 6,411 357,299
Elec & Eltek International Company Limited
Annual Report 2008
84
Notes to the Financial StatementsFor the year ended 31 December 2008
16. PROPERTY, PLANT AND EQUIPMENT (Continued)
Furniture and Office fixtures equipment Total US$’000 US$’000 US$’000
THE COMPANYCost
At 1 January 2007 20 120 140
Additions – 7 7
Disposals – (8 ) (8 )
At 31 December 2007 20 119 139
Additions 13 10 23
Disposals (8 ) (41 ) (49 )
At 31 December 2008 25 88 113
Accumulated Depreciation
At 1 January 2007 15 111 126
Charge for the financial year 4 6 10
Disposals – (8 ) (8 )
At 31 December 2007 19 109 128
Charge for the financial year 3 5 8
Disposals (8 ) (41 ) (49 )
At 31 December 2008 14 73 87
Carrying Amount
At 31 December 2008 11 15 26
At 31 December 2007 1 10 11
Elec & Eltek International Company Limited
Annual Report 2008
85
Notes to the Financial Statements
16. PROPERTY, PLANT AND EQUIPMENT (Continued)
Details of the freehold and leasehold properties held by the Group as at 31 December 2008 are
set out below:
Description and location Gross area Tenure Use (sq. m.)
Freehold:
(i) Land at No. 134 82,080 – Industrial
Moo 2 Soi Sriyothin
Pakred-Pathumthani Road,
Bang-Khayang,
Muang District, Thailand
(ii) Land at Rojana Industrial 17,180 – Industrial
Park No. 1/68 Moo 5,
Pranakorn, Sri Ayutthaya,
Thailand
Leasehold:
(i) Land at New Technology 122,877 50 years commencing Industrial
Development Zone, from 30 July 1997
Kai Ping, Guangdong
Province, The PRC
(ii) Land at New Technology 158,500 50 years commencing Industrial
Development Zone, from 15 March 2004
Kai Ping, Guangdong
Province, The PRC
(iii) Land at New Technology 53,265 50 years commencing Industrial
Development Zone, from 30 November 2006
Kai Ping, Guangdong
Province, The PRC
(iv) Land at lot BW-5, 25,907 50 years commencing Industrial
Guangzhou Economic & from 31 December 1993
Technological Development
District, The PRC
Elec & Eltek International Company Limited
Annual Report 2008
86
Notes to the Financial StatementsFor the year ended 31 December 2008
16. PROPERTY, PLANT AND EQUIPMENT (Continued)
Description and location Gross area Tenure Use (sq. m.)
Leasehold: (Continued)
(v) Land at Eastern Park of 160,554 50 years commencing Industrial
Guangzhou Economic & from 16 August 2000
Technological Development
District, The PRC
(vi) Factories and office units in 13,764 75 years commencing Industrial
Merit Industrial Centre, from 5 October 1953
Hong Kong and renewable for a
further 75 years
(vii) Land at Nanjing Economic 13,661 50 years commencing Industrial
& Technological from 28 November 2000
Development Zone,
Jiangsu Province, The PRC
During the year, US$591,000 (2007: US$346,000) of interest cost was capitalised and
included in the cost of leasehold buildings and plant and equipment. The capitalisation rate used
to determine the amount of borrowing costs eligible for capitalisation is 3.34% (2007: 5.20%)
per annum.
17. INVESTMENT PROPERTIES
THE GROUP 2008 2007
US$’000 US$’000
At fair value
Balance at beginning of year 8,733 –
Loss on fair value change include in profit and
loss statement (4 ) –
Transfer from property, plant and equipment 7,027 8,733
Balance at end of the year 15,756 8,733
Elec & Eltek International Company Limited
Annual Report 2008
87
Notes to the Financial Statements
17. INVESTMENT PROPERTIES (Continued)
Upon transfer from property, plant and equipment, the investment properties were carried at
their fair values and the increase in carrying amount at the date of transfer was recognised in
equity as revaluation reserve.
The fair values of the Group’s investment properties at 31 December 2008 have been
determined on the basis of valuation carried out at the respective year end date by independent
valuer having an appropriate recognised professional qualification and recent experience in
the location and category of the properties being valued. The valuations were arrived at by
reference to market evidence of transaction prices for similar properties, and was performed
in accordance with valuation standards on properties as laid down by the Hong Kong Institute
of Surveyors and the Appraisal and Valuation Standards as published by the Royal Institute of
Chartered Surveyors.
The Group’s investment properties are held under freehold interests. The property rental
income from one of the Group’s investment properties which is leased out under operating
leases, amounted to US$1,773,150 (2007: US$92,850).
18. INTANGIBLE ASSETS
THE GROUP US$’000
Cost
At 1 January 2007, 31 December 2007 and 31 December 2008 516
Accumulated Amortisation
At 1 January 2007 514
Charge for the financial year 2
At 31 December 2007 and 31 December 2008 516
Carrying Amount
At 31 December 2008 –
At 31 December 2007 –
Elec & Eltek International Company Limited
Annual Report 2008
88
Notes to the Financial StatementsFor the year ended 31 December 2008
19. SUBSIDIARY COMPANIES
THE COMPANY 2008 2007
US$’000 US$’000
Unquoted equity shares, at cost 22,186 22,186
Recognition of financial guarantee provided
to subsidiaries 485 2,385
22,671 24,571
The Company issued financial guarantees to banks for credit facilities of its subsidiaries
and recorded a deemed financial guarantee fee income in accordance with the provisions
of FRS 39 – Financial Instruments: Recognition and measurements. The deemed income
was amortised over the period of the guarantee. The guarantee fee was not charged by the
Company to the subsidiaries. The full amount of the guarantee fee, including the unamortised
portion, is deemed to be additional investment in the subsidiaries.
Details of the subsidiary companies at 31 December 2008 are as follows:
Proportion of Country of ownership incorporation interest andName of subsidiary and operation voting power held Principal activities 2008 2007
% %
Principal subsidiary companies
^ Elec & Eltek (Guangzhou) The PRC 98.0 98.0 Manufacturing and
Electronic Company Limited distribution of
依利安達(廣州)電子有限公司 printed circuit
boards (“PCBs”)
^ Guangzhou Elec & Eltek The PRC 98.0 98.0 Manufacturing and
High Density Interconnect distribution of PCBs
Technology No. 1
Company Limited
廣州依利安達精密互連科技 第一有限公司
^ Guangzhou Elec & Eltek The PRC 98.0 98.0 Manufacturing and
Microvia Technology Limited distribution of PCBs
廣州依利安達微通科技有限公司
Elec & Eltek International Company Limited
Annual Report 2008
89
Notes to the Financial Statements
19. SUBSIDIARY COMPANIES (Continued)
Proportion of Country of ownership incorporation interest andName of subsidiary and operation voting power held Principal activities 2008 2007
% %
Principal subsidiary companies (Continued)
^ Kai Ping Elec & Eltek The PRC 95.0 95.0 Manufacturing and
Company Limited distribution of PCBs
開平依利安達電子有限公司
^ Kaiping Elec & Eltek The PRC 95.0 95.0 Manufacturing and
No.2 Company Limited distribution of PCBs
開平依利安達電子第二有限公司
^ Kaiping Elec & Eltek The PRC 95.0 95.0 Manufacturing and
No.3 Company Limited distribution of PCBs
開平依利安達電子第三有限公司
^ Kaiping Elec & Eltek The PRC 95.0 95.0 Manufacturing and
No.5 Company Limited distribution of PCBs
開平依利安達電子第五有限公司
^ Nanjing Elec & Eltek The PRC 100.0 100.0 Manufacturing and
Electronic Co., Ltd. distribution of PCBs
南京依利安達電子有限公司
@ Elec & Eltek Multilayer Hong Kong 100.0 100.0 Manufacturing and
PCB Limited distribution of PCBs
依利多層線路板有限公司
ß Elec & Eltek (Thailand) Limited Thailand 100.0 100.0 Manufacturing and
distribution of PCBs
% Elec & Eltek Company Macao 100.0 100.0 Trading of PCBs and
(Macao Commercial provision of sales and
Offshore) Limited marketing services
依利安達(澳門離岸商業服務) 有限公司
Elec & Eltek International Company Limited
Annual Report 2008
90
Notes to the Financial StatementsFor the year ended 31 December 2008
19. SUBSIDIARY COMPANIES (Continued)
Proportion of Country of ownership incorporation interest andName of subsidiary and operation voting power held Principal activities 2008 2007
% %
Principal subsidiary companies (Continued)
* Elec & Eltek Technology Singapore 100.0 100.0 Technology research
Research & Marketing and marketing
Pte. Ltd.
^ Kaiping Pacific Insulating The PRC 100.0 100.0 Manufacturing and
Material Company Limited distribution of high-end
開平太平洋絕緣材料有限公司 PCB raw materials
ß Pacific Insulating Material Thailand 100.0 100.0 Manufacturing and
(Thailand) Limited distribution of PCB
raw materials
^ Shenzhen Pacific Insulating The PRC 93.5 93.5 Manufacturing and
Material Co., Ltd. distribution of PCB
深圳太平洋絕緣材料有限公司 raw materials
* Audited by Deloitte & Touche LLP – Singapore.
@ Audited by Deloitte Touche Tohmatsu – Hong Kong.
ß Audited by Enrst & Young – Thailand.
% Audited by Deloitte Touche Tohmatsu – Macao for statutory purpose. Deloitte Touche Tohmatsu –
Hong Kong audited the financial statements for consolidation purposes.
^ Audited by Guangzhou Xin Zhong Nan Certified Public Accountants Co., Ltd., a Certified
Public Accountants firm in the PRC under PRC Generally Accepted Accounting Principles for
local compliance. Deloitte Touche Tohmatsu – Hong Kong audited the financial statements for
consolidation purposes.
Elec & Eltek International Company Limited
Annual Report 2008
91
Notes to the Financial Statements
20. INTEREST IN AN ASSOCIATE
THE GROUP 2008 2007
US$’000 US$’000
Cost of investment in an associate 5,441 5,441
Share of post-acquisition reserves 2,947 2,728
Carrying amount of investment 8,388 8,169
In 2007, US$441,000 capital injection was paid.
Proportion of Country of ownership interestName incorporation Principal activities and voting power held 2008 2007
Held through a subsidiary
United Hill Group Limited British Virgin Investment holding 49% 49%
Islands
Summarised financial information of the associate is set out below:
2008 2007
US$’000 US$’000
Total assets 40,175 34,731
Total liabilities (23,056 ) (18,060 )
Net assets 17,119 16,671
Revenue 11,539 9,377
Profit for the year 3,163 2,910
Group’s share of profits of associate 1,550 1,426
Elec & Eltek International Company Limited
Annual Report 2008
92
Notes to the Financial StatementsFor the year ended 31 December 2008
21. BANK OVERDRAFTS AND LOANS
THE GROUP 2008 2007
US$’000 US$’000
Unsecured:
USD bank loans – 27,400
HKD bank loans 155,004 106,269
USD bank overdrafts 2 75
Trust receipts 2,593 –
157,599 133,744
Comprising amounts following due:
– within one year 65,063 83,223
– more than one year 92,536 50,521
157,599 133,744
The effective interest rate of bank overdrafts is 5.40% (2007: 6.04%) per annum.
The Group’s unsecured bank loans are repayable in quarterly instalments commencing from
2006 and ending in 2013 and bear interest at weighted effective rates of 3.37% (2007: 5.22%)
per annum. The interest rates of these floating rate loans repriced at 0.5% to 1.55% (2007:
0.5% to 1.25%) per annum over 1, 2 or 3 months Singapore Interbank Offer Rate (“SIBOR”)
or Hong Kong Interbank Offer Rate (“HIBOR”).
The above credit facilities are provided under:
(a) corporate guarantees from the Company;
(b) a letter of undertaking from the Company to maintain:
(i) a consolidated tangible net worth at a level not less than US$250,000,000 at any
time;
(ii) a consolidated gearing ratio and consolidated interest cover ratio at a level of not
higher than 85% and not less than 5 times, respectively at all time; and
(c) negative pledges from the Company.
There are no fixed or floating charges against any assets belonging to the Group or the
Company.
All borrowings are arranged at floating rates, thus exposing the Group to cash flow interest rate
risk.
The fair value of the Group’s borrowings approximates their carrying amount.
Elec & Eltek International Company Limited
Annual Report 2008
93
Notes to the Financial Statements
22. TRADE PAYABLES
THE GROUP 2008 2007
US$’000 US$’000
Third parties 56,682 80,057
Related companies 31,568 39,176
88,250 119,233
Trade payables are non-interest bearing and generally on 90 to 120 days’ terms. The Group
has financial risk management policies in place to ensure that all payables are within the credit
timeframe.
The Group’s trade payables that are not denominated in the functional currencies of the
respective entities are as follows:
THE GROUP 2008 2007
US$’000 US$’000
Denominated in:
Hong Kong Dollars 5,376 5,053
Chinese Renminbi 46,238 –
Euro 239 269
Japanese Yen 90 20
United States Dollars 979 7,725
Trade payables principally comprise amounts outstanding for trade purchases and ongoing
costs.
Amount due to related companies are unsecured, interest-free and are repayable on demand.
Elec & Eltek International Company Limited
Annual Report 2008
94
Notes to the Financial StatementsFor the year ended 31 December 2008
23. OTHER PAYABLES
THE GROUP THE COMPANY 2008 2007 2008 2007
US$’000 US$’000 US$’000 US$’000
Accrued expenses 15,148 17,993 119 180
Financial guarantee contracts – – 185 524
Other payables 23,472 14,661 – 53
38,620 32,654 304 757
The Group and the Company’s other payables that are not denominated in the functional
currencies of the respective entities are as follows:
THE GROUP THE COMPANY 2008 2007 2008 2007
US$’000 US$’000 US$’000 US$’000
Denominated in:
Chinese Renminbi 12,660 5 – –
Euro 4,053 – – –
Hong Kong Dollars 3,142 2,554 – –
Japanese Yen 940 – – –
Singapore Dollars 174 235 119 179
United States Dollars 36 1,881 – –
24. DEFERRED TAXATION
The following are the major deferred tax liabilities and assets recognised by the Group, and the
movements thereon, during the current and prior reporting periods:
THE GROUP 2008 2007
US$’000 US$’000
Deferred tax assets 1,446 1,351
Deferred tax liabilities (1,998 ) (1,657 )
Elec & Eltek International Company Limited
Annual Report 2008
95
Notes to the Financial Statements
24. DEFERRED TAXATION (Continued)
Deferred tax assets
Decelerated tax depreciation Others Total US$’000 US$’000 US$’000
THE GROUPAt 1 January 2007 1,124 121 1,245
Currency realignment 73 – 73
(Charge) Credit to profit and loss
statement for the year (15 ) 48 33
At 31 December 2007 and 1 January 2008 1,182 169 1,351
Currency realignment 82 – 82
(Charge) Credit to profit and loss
statement for the year (13 ) 26 13
At 31 December 2008 1,251 195 1,446
Deferred tax liabilities
Accelerated tax Undistributed depreciation earnings Total US$’000 US$’000 US$’000
THE GROUPAt 1 January 2007 (1,780 ) – (1,780 )
Currency realignment 6 – 6
Credit to profit and loss statement
for the year 117 – 117
At 31 December 2007 and 1 January 2008 (1,657 ) – (1,657 )
Currency realignment (13 ) – (13 )
Credit (Charge) to profit and loss
statement for the year 258 (586 ) (328 )
At 31 December 2008 (1,412 ) (586 ) (1,998 )
At the balance sheet date, the Group has unutilised tax losses of US$29.03 million (2007:
US$15.84 million) available for offset against future profits. No deferred tax asset has been
recognised (2007: US$ Nil) due to the unpredictability of future profit streams.
Elec & Eltek International Company Limited
Annual Report 2008
96
Notes to the Financial StatementsFor the year ended 31 December 2008
25. SHARE CAPITAL
THE GROUP AND THE COMPANY 2008 2007
No. of Shares US$’000 No. of shares US$’000
Issued and fully paid:
At beginning of financial year 179,148,062 97,760 178,854,462 97,069
Issue pursuant to the exercise
of share options – – 780,600 1,587
179,148,062 97,760 179,635,062 98,656
Purchase of treasury shares (261,000 ) (460 ) (487,000 ) (896 )
At end of financial year 178,887,062 97,300 179,148,062 97,760
The holders of ordinary shares are entitled to receive dividends as and when declared by the
Company. All ordinary shares carry one vote per share without restriction and no par value. The
new shares issued in 2007 rank pari passu to existing ordinary shares.
The Company acquired 261,000 (2007: 487,000) shares of its own shares through on market
purchases on the Singapore Exchange Securities Trading Limited during the financial year.
Such shares were held as treasury shares, with no voting rights and dividend entitlements, for
future application. The total consideration paid to acquire the shares was US$460,000 (2007:
US$896,000) and this was deducted against shareholders’ equity.
Details of the outstanding options to subscribe for unissued ordinary shares of the Company
are set out in Note 26.
As at the end of the financial year, there are outstanding options granted to directors and
employees of the Group and associates of controlling shareholders to subscribe for unissued
shares totalling 9,333,800 (2007: 10,687,000) ordinary shares as described in the report of
the directors.
Elec & Eltek International Company Limited
Annual Report 2008
97
Notes to the Financial Statements
26. SHARE-BASED PAYMENTS
The Company has granted share options to eligible employees under the 2002 Elec & Eltek
Employees’ Share Option Scheme (the “2002 Scheme”) which was adopted from 12 November
2002. The 2002 Scheme was terminated in November 2007, at the expiry of its duration of 5
years, without affecting the rights of holders of any options granted and outstanding under the
2002 Scheme.
During the financial year, a new share option scheme, the 2008 Elec & Eltek Employees’ Share
Option Scheme (the “2008 Scheme”) was approved by the shareholders at the Extraordinary
General Meeting held on 21 April 2008 and was adopted by the Company on 9 May 2008 upon
fulfilment of all the conditions precedent as set out in Rule 2 of the 2008 Scheme. No option
was granted by the Company pursuant to the 2008 Scheme during the financial year.
The 2008 Scheme is open to full-time employees and directors of any company within the
Group, the parent group and of an associated company of the Company, subject to certain
conditions being satisfied.
The 2008 Scheme entitles the option holders to exercise their options and subscribe for new
ordinary shares in the Company either at an “Exercise Price”, which equal to the average of
the last dealt prices of the Company’s shares for a period of five consecutive market days
immediately preceding the relevant date of grant, or at a discount to the Exercise Price as
defined earlier, whereby the discount shall not exceed 20% of the Exercise Price.
Options granted at the Exercise Price may be exercised after the first anniversary of the date of
grant and expiring on the fifth anniversary of the date of grant. Options granted at a discount to
the Exercise Price may only be exercised after the second anniversary of the date of grant and
expiring on the fifth anniversary of the date of grant.
The duration of the 2008 Scheme is ten years and the total number of shares that may be issued
shall not exceed 10% of the total number of shares in issue as at the adoption date or subject
to certain conditions being satisfied, 15% of the total issued shares of the Company excluding
treasury shares from time to time.
The Company did not grant any share option in both years.
Elec & Eltek International Company Limited
Annual Report 2008
98
Notes to the Financial StatementsFor the year ended 31 December 2008
26. SHARE-BASED PAYMENTS (Continued)
Information with respect to the movement of share options of the Company during the current
financial year is as follows:
Balance Balance as at as at 1 January 31 December SubscriptionDate of grant 2008 Lapsed 2008 price Expiry date US$
24.6.2005 9,579,000 (1,198,200 ) 8,380,800 2.033 24.5.2010
29.9.2005 180,000 (60,000 ) 120,000 2.375 4.9.2010
12.12.2006 928,000 (95,000 ) 833,000 2.400 12.11.2011
10,687,000 (1,353,200 ) 9,333,800
Information with respect to the movement of share options of the Company during the last
financial year is as follows:
Balance Balance as at as at 1 January 31 December SubscriptionDate of grant 2007 Lapsed Exercised 2007 price Expiry date US$
24.6.2005 10,706,400 (346,800 ) (780,600 ) 9,579,000 2.033 24.5.2010
29.9.2005 180,000 – – 180,000 2.375 4.9.2010
12.12.2006 1,020,000 (92,000 ) – 928,000 2.400 12.11.2011
11,906,400 (438,800 ) (780,600 ) 10,687,000
In the above tables, adjustments were made to the subscription price and number of share
options granted on 24 June 2005 and 29 September 2005 under the 2002 Scheme with effect
from 13 October 2005, upon the bonus issue of shares on the basis of one (1) bonus share
for every five (5) ordinary shares held in the capital of the Company. Such adjustments were
reviewed by the Company’s Employees’ Share Option Scheme Committee.
Elec & Eltek International Company Limited
Annual Report 2008
99
Notes to the Financial Statements
26. SHARE-BASED PAYMENTS (Continued)
Details of the share options and the estimated fair value of the options are as follows:
Option 1 Option 2 Option 3
Date of grant 24 June 2005 29 September 2005 12 December 2006
Estimated fair value per option US$0.2033 US$0.1997 US$0.3293
These fair values were calculated using the Trinomial Lattice Model. The inputs into the model
were as follows:
Option 1 Option 2 Option 3
Share price at grant date US$2.53 US$2.92 US$2.74
Subscription price US$2.033 * US$2.375 * US$2.40
Expected volatility 25.4% 21.2% 36.6%
Expected life (years) 5 5 5
Risk free interest rate 3.7% 4.2% 3.7%
Expected dividend yield 7.5% 7.5% 7.5%
* The subscription price reflected are after adjustment made to effect the bonus issue of shares on
the basis of one bonus share for every five ordinary shares held in the capital of the Company on
13 October 2005.
Expected volatility was determined by calculating the historical volatility of the Company’s
share price over the previous five years. The expected life used in the model has been
adjusted, based on management’s best estimate, for the effects of non-transferability, exercise
restrictions and behavioral considerations.
As at balance sheet date, the total exercisable share options were 9,333,800 (2007:
10,687,000).
There was no options exercised during the year. In 2007, the weighted average exercise price
was US$2.033 and the weighted share price at the date of exercise for the share options
exercised was US$2.68. The share options outstanding at the end of year have a weighted
average contracted age of 2.5 years (2007: 3.5 years).
The Group and the Company recognised total expenses of US$361,000 (2007: US$570,000)
related to equity-settled share-based payment transactions during the year.
Elec & Eltek International Company Limited
Annual Report 2008
100
Notes to the Financial StatementsFor the year ended 31 December 2008
27. DISPOSAL OF A SUBSIDIARY/ASSETS AND LIABILITIES HELD FOR SALE
On 30 October 2007, the Company entered into an agreement to dispose of its entire equity
interest in Elec & Eltek Electronic (Kunshan) Company Limited (“E&E Kunshan”) to a subsidiary
of its ultimate holding company. Such disposal was completed on 4 May 2008 on which date
the control of E&E Kunshan was passed to the subsidiary of its ultimate holding company. The
assets and liabilities of E&E Kunshan had been classified as held for sale on 31 December
2007.
The net assets of E&E Kunshan at the date of disposal and as at 31 December 2007 were as
follows:
4 May 31 December
2008 2007
US$’000 US$’000
Carrying values of net assets:
Non-current asset
Property, plant and equipment 10,153 10,115
Current assets
Other receivables 370 370
Bank balances and cash 469 5,136
Total current assets 839 5,506
Total assets 10,992 15,621
Current liabilities
Trade and other payables (7,918 ) (12,547 )
Total current liabilities (7,918 ) (12,547 )
3,074 3,074
Assignment of intra-group debts 4,644Gain on disposal 590
Total consideration 8,308
Satisfied by:
Cash received in 2007 8,308
Net cash outflow arising on disposal (469 )
The disposal of E&E Kunshan had no significant impact on the Group’s results and cashflows
in prior year and the period up to date of disposal.
Elec & Eltek International Company Limited
Annual Report 2008
101
Notes to the Financial Statements
28. RETIREMENT BENEFIT OBLIGATIONS
Defined contribution plansThe employees of the Group that are located in Singapore, the PRC and Hong Kong are
members of the Central Provident Fund Board in Singapore, a state-sponsored retirement
benefit plan in the PRC and Mandatory Provident Fund Scheme in Hong Kong, operated by
the Government of Singapore, the PRC and Hong Kong, respectively. The Company and the
subsidiary companies are required to contribute a specified percentage of payroll costs to the
retirement benefit schemes to fund the benefits. The only obligation of the Group with respect
to the retirement benefit plans is to make the specified contributions.
The total expense recognised in the profit and loss statement of US$2,872,000 (2007:
US$3,044,000) represents contributions payable to these plans by the Group at rates specified
in the rules of the plans. The amounts were paid over subsequent to the balance sheet date.
29. CONTINGENT LIABILITIES
THE GROUP THE COMPANY 2008 2007 2008 2007
US$’000 US$’000 US$’000 US$’000
Bank guarantees given to third
parties (unsecured) 779 793 – –
Corporate guarantees given by the
Company to secure bank credit
facilities granted to subsidiary
companies (unsecured) – – 348,268 272,377
The Group’s subsidiary, Kaiping Elec & Eltek No.3 Company Limited (“KPEE#3”) is currently
involved in potential lawsuits, claims and proceedings with one of our PRC customers
amounting to approximately RMB30.0 million, arising from some negative feedback from the
end users of the assembled products using PCBs supplied by KPEE#3. At the same time, the
Group is now recovering the long overdue trade receivables of approximately RMB1.0 million
from the same customer.
Based on the legal advice obtained by the Group, the Board is of the opinion that the
abovementioned claim has no merit and the potential lawsuit will not have a material adverse
effect on the consolidated financial position of the Group.
Elec & Eltek International Company Limited
Annual Report 2008
102
Notes to the Financial StatementsFor the year ended 31 December 2008
30. CAPITAL COMMITMENTS
THE GROUP 2008 2007
US$’000 US$’000
Capital expenditure not provided for in the
financial statements:
Commitments for capital contributions in
subsidiary companies 17,925 17,697
Commitments in respect of contracts placed for
plant expansion 12,968 26,629
30,893 44,326
31. OPERATING LEASES ARRANGEMENT
The Group as lessee
THE GROUP 2008 2007
US$’000 US$’000
Minimum lease payments under operating leases
recognised as an expense in the current year 781 628
At the balance sheet date, the Group had outstanding commitments under non-cancellable
operating leases, when fall due as follows:
THE GROUP 2008 2007
US$’000 US$’000
Within one year 361 430
In two to five years 272 341
Total 633 771
Operating lease payments represent rental payable by the Group of certain of its office
properties and leases are negotiated for an average of 2 years.
Elec & Eltek International Company Limited
Annual Report 2008
103
Notes to the Financial Statements
31. OPERATING LEASES ARRANGEMENT (Continued)
The Group as lessorThe Group rents outs one of its investment properties in the People’s Republic of China under
operating leases. Property rental income earned during the year was US$1,773,150 (2007:
US$92,850). This property has committed tenant for the next four years.
At the balance sheet date, the Group has contracted with tenant for the following future
minimum lease payments:
THE GROUP 2008 2007
US$’000 US$’000
Within one year 1,513 1,309
In the second to fifth years inclusive 4,390 5,456
5,903 6,765
32. INFORMATION BY SEGMENT ON GROUP’S OPERATIONS
The Group operates principally in one business segment, namely, the manufacture and
distribution of PCBs. All the Group’s productive assets are employed in Asia with plants located
in Hong Kong, Thailand and the PRC. The analysis of the Group’s revenue, results, assets
and liabilities are set out in the consolidated profit and loss account and consolidated balance
sheet.
Revenue by geographical areaThe sale of goods of the Group by geographical area segments, which is based upon the
shipment locations, are provided below:
THE GROUP 2008 2007
US$’000 US$’000
Asia
The People’s Republic of China (including Hong Kong) 297,531 291,300
South East Asia 100,631 114,793
Others 15,108 21,973
413,270 428,066
Europe 68,966 104,331
North and Central America 28,438 35,011
Rest of the World 7,257 4,866
517,931 572,274
Elec & Eltek International Company Limited
Annual Report 2008
104
Notes to the Financial StatementsFor the year ended 31 December 2008
32. INFORMATION BY SEGMENT ON GROUP’S OPERATIONS (Continued)
Assets and capital expenditure by geographical areaThe following table showing the carrying amount of segment assets and capital expenditure by
geographical area (based on location of assets):
The People’s Republic of China (including Hong Kong and Macao) Thailand Others Total US$’000 US$’000 US$’000 US$’000
31 December 2008
Segment assets 580,184 60,669 421 641,274
Investment in an associate – – 8,388 8,388
Total assets 649,662
Capital expenditure:
Property, plant and equipment 77,010 525 74 77,609
31 December 2007
Segment assets 580,359 67,284 685 648,328
Investment in an associate – – 8,169 8,169
Total assets 656,497
Capital expenditure:
Property, plant and equipment 46,326 547 127 47,000
Elec & Eltek International Company Limited
Annual Report 2008
105
Statement of Directors
In the opinion of the directors, the consolidated financial statements of the Group and the balance
sheet and statement of changes in equity of the Company as set out on page 45 to 104 are drawn
up so as to give a true and fair view of the state of affairs of the Group and the Company as at 31
December 2008 and of the results, changes in equity and cash flows of the Group and changes in
equity of the Company for the year ended and at the date of this statement, there are reasonable
grounds to believe that the Company will be able to pay its debts when they fall due.
On behalf of the Board
Chadwick Mok Cham HungVice-Chairman
Chan Wing KwanDirector
26 February 2009
Elec & Eltek International Company Limited
Annual Report 2008
106
SGX Listing Manual Requirements
1. Directors’ Remuneration
The following information relates to remuneration of directors of Elec & Eltek International
Company Limited.
Number of Directors in remuneration bands
Group 2008 2007
S$500,000 (US$353,600 equivalent and above) – 3
S$250,000 to S$499,999
(US$176,800 to US$353,600 equivalent) 5 2
Below S$250,000 (US$176,800 equivalent) 5 3
Total 10 8
The number of directors disclosed above includes director who resigned during the financial
year ended 31 December 2008. In addition, the four directors nominated from Kingboard
Chemical Holdings Limited, namely, Messrs Cheung Kwok Wing, Chadwick Mok Cham Hung,
Chan Wing Kwan and Chang Wing Yiu did not receive any remuneration from the Company or
from any of its subsidiaries.
Summary of Directors’ remuneration (in percentage terms) for the financial year ended 31 December 2008
OtherName of Director Salary Bonus Fees # Benefits Total * % % % % %
Chadwick Mok Cham Hung – – – – –
Sammy Leung Tin Po
(resigned on 1 February 2008) 98 – – 2 100
Li Muk Kam 78 18 – 4 100
Philip Chan Sai Kit 76 21 – 3 100
Clement Sun 73 23 – 4 100
Claudia Heng Nguan Leng 73 15 – 12 100
Li Chiu Cheuk 73 24 – 3 100
Chan Wai Leung 87 9 – 4 100
Cheung Kwok Wing – – – – –
Chan Wing Kwan – – – – –
Chang Wing Yiu – – – – –
Philip Wong Yu Hong – – 100 – 100
Larry Lai Chong Tuck – – 100 – 100
Raymond Leung Hai Ming – – 100 – 100
# subject to approval by the shareholders at each annual general meeting.
* excluding share options which are disclosed in the Report of the Directors.
Elec & Eltek International Company Limited
Annual Report 2008
107
SGX Listing Manual Requirements
2. Remuneration Data
The remuneration paid to the top five key management executives who are not Directors of
the Company fall within the remuneration band of S$199,214 (US$140,884 equivalent) to
S$415,012 (US$293,497 equivalent) for the financial year ended 31 December 2008.
During the financial year under review, no employee whose annual remuneration exceeded
S$150,000 was related to the Chairman, the Chief Executive Officer or any other Director of the
Company.
3. Interested Person Transactions
The amount of interested person transactions to be disclosed pursuant to Rule 920 (1)(a)(ii) of
the Listing Manual of the Singapore Exchange Securities Trading Limited for the financial year
ended 31 December 2008 are as follows:
Aggregate value of all interested person transactions during the financial year (including transactions less than S$100,000) Excluding transactions conducted under Conducted under shareholders’ mandate shareholders’ mandate Name of Interested Person pursuant to Rule 920 pursuant to Rule 920US$’000 2008 2007 2008 2007
Sale of plant and equipment Techwise (Macao Commercial Offshore)
Circuits Limited – 161 – –
– 161 – –
Sale of subsidiaryTop Faith PCB (Kunshan) Co. Ltd. – 8,308 – –
– 8,308 – –
Elec & Eltek International Company Limited
Annual Report 2008
108
SGX Listing Manual Requirements
3. Interested Person Transactions (Continued)
Aggregate value of all interested person transactions during the financial year (including transactions less than S$100,000) Excluding transactions conducted under Conducted under shareholders’ mandate shareholders’ mandate Name of Interested Person pursuant to Rule 920 pursuant to Rule 920US$’000 2008 2007 2008 2007
Purchases of goods and servicesElec & Eltek Corporate Services Limited 509 372 – –
Elec & Eltek Display Technology
(Qingyuan) Company Limited – 118 – –
Heng Yang Kingboard Chemical Co., Ltd. – – 7,405 5,648
Hong Kong Fibre Glass Company Limited – – 2,884 5,976
Huizhou Chung Shun Chemical Co., Ltd. – – 346 –
Jiangmen Glory Faith PCB Co. Ltd. – – 19 –
Joyful Source Group Limited 1,507 2,416 – –
Kingboard Copper Foil (Macao
Commercial Offshore) Limited – – 44,527 51,784
Kingboard Investments Limited 775 410 – –
Kingboard Laminates (Macao
Commercial Offshore) Limited – – 44,287 50,313
Kingboard (Lian Zhou) Electronic
Materials Ltd. – – 14,135 10,209
Techwise (Macao Commercial Offshore)
Circuits Limited – – – 75
Techwise Circuits Co. Ltd. – 6 – –
Top Faith PCB Co. Ltd. – – 51 284
2,791 3,322 113,654 124,289
Provision of goods and servicesElec & Eltek Display Technology Limited 42 45 – –
E & E Magnetic Products Limited 7 13 – –
Express Electronics (Suzhou) Co. Ltd. – – 12 –
Jiangmen Glory Faith PCB Co. Ltd. – 3 4,687 2,819
Kingboard Laminates (Macao
Commercial Offshore) Limited 259 – – –
Smark Foundate (H.K.) Ltd. – 1 – –
Techwise (Macao Commercial Offshore)
Circuits Limited – 7 332 1,230
Top Faith PCB Co. Ltd. – 1 573 2
Topsearch Printed Circuits (H.K.) Ltd. – 10 – –
Shenzhen Wing Fung PCB Company
Limited – 1 124 118
308 81 5,728 4,169
Elec & Eltek International Company Limited
Annual Report 2008
109
SGX Listing Manual Requirements
4. Shareholding Statistics as at 3 March 2009
Number of shares in issue : 178,887,062 (excluding treasury shares)
Class of Shares : Ordinary Shares
Voting Rights : One vote per share
Distribution of Shareholdings
No. ofSize of Shareholdings Shareholders % No. of Shares %
1 – 999 147 6.50 46,660 0.03
1,000 – 10,000 1,714 75.84 5,918,475 3.31
10,001 – 1,000,000 388 17.17 13,238,924 7.40
1,000,001 and above 11 0.49 159,683,003 89.26
Total 2,260 100.00 178,887,062 100.00
As at 3 March 2009, 18.37% of the Company’s total number of issued ordinary shares,
excluding treasury shares, was held in the hands of the public. Accordingly, the Company
confirms that Rule 723 of the Listing Manual has been complied with.
SUBSTANTIAL SHAREHOLDERS (HOLDING 5% AND ABOVE)(as shown in the Register of Substantial Shareholders)
No. of Name of substantial shareholders shares held
Hallgain Management Limited (“HML”)(1) 128,278,165
Kingboard Chemical Holdings Limited (“Kingboard”)(2) 128,278,165
Cheung Kwok Wing(1) 128,338,165
Ease Ever Investments Limited (“Ease Ever”)(3) 90,741,550
Elec & Eltek International Holdings Limited (“EEIH”) 90,741,550
Elitelink Holdings Limited (“Elitelink”) 34,321,615
Cheah Cheng Hye(4) 16,069,800
To Hau Yin(4) 16,069,800
Hang Seng Bank Trustee International Limited (“HSBTIL”)(4) 16,069,800
Cheah Company Limited (“CCL”)(4) 16,069,800
Cheah Capital Management Limited (“CCML”)(4) 16,069,800
Value Partners Group Limited (“VPGL”)(4) 16,069,800
Value Partners Limited (“VPL”)(5) 16,069,800
Elec & Eltek International Company Limited
Annual Report 2008
110
SGX Listing Manual Requirements
4. Shareholding Statistics as at 3 March 2009 (Continued)
(1) HML’s deemed interest arises from its direct shareholding interest in Kingboard of 30.97% and Mr. Cheung Kwok Wing holds approximately 23% in HML.
(2) Kingboard’s deemed interest arises from its direct shareholding interest in Elitelink, Kingboard Investments Limited of 100%, direct shareholding interest of 11.59% in EEIH and deemed interest of 88.41% in EEIH by virtue of its shareholding interest in Ease Ever and Kingboard Investments Limited.
(3) Ease Ever’s deemed interest arises from its direct shareholding interest in EEIH of 77.34%.
(4) Cheah Cheng Hye and To Hau Yin are deemed interested in the shares held by the funds managed by VPL, by virture of them being the founder and beneficiary respectively of a discretionary trust, The C H Cheah Family Trust, with HSBTIL as the Trustee. HSBTIL owns 100% in CCL which in turn owns 100% in CCML which in turn owns 35.65% in VPGL which in turn owns 100% in VPL.
(5) VPL, a fund manager, is deemed interested by virtue of shares held directly by the funds under its management.
Twenty Largest Shareholders
No. Name No. of Shares %
1 Elec & Eltek International Holdings Limited 90,741,550 50.73
2 Elitelink Holdings Limited 34,321,615 19.19
3 HSBC (Singapore) Nominees Pte Ltd 12,412,466 6.94
4 Raffles Nominees Pte Ltd 4,828,760 2.70
5 DBS Nominees Pte Ltd 4,207,243 2.35
6 Citibank Nominees Singapore Pte Ltd 3,336,800 1.87
7 CLSA Singapore Pte Ltd 3,218,600 1.80
8 DBSN Services Pte Ltd 2,317,089 1.30
9 Merrill Lynch (S’pore) Pte Ltd 1,817,808 1.02
10 DBS Vickers Securities (S) Pte Ltd 1,445,196 0.81
11 Li Muk Kam 1,035,876 0.58
12 UOB Kay Hian Pte Ltd 615,040 0.34
13 Phillip Securities Pte Ltd 370,698 0.21
14 Heng Nguan Leng 322,800 0.18
15 Cosmic Insurance Corporation Limited – SIF 275,712 0.15
16 Tan Her Lian 257,000 0.14
17 Tok Ching Ka 250,000 0.14
18 Leap International Pte Ltd 240,000 0.13
19 Huashin Investments Pte Ltd 185,000 0.10
20 Tan Ah Chai 180,000 0.10
Total 162,379,253 90.78
The shareholding statistics shown above exclude 748,000 shares, representing 0.42% of the
total number of issued ordinary shares excluding treasury shares, bought back by the Company
and held as treasury shares as at 3 March 2009. The percentage of issued ordinary shares is
calculated based on the number of issued ordinary shares of the Company as at 3 March 2009
excluding treasury shares.
Elec & Eltek International Company Limited
Annual Report 2008
111
Notice of Annual General Meeting
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the Company will be held at the Hullet
Room, Level 4 Raffles City Convention Centre – Fairmont Singapore, 80 Bras Basah Road, Singapore
189560 on 16 April 2009, Thursday at 2:00 p.m. to transact the following ordinary and special
businesses:
ORDINARY BUSINESSES:
1. To receive and adopt the Directors’ Report and the Audited Accounts of the Company for the
financial year ended 31 December 2008 with the Auditors’ Report thereon.
2. To declare a one-tier tax exempt final dividend of 5.0 United States cents per share and a one-
tier tax exempt special dividend of 5.5 United States cents per share for the financial year
ended 31 December 2008.
3. To re-elect Mr. Cheung Kwok Wing, retiring by rotation in accordance with Articles 95(2)
and 95(4) of the Company’s Articles of Association (the “Articles”), as Director of the
Company. [see Note (1) below]
4. To re-elect Mr. Chan Wing Kwan, retiring by rotation in accordance with Articles 95(2) and
95(4) of the Articles, as Director of the Company. [see Note (1) below]
5. To re-elect Mr. Chadwick Mok Cham Hung, retiring by rotation in accordance with Articles
95(2) and 95(4) of the Articles, as Director of the Company.
6. To re-elect Ms. Claudia Heng Nguan Leng, retiring by rotation in accordance with Articles 95(2)
and 95(4) of the Articles, as Director of the Company.
7. To re-appoint Dr. Philip Wong Yu Hong, pursuant to Section 153(6) of the Companies Act,
Chapter 50 of Singapore Statutes (the “Act”), as Director of the Company to hold office until
the conclusion of the next annual general meeting of the Company. [see Note (2) below]
8. To approve Directors’ fees of HK$300,000 for the financial year ending 31 December 2009.
[see Note (3) below]
9. To re-appoint Deloitte & Touche LLP as Auditors of the Company and authorise the Directors to
fix their remuneration.
Elec & Eltek International Company Limited
Annual Report 2008
112
Notice of Annual General Meeting
SPECIAL BUSINESSES:
10. To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or
without any modification:
10.1 Authority to issue shares pursuant to the exercise of share options granted under
the 2002 Elec & Eltek Employees’ Share Option Scheme and the 2008 Elec & Eltek
Employees’ Share Option Scheme (collectively the “Option Schemes”) [see Note (4)
below]
That approval be and is hereby given to the Directors or a Committee of the Directors of
the Company to allot and issue from time to time such number of new ordinary shares
in the capital of the Company as may be required to be issued pursuant to the exercise
of share options granted under the Option Schemes in accordance with the provisions
of the Option Schemes; PROVIDED ALWAYS that the aggregate number of new ordinary
shares to be issued pursuant to the Option Schemes shall not exceed 15% of the issued
shares in the capital of the Company, excluding treasury shares, from time to time.
10.2 Authority to issue new shares [see Note (5) below]
That pursuant to Section 161 of the Act and Rule 806 of the Listing Manual of Singapore
Exchange Securities Trading Limited (the “SGX-ST”), authority be and is hereby given to
the Directors to
(a) (i) issue shares in the capital of the Company (“shares”) whether by way of
rights, bonus or otherwise; and/or
(ii) make or grant offers, agreements or options (collectively “Instruments”)
that might or would require shares to be issued, including but not limited to
the creation and issue of (as well as adjustments to) warrants, debentures
or other instruments convertible into shares,
at any time and upon such terms and conditions and for such purposes and to
such persons as the Directors may in their absolute discretion deem fit; and
(b) issue shares in pursuance of any Instrument made or granted by the Directors
while this Resolution was in force, notwithstanding that the authority granted by
this Resolution may have ceased to be in force at the time of such issuance of
shares.
Elec & Eltek International Company Limited
Annual Report 2008
113
Notice of Annual General Meeting
PROVIDED THAT
(1) the aggregate number of shares to be issued pursuant to this Resolution (including
shares to be issued in pursuance of Instruments made or granted pursuant to this
Resolution):
(i) by way of renounceable rights issues on a pro-rata basis to shareholders
of the Company (“Renounceable Rights Issues”) shall not exceed 100% of
the total number of issued shares in the capital of the Company excluding
treasury shares (as calculated in accordance with sub-paragraph (2)
below); and
(ii) otherwise than by way of Renounceable Rights Issues (“Other Share
Issues”) shall not exceed 50% of the total number of issued shares in
the capital of the Company excluding treasury shares (as calculated in
accordance with sub-paragraph (2) below), of which the aggregate number
of shares to be issued other than on a pro-rata basis to shareholders of
the Company shall not exceed 20% of the total number of issued shares
in the capital of the Company excluding treasury shares (as calculated in
accordance with sub-paragraph (2) below),
for the avoidance of doubt, the shares issued pursuant to the Renounceable
Rights Issues and Other Share Issues shall not, in aggregate, exceed 100% of the
total number of issued shares in the capital of the Company excluding treasury
shares (as calculated in accordance with sub-paragraph (2) below);
(2) (subject to such manner of calculation and adjustments as may be prescribed
by the SGX-ST) for the purpose of determining the aggregate number of shares
that may be issued under sub-paragraph (1) above, the percentage of issued
shares shall be based on the total number of issued shares in the capital of the
Company, excluding treasury shares, at the time this Resolution is passed, after
adjusting for:
(i) new shares arising from the conversion or exercise of any convertible
securities or share options or vesting of share awards which are outstanding
or subsisting at the time this Resolution is passed; and
(ii) any subsequent bonus issue, consolidation or subdivision of the shares;
(3) in exercising the authority conferred by this Resolution, the Company shall comply
with the provisions of the Listing Manual of the SGX-ST for the time being in force
(unless such compliance has been waived by the SGX-ST) and the Articles for the
time being; and
Elec & Eltek International Company Limited
Annual Report 2008
114
Notice of Annual General Meeting
(4) unless revoked or varied by the Company in general meeting, the authority
conferred by this Resolution shall continue in force until the conclusion of the
next annual general meeting of the Company or the date by which the next annual
general meeting of the Company is required by law to be held, whichever is the
earlier.
BY ORDER OF THE BOARD
CLAUDIA HENG NGUAN LENGCompany Secretary
Singapore
31 March 2009
Notes:
(1) Mr. Cheung Kwok Wing and Mr. Chan Wing Kwan will, upon re-election as Directors, remain as members
of the Employees’ Share Option Scheme Committee of the Company.
(2) Dr. Philip Wong Yu Hong will, upon re-election as a Director, remain as a member and as the Chairman of
the Remuneration Committee and the Nominating Committee, and as a member of the Audit Committee
of the Company.
(3) For the financial year ended 31 December 2008, the approved Directors’ fee was also HK$300,000.
(4) Resolution 10.1, if passed, will empower the Directors of the Company to issue shares in the capital of
the Company pursuant to the exercise of share options granted under the Option Schemes, up to and
not exceeding in total 15% of the issued shares in the capital of the Company, excluding treasury shares,
from time to time.
(5) Resolution 10.2, if passed, will authorise the Directors of the Company to issue shares and Instruments
in the Company up to 50% of the Company’s total number of issued shares excluding treasury shares
(calculated as described in Resolution 10.2) with an aggregate sub-limit of 20% of the Company’s total
number of issued shares excluding treasury shares (calculated as described in Resolution 10.2) for any
issues not made on a pro-rata basis to shareholders of the Company.
(6) A member entitled to attend and vote at the Annual General Meeting is entitled to appoint a proxy to
attend and vote on his behalf. A proxy need not also be a member. The instrument appointing a proxy
must be deposited at the registered office of the Company at 80 Raffles Place, #33-00 UOB Plaza 1,
Singapore 048624, not less than 48 hours before the time of the meeting.
ANNUAL GENERAL MEETINGProxy Form
Registered Office: 80 Raffles Place #33-00, UOB Plaza 1, Singapore 048624
(Please read notes overleaf carefully before completing this Form)
I / We
NRIC/Passport No./Company Registration No.
of
(Address)
being a member(s) of Elec & Eltek International Company Limited (the “Company”) hereby appoint:
Name Address NRIC/Passport No.
No. ofShares
Proportion of Shareholding (%)
and/or (delete as appropriate)(The next row should be completed only where it is desired to appoint two proxies or an alternate proxy)
as my/our proxy/proxies to attend and to vote for me/us on my/our behalf and if necessary, to demand a poll at the Annual General Meeting (“AGM”) of the Company to be held at the Hullet Room, Level 4 Raffles City Convention Centre – Fairmont Singapore, 80 Bras Basah Road, Singapore 189560 on 16 April 2009, Thursday, at 2:00 p.m., and at any adjournment thereof, for the purpose of considering and if thought fit, passing with or without modifications, the Resolutions as set out in the Notice convening the AGM, as hereunder indicated.
(Please indicate with an “X” in the spaces provided below whether your wish your vote(s) to be cast for or against the respective Resolutions as set out in the Notice convening the AGM. In the absence of specific directions, the proxy/proxies will vote or abstain from voting as he/they may think fit on any matter arising at the AGM.)
Ordinary Resolutions
To be used ona show of hands
To be used inthe event of a poll
For* Against* For** Against**
1 Adoption of the Directors’ Report and the Audited Accounts for the financial year ended 31 December 2008 with the Auditors’ Report thereon
2 Declaration of dividends
3 Re-election of Mr. Cheung Kwok Wing as Director
4 Re-election of Mr. Chan Wing Kwan as Director
5 Re-election of Mr. Chadwick Mok Cham Hung as Director
6 Re-election of Ms. Claudia Heng Nguan Leng as Director
7 Re-appointment of Dr. Philip Wong Yu Hong as Director
8 Approval of Directors’ fees for financial year ending 31 December 2009
9 Re-appointment of Auditors and authorisation of Directors to fix Auditors’ remuneration
10.1 Authority to allot and issue shares pursuant to employees’ share option schemes
10.2 Authority of Directors to issue new shares
* Please indicate your vote “For” or “Against”.
** If you wish to use all your votes “For” or “Against”, please indicate with an “X” within the box provided. Otherwise, please indicate number of votes.
Dated this day of 2009
Signature(s) of Member(s)/Common Seal
Total No. of Shares in No. of Shares
CDP Register
Register of Members
✄
IMPORTANT (PLEASE READ NOTES BELOW BEFORE COMPLETING THIS PROXY FORM)
Notes:
1. Please insert the total number of shares in the capital of the Company (“Shares”) held by you. If you have Shares entered against your name in the
Depository Register (as defined in Section 130A of the Companies Act, Chapter 50 of Singapore) (the “Act”), you should insert that number of Shares.
If you have Shares registered in your name in the Register of Members of the Company, you should insert that number of Shares. If you have Shares
entered against your name in the Depository Register and Shares registered in your name in the Register of Members, you should insert the aggregate
number of Shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number of Shares is
inserted, this proxy form will be deemed to relate to all the Shares held by you.
2. A member entitled to attend and vote at the AGM of the Company is entitled to appoint one or two proxies to attend and vote on his behalf. A proxy
need not be a member of the Company.
3. Where a member appoints two proxies, the appointment shall be invalid unless the member specifies the proportion of his shareholding (expressed as a
percentage of the whole) to be represented by each proxy.
4. This proxy form appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised in writing by the appointor.
Where the proxy form is executed by a corporation, it must be executed under its common seal or under the hand of any officer or attorney duly
authorised by the corporation.
5. Where a proxy form is signed on behalf of the appointer by an attorney, the power of attorney (or other authority) or a duly certified true copy thereof
must (failing previous registration with the Company) be lodged with the proxy form, failing which the proxy form shall be treated as invalid.
6. A corporation which is a member of the Company may authorise by resolution of its directors or other governing body, such person as it thinks fit to
act as its representative at the AGM in accordance with Section 179 of the Act. The representative attending the meeting must produce evidence of his
authority.
7. This proxy form duly executed must be deposited at the Company’s registered office at 80 Raffles Place #33-00, UOB Plaza 1, Singapore 048624 not
less than 48 hours before the time appointed for holding the AGM in order for the proxy to be entitled to attend and vote at the AGM.
8. The Company shall be entitled to reject this proxy form if it is incomplete, improperly completed, illegible or where the true intentions of the appointor
are not ascertainable from the instructions of the appointor specified in the proxy form. In addition, in the case of a member of the Company whose
Shares are entered against his name in the Depository Register, the Company may reject the proxy form deposited if such member is not shown to
have Shares entered against his name in the Depository Register 48 hours before the time appointed for holding the AGM, as certified by The Central
Depository (Pte) Limited to the Company.
9. The submission of a proxy form by a member of the Company does not preclude him from attending and voting in person at the AGM if he so wishes.
✄