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Annual Report 2004/2005

Elec Eltek&Elec & Eltek International Company Limited

(Incorporated in the Republic of Singapore)Company Registration Number 199300005H


Elec & Eltek International C

ompany Lim

itedA

nnual Report

2004/2005

CONTENTS 2 Corporate Profile3 Financial Highlights and Calendar6 Production and Market Information7 Five Years’ Financial Summary8 Corporate Information9 Functional Structure of the Group11 Chairman’s Letter14 Statement on Corporate Governance25 Profiles of Board of Directors and Core Management32 Report of the Directors39 Statement by Directors41 Statutory Auditors’ Report42 Consolidated Profit and Loss Account43 Balance Sheets44 Statements of Changes in Equity46 Consolidated Statement of Cash Flow47 Notes to the Financial Statements84 SGX Listing Manual Requirements

Corporate Profile

2 Elec & Eltek International Company Limited

Elec & Eltek International Company Limited (“Elec & Eltek”), with its regional investment office in Singapore, is

principally engaged in the manufacture and distribution of high-density double-sided and multi-layer printed circuit

boards (“PCBs”).

Founded 33 years ago in Hong Kong with no more than 40 staff, the Elec & Eltek Group today has eighteen offices

worldwide, fifteen plants across Asia — one in Hong Kong, two in Thailand and twelve in mainland China — and a

skilled and experienced workforce of over 11,000 employees.

The Group mass-produces HDI, microvia, backplanes, high-end servers and up to 36-layer PCB with production

capacity of approximately 43 million square feet per annum. Our diverse customer base includes worldwide market

leaders in different sectors, such as computer and computer peripheral, communication/networking, consumer

electronics, and automotive.

We provide “one-stop-shopping” for customers with wide array of PCBs requirements. On the upstream, through

vertical integration, our prepreg and laminate material plants in China and Thailand enhance our competitive edge in

quality, cost and delivery.

The global PCB market has continued its exponential growth over the past decade. Elec & Eltek, in this era of keen

competition and rapid changes, has maintained its premier position in PCB industry. We are equipped with high

density interconnect and high layer PCB technologies to satisfy our customers' every expectation.

Elec & Eltek’s mission is to be a leading PCB manufacturer that supplies quality high-tech PCBs in

mass volume at competitive prices with excellent services.

3Annual Report 2005

Financial Highlights and Calendar

2005 2004

US$ million US$ million

Profit and Loss Account

Turnover 438 354

Profit before taxation 51 46

Profit after taxation and minority interests but before extraordinary item 43 41

Per Share

Net earnings (US cents) – Basic 28.83 27.79

Net earnings (US cents) – Diluted 28.73 27.67

Net tangible assets (US$) 1.74 1.63

Balance Sheet

Shareholders’ funds 259 238

Total assets 531 470

Financial Ratios

Current assets: Current liabilities (ratio) 1.11 1.16

Inventory turnover period (month) 1.80 1.88

Gearing ratio 0.35 0.24

Financial Calendar 2004-2005 2003-2004

Financial year results announced on 23 August 2005 23 August 2004

Annual Report and Accounts issued on 16 September 2005 10 September 2004

Annual General Meeting held on 5 October 2005 5 October 2004

Registers of Shareholders closed on 12-13 October 2005 12-13 October 2004

Dividend paid/payable on

Interim 3 March 2005 12 March 2004

Final 20 October 2005 20 October 2004

30 June 2005

Financial Highlights and Calendar


Turnover by Geographical Locations (US$ Million)

Financial year 2005

Turnover by Layer Count (US$ Million)

% Turnover Contribution by Manufacturing Locations (US$ Million)

Financial year 2004

Financial year 2005 Financial year 2004

Financial year 2005 Financial year 2004

Double-sided51.0 (12%)

4-Layer174.6 (41%)

10-Layer & up102.9 (24%)

8-Layer34.5 (8%)

6-Layer64.9 (15%)

Double-sided46.8 (14%)

4-Layer134.9 (39%)

10-Layer & up73.6 (21%)

8-Layer32.7 (9%)

6-Layer57.5 (17%)

Hong Kong26.4 (6%)

Thailand63.0 (14%)

Mainland China348.1 (80%)

Hong Kong28.0 (8%)

Thailand51.5 (14%)


Others2.4 (1%)

Hong Kong83.9 (19%)

Singapore &Malaysia82.6 (19%)


North &Central America

33.0 (8%)

Europe79.5 (18%)

Other Asiancountries24.7 (5%)

Hong Kong51.4 (15%)

Others3.1 (1%)

Singapore &Malaysia60.4 (17%)


Asia 247.4Asia 322.6

North &Central America

23.4 (7%)

Europe80.5 (22%)

Other Asiancountries30.4 (8%)

5Annual Report 2005

0

100

200

300

400

500

20052004200320022001

2005 2004200320022001

0

20

40

60

80

20052004200320022001

0

100

200

300

400

500

600

0

10

20

30

40

50

60

20052004200320022001

340.3

244.2 245.1

354.4

437.5

54.156.9

26.328.1

14.816.6

40.643.0 44.3

47.4

53.4

29.6

24.722.7

14.2

23.5

40.6

26.1

42.6

29.6

342.1

227.4

329.4

232.5

352.4

221.6

470.5

238.3

530.7

259.0

Financial Year

Financial Year

Financial Year

Financial Year

Turnover (US$ Million) Profit Trend (US$ Million)

Earnings & Dividend Payout Trend (US$ Million)

Compare Total Assets withShareholders’ Funds (US$ Million)

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

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

Total assets

Shareholders’ funds

Dividend payout

Profit after taxation & minority interests

Production and Market Information


Production Capacity as at 30 June 2005

2005 PCB Projected Value World Market (US$ Million)

Source: BPA Feb 2005

CAAGR: Compounded Annual Average Growth Rate

Current Total PCBs Production Capacity42.9 million sq. ft. per annum

Mainland China32.4 million sq. ft. (76%)

Thailand10.0 million sq. ft. (23%)

Hong Kong0.5 million sq. ft. (1%)

PCBs with Mass

Laminate

Pathumthani1 plant

PCBRaw

Materials

Rojana1 plant

PCBs withMass

Laminate

1 plantHuangpu5 plants

PCBs withMass

Laminate

Nanjing2 plants

PCBs withMass

Laminate

Shenzhen1 plant

PCBRaw

Materials

PCBs withMass

Laminate

Kaiping4 plants

Europe $3.8 Bn Japan $8.2 Bn$3.0 Bn 5.1%$4.0 Bn 5.0%

Rest of World $1.1 Bn

N America $7.2 Bn

CIS & Eastern Europe $1.2 Bn

Asia $19.2 Bn(Ex Japan)

$12.6 Bn 13.2%$13.4 Bn 12.9%

Projected Asia (excluding Japan)Double-sided and Multi-layerPCB Production

2005 2006 2007 2008Projected PCB World Market $40.7 $44.6 $48.6 $51.7Projected Double-sided and Multi-layer PCB Market $27.0 $29.6 $32.2 $34.3PCB Market CAAGR (2003-2008)Projected Double-sided and Multi-layer PCB Production $26.7 $29.6 $32.3 $34.3PCB Production CAAGR (2003-2008)

5.1%$5.4 Bn 5.1%$6.1 Bn

$1.0 Bn 5.3%$0.4 Bn 5.3%

$3.3 Bn 2.5%$2.9 Bn 2.5%

$1.0 Bn 4.1%$0.6 Bn 4.1%

2003 2005 2008Country $ Bn $ Bn $ BnChina (Incl. HK) 5.0 7.2 11.2Korea 1.4 1.7 2.1Singapore 0.3 0.4 0.4Taiwan 2.9 3.3 4.1Rest of Asia 0.7 0.8 1.2Total 10.3 13.4 19.0

7Annual Report 2005

Five Years’ Financial Summary

2005 2004 2003 2002 2001

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

Consolidated Results

Turnover 437,510 354,388 245,080 244,165 340,277

Profit before taxation 50,910 46,406 17,358 28,243 60,016

Taxation (5,193) (3,403) (1,360) (1,749) (3,775)

Profit after taxation 45,717 43,003 15,998 26,494 56,241

Minority interests (3,103) (2,408) (1,788) (1,809) (2,837)

Profit for the year 42,614 40,595 14,210 24,685 53,404

Financial Positions

Property, plant and equipment 300,120 274,287 209,635 212,339 215,326

Intangible assets 11 71 174 252 350

Deferred tax assets 2,771 2,111 1,763 1,958 1,075

Current assets 227,775 194,002 140,778 114,883 125,309

Total assets 530,677 470,471 352,350 329,432 342,060

Non-current liabilities 51,698 50,941 18,109 19,877 9,720

Current liabilities 204,505 167,473 96,982 62,002 87,323

Total liabilities 256,203 218,414 115,091 81,879 97,043

Net assets 274,474 252,057 237,259 247,553 245,017

Represented by:

Shareholders’ funds 259,029 238,294 221,577 232,498 227,363

Minority interests 15,445 13,763 15,682 15,055 17,654

274,474 252,057 237,259 247,553 245,017

Corporate Information


BOARD OF DIRECTORS

Executive Directors

Chadwick Mok Cham Hung

Vice-Chairman

Sammy Leung Tin Po

Chief Executive Officer

Cheung Kwok Wa

Li Muk Kam

Philip Chan Sai Kit

Claudia Heng Nguan Leng

Non-executive Directors

Cheung Kwok Wing

Chairman

Chan Wing Kwan

Chang Wing Yiu

Independent Non-executive Directors

Philip Wong Yu Hong

Ann Chiang Lai Wan

Larry Lai Chong Tuck

AUDIT COMMITTEELarry Lai Chong Tuck (Chairman)

Philip Wong Yu Hong

Ann Chiang Lai Wan

NOMINATING COMMITTEEPhilip Wong Yu Hong (Chairman)

Ann Chiang Lai Wan


REMUNERATION COMMITTEEPhilip Wong Yu Hong (Chairman)

Ann Chiang Lai Wan


EMPLOYEES’ SHARE OPTION SCHEMECOMMITTEE

Cheung Kwok Wing

Chan Wing Kwan

Chang Wing Yiu

SECRETARIESClaudia Heng Nguan Leng

Marian Ho Wui Mee

REGISTERED OFFICE80 Raffles Place #25-01

UOB Plaza 1

Singapore 048624

Tel : 6535 6844

Fax: 6534 1909

PRINCIPAL OFFICE8 Shenton Way #37-03

Temasek Tower

Singapore 068811

Tel : 6226 0488

Fax: 6220 2377

Website: www.eleceltek.com

SHARE REGISTRARSLim Associates (Pte) Ltd

10 Collyer Quay #19-08

Ocean Building

Singapore 049315

STATUTORY AUDITORSErnst & Young

Certified Public Accountants

Partner: Winston Ngan

(since the financial year 30 June 2004)

SOLICITORSKhattar Wong & Partners

Chang See Hiang & Partners

PRINCIPAL BANKERSThe Hongkong and Shanghai

Banking Corporation Limited

DBS Bank Ltd

9Annual Report 2005

Functional Structure of the Group

30 June 2005

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

Elec & Eltek International Company LimitedSingapore

Elec & EltekMultilayer PCB Limited

Hong Kong (100%)

Elec & Eltek(Thailand) Limited

Thailand (100%)

Pacific Insulating Material(Thailand) Limited

Thailand (100%)

Kaiping Elec & EltekNo.3 Company Limited

China (90.1%)


China (90.1%)

Elec & Eltek (Guangzhou) Technology Company Limited

China (98%)

Nanjing Elec & EltekElectronic Co., Ltd.

China (74.1%)

Shenzhen Pacific Insulating Material Co., Ltd.

China (93.5%)

Elec & EltekInternational Limited

Hong Kong (100%)

UK Liaison OfficeGerman Liaison OfficeTaiwan Liaison Office

Elec & Eltek TechnologyResearch & Marketing Pte. Ltd.

Singapore (100%)

Malaysia Branch

Kai Ping Elec & Eltek Company Limited

China (90.1%)

Guangzhou Liaison OfficeShanghai Liaison Office

Elec & Eltek(Thailand) Limited

Thailand (100%)

Elec & EltekCompany Limited

Hong Kong (100%)

Nanjing Elec & Eltek Electronic Co., Ltd.

China (74.1%)

Elec & Eltek PrintedCircuit Board Corporation

USA (100%)

PIC Corporate ServicesLimited

Hong Kong (100%)


China (90.1%)

Elec & Eltek (Guangzhou)Electronic Company Limited

China (98%)

Guangzhou Elec & EltekMicrovia Technology Limited

China (98%)

Guangzhou Elec & EltekHigh Density InterconnectTechnology No.1Company Limited

China (98%)

Elec & EltekInternational Limited

Hong Kong (100%)

Manufacturing and Research and Development

Marketing/SalesManagement/

Corporate Services

Investment Holdings

Kai Ping Elec & EltekCompany Limited

The People’s Republic of China (“China”) (90.1%)

Chairman’s Letter


Growth vs Productivity

11Annual Report 2005

Chairman’s Letter

Dear Shareholders

It gives me great pleasure to present you the 2005

Annual Report of Elec & Eltek Group (the “Group”).

This is my first report since becoming the Chairman of

the new Board of Directors, following the acquisition of

the controlling stake made by Kingboard Chemical

Holdings Limited in the Company.

BUSINESS REVIEW

Fourth Quarter (“Q4”), financial year 2005

The Group experienced growth in all major market

sectors during the June quarter with all manufacturing

facilities operating at close to full capacity. The improved

business environment is mainly contributed by a better

global economy as well as the continued outsourcing

by original equipment manufacturers (“OEMs”) and

contract manufacturers (“CMs”).

In the June quarter, printed circuit board (“PCB”) sales

for computer & peripherals sector and communication

& networking sector increased by 10.3% and 15.2%

over the third quarter (“Q3”) of the financial year 2005,

respectively.

The proportion of 6-layer and above PCBs sales

accounted for 49.4% of the Group’s revenue in Q4

financial year 2005 compared to 41.5% in Q3 financial

year 2005, while the proportion of 2- and 4-layer PCB

sales has reduced from 58.5% in Q3 financial year 2005

to 50.6% in Q4 financial year 2005. The migration to

the higher layer count mix resulted in a 5.9% hike in the

weighted average selling prices (“ASP”) in Q4 financial

year 2005 as compared to Q3 financial year 2005.

Raw material supply and prices have stabilized since

the March quarter under a more balanced supply and

demand situation. The smooth business integration with

the Kingboard Group has given the Group an effective

vertical integration capability to ensure a steady supply

of quality raw materials at competitive prices. The Group

started to procure the critical raw materials for PCB

manufacturing, namely, prepreg, copper foil, copper clad

laminates and other essential materials from Kingboard

Group since April 2005.

In light of the above factors, the Group posted a 10.6%

growth in its Q4 financial year 2005 revenue to

US$115.2 million from Q3 financial year 2005. Net profit

attributable to shareholders rose by 51.0% to US$12.3

million in Q4 financial year 2005 compared to US$8.1

million in Q3 financial year 2005. The benefit of sourcing

critical raw materials from Kingboard Group has been

reflected in the Group’s improved gross profit margin

from 21.2% in Q3 financial year 2005 to 22.6% in Q4

financial year 2005.

Despite higher shipment in the June quarter, book-to-

bill ratio in Q4 financial year 2005 stood at 1.06 on

enlarged capacity. As at 30 June 2005, the Group’s

backlogs increased by around 10.4% over Q3 financial

year 2005 to US$38.7 million.

Full year ended 30 June 2005

Against the backdrop of positive demands and better

economies, the Group’s revenue of US$437.5 million

was the highest ever, up US$83.1 million or 23.5% from

the financial year 2004. Despite stronger revenue, the

profit attributable to shareholders only improved by 5.0%

to US$42.6 million due to higher material costs and

depreciation charges as compared to the financial year

2004.

Chairman’s Letter


US sales grew by 41.1% over the financial year 2004

after gaining market share with new customers and new

projects secured from the existing customers. Sales to

the European market has declined by a marginal 1.3%.

Sales to the Asian market increased by 30.4%, in

particular, China sales have continued its growth

momentum.

During the financial year 2005, the Group has spent

around US$58.2 million in capital expenditure in bringing

the available production capacities to around 850k sq.ft.

per week. Shipment volume for the financial year 2005

has increased by 23.5% over the financial year 2004.

Sales of PCB to computer & peripherals sector and

communication & network sector accounted for 43.6%

(financial year 2004: 39.7%) and 28.0% (financial year

2004: 34.0%) of the Group’s revenue, respectively.

Whilst there was a shift of sales mix towards higher value-

added PCB for the higher-end server business, the overall

product mix contribution achieved in the financial year

2005 was similar to the financial year 2004 with sales

for 2- & 4-layer PCBs at approximately 52.7% and sales

for 6-layer and above PCBs at approximately 47.3%. With

the pricing environment remains stable, the Group

attained a weighted ASP for the financial year 2005

comparable with the financial year 2004.

On the whole, our critical raw material cost in the financial

year 2005 has gone up by at least double digit over the

financial year 2004 as a result of higher oil prices and

tight market supplies during the first and second quarters

in the financial year 2005. Coupled with higher

depreciation charges, the Group’s gross profit margin

declined to 21.8% in the financial year 2005 from 23.6%

in the financial year 2004.

The Group has renegotiated new banking facilities with

a few major international banks, and is expected to

benefit from the cheaper funding costs starting from

the next financial quarter. In addition, the Group is

working jointly with other PCB subsidiaries of the

Kingboard Group, to negotiate with our common

suppliers for better payment terms and more competitive

pricing on raw materials and equipment.

In the opinion of the Directors, no item, transaction or

event of material or unusual nature has occurred during

the period from 1 July 2005 to the date of this report

that would materially affect the results of the Company

and/or the Group in the financial year in which this

announcement is made.

FUTURE PROSPECTS

All recent economic indicators released by the US shows

that the America economy is still sustaining well. Falling

unemployment rate, rising living standards and increasing

consumer spending in the US would fuel this growth

for the year and benefit other economies around the

world.

Therefore, despite concerns over rising oil prices, higher

interest rate and possible economic cool down in China,

the management expects overall business environment

to remain positive yet challenging due to keen regional

competition. Bookings remain strong with book-to-bill

ratio of above one up to the date of this announcement

despite the first financial quarter is usually a seasonally

weak quarter due to summer vacation.


The Group’s China strategy continues to be affirmed in

line with the growing trend of outsourcing by multi-

national companies into China. The management is

working towards further expansion in the production

capacity in Kaiping south zone. To gear up for business

expansion, the Group intends to set up a new plant in

Kaiping south at a total investment of approximately

US$74 million over the next two years. This new plant

equipped with an annual capacity of at least 3.0 million

sq.ft. would focus on supplying high density interconnect

(HDI) PCBs for handheld consumer application products

and is expected to start commercial production in the

March 2006 quarter.

As a growing global entity, the Group is not immune to

the gyrations of the international economy. We have to

continue our adjustment and management of various

regional challenges, such as increase in minimum wages

costs for our operation in mainland China, the macro

economic policies adopted by the Chinese Government

in regulating its overheated economy etc.

The Chinese Government has recently uplifted the yuan’s

peg to the US dollar and appreciated Renminbi to

RMB8.11 to US$1.00, effectively by 2.1%. As the Group

imports a substantial proportion of its critical raw materials

and machineries from overseas which are non-RMB

denominated, this would help to mitigate the full effects

arising from Renminbi revaluation. Nevertheless, the

Group will look to making improvements on our volume/

profit measurement to alleviate any potentially negative

effects on further strengthening of Renminbi.

Barring unforeseen circumstances, the Directors are

cautiously optimistic that the Group would deliver

satisfactory results in the first quarter of the financial

year 2006.

In line with the Group's aim to maintain a consistent

dividend policy, the Board is recommending a final one-

tier tax exempt dividend of 20.0 Singapore cents,

comprising a final one-tier tax exempt dividend of 7.0

Singapore cents and a final special one-tier tax exempt

dividend of 13.0 Singapore cents. This, together with

the interim one-tier tax exempt dividend of 13.0

Singapore cents paid in March 2005, the total gross

one-tier tax exempt dividend represents 69.5% of the

net earnings and dividend yield of 7.7%.

We would like to express our gratitude to our

shareholders, customers, business associates for their

continuing support after the ownership changeover.

On behalf of the Board and management, we would

like to thank our employees for their passion and

dedication in preparing Elec & Eltek for future growth.

Last, but not the least, we wish to thank our fellow Board

members for the value and expertise they have imparted

and for their continued service to our shareholders.

By order of the Board

Cheung Kwok Wing

Chairman

23 August 2005

Statement on Corporate Governance


INTRODUCTION

Elec & Eltek International Company Limited (the “Company”) is committed to complying with the Code of Corporate

Governance (the “Code”) issued by the Corporate Governance Committee in 2001 so as to promote greater

transparency and protection of shareholders’ interests. This Statement describes the corporate governance policies

and practices of the Company during the financial year ended 30 June 2005.

BOARD MATTERS

Board of Directors’ (the “Board”) Conduct of Its Affairs

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 overseeing 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 office holders;

(v) approving nominations to the Board;

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

the Remuneration Committee; and

(vii) assuming overall responsibility for corporate governance.

To facilitate effective management, certain functions have been delegated by the Board to various Board Committees.

Each Board Committee operates under clearly defined terms of reference. The Chairman of the respective Board

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


BOARD MATTERS (continued)

Board Composition and Balance

Presently, the Board comprises twelve Directors as follows:

(i) six Executive Directors;

(ii) three Non-executive Directors; and

(iii) three Independent Non-executive Directors.

The Board has reviewed its composition of Directors and is satisfied that such composition is appropriate. The Board

will continuously examine its size, and with a view to determining the impact of the number of Directors upon the

effectiveness of the Board, maintain an appropriate size which will facilitate effective decision-making.

The Board examines the independence of its Directors based on the criterion of independence defined in the 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.

Chairman, Vice-Chairman and Chief Executive Officer

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 set the strategic direction for the Board,

the Vice-Chairman together with the Chief Executive Officer (“CEO”) collectively responsible for ensuring the execution

of strategic goals and the day-to-day management of the Group.

The Vice-Chairman and the CEO’s performance, appointment to the Board and remuneration package are reviewed

periodically by the Nominating Committee and Remuneration Committee respectively. All members of these committees

are Independent Non-executive Directors of the Company.

Board Committees

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.




Nominating Committee

The Nominating Committee comprises Dr. Philip Wong Yu Hong (Chairman), Ms. Ann Chiang Lai Wan and Mr. Larry

Lai Chong Tuck, all of whom are Independent Non-executive Directors.

During the financial year and up to the date of this report, the Nominating Committee performed, inter alia, the

following functions:

(i) evaluated 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) reviewed and recommended to the Board, the retirement and re-election of Directors in accordance with the

Company’s Articles of Association at each annual general meeting;

(iii) evaluated 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.

Remuneration Committee

The Remuneration Committee comprises Dr. Philip Wong Yu Hong (Chairman), Ms. Ann Chiang Lai Wan and Mr. Larry

Lai Chong Tuck, all of whom are Independent Non-executive Directors.

The Remuneration Committee will review and recommend remuneration policies and packages for key executives.

The review will cover all aspects of remuneration, including but not limited to salaries, allowances, bonuses, options

and benefits-in-kind. In conducting its review, the 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

Committee in the review. The Committee’s recommendations will be submitted for endorsement by the entire

Board.



Remuneration Committee (continued)

The Remuneration Committee has a set of terms of reference defining its scope of authority. During the financial year

and up to the date of this report, the Remuneration Committee performed, inter alia, the following functions:

(i) to ensure the Committee’s recommendations have been made in consultation with the Chairman of the Board

and submitted for endorsement by the entire Board; and

(ii) to liaise with the Board in relation to the preparation on 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 employees and Directors. Details of

remuneration and benefits of Directors and top five executives are disclosed in the section “SGX Listing Manual

Requirements” on pages 84-85.

Employees’ Share Option Scheme Committee

The Employees’ Share Option Scheme Committee was formed during the financial year and its members comprise

Mr. Cheung Kwok Wing, Mr. Chan Wing Kwan and Mr. Chang Wing Yiu who are all Non-executive Directors.

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

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

During the financial year and up to the date of this report, the Employees’ Share Option Scheme Committee had

considered and granted share options to eligible employees and Directors of the Company.




Board Membership

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

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

The Board benefits from the depth and breath of experience each Director possesses, collectively providing core

competencies in finance, industry, business and management.

The profiles of the Directors and core management are set forth on pages 25 to 31 of this Annual Report.

In accordance with the Code and the Company’s Articles of Association, each Director is required to retire at least

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

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

recommended to the Board, the re-appointment of eleven newly appointed Directors, Mr. Chadwick Mok Cham

Hung, Mr. Cheung Kwok Wa, Mr. Cheung Kwok Wing, Mr. Chan Wing Kwan, Mr. Chang Wing Yiu, Mr. Sammy Leung Tin

Po, Mr. Li Muk Kam, Mr. Philip Chan Sai Kit, Dr. Philip Wong Yu Hong, Ms. Ann Chiang Lai Wan and Mr. Larry Lai Chong

Tuck, at the for thcoming Annual General Meeting. The Board has accepted the Nominating Committee’s

recommendation, and all the abovementioned Directors will be offering themselves for re-election at the forthcoming

Annual General Meeting.

Board Performance

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

experience and knowledge 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 but is not limited to the comparison of the Company’s share price performance against

appropriate indices of SGX-ST. Other performance criteria that may be used include return on assets, return on equity,

return on investment and economic value added.



Access to 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, the Management will, upon direction by the Board, appoint a professional advisor selected by the group or the

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

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

announcements of the Group’s quarterly and full year results, and is responsible for ensuring that Board procedures

are followed. Together with the management, the company secretaries are responsible for ensuring compliance with

the Companies Act (Chapter 50, Singapore Statutes) and all other SGX-ST rules and regulations applicable to the

Company.

Accountability and Audit

In presenting the financial statements announcements 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

The Audit Committee comprises Mr. Larry Lai Chong Tuck (Chairman), Dr. Philip Wong Yu Hong and Ms. Ann Chiang

Lai Wan, all of whom are Independent Non-executive Directors.



BOARD MATTERS (continued)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 over four meetings:

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

financial statements, as well as their evaluation of the Group’s internal accounting controls and management’s

responses to their recommendations;

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

auditors;

(iii) reviewed and approved internal audit plans and reviews results of internal audits and management’s responses

to the internal auditors’ recommendations;

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

(v) reviewed the annual and quarterly financial statements and announcements to shareholders before submission

to the Board.

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

and is of the opinion that the provision of such services will not affect the independence of the statutory auditors.

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

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

and internal auditors have unrestricted access to the Audit Committee.



Internal Controls

The Group’s 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

weakness highlighted.

Internal Audit

The Group has an adequately resourced internal audit function which was set up in financial year 2002 to report the

conclusions and recommendations of their audit findings to management and the Audit Committee.

The internal audit function would report to the Audit Committee and assist the Board in monitoring, and managing

business risks and internal controls. The Audit Committee reviews and approves the internal audit plan. Reports from

the internal auditors are tabled at meetings of the Audit Committee, where applicable.

Communication with Shareholders

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. The Board has released its quarterly financial results from financial

year 2004 onwards.

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.




Communication with Shareholders (continued)

Notices of shareholders’ general 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.

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

to attend and vote at all shareholders’ meetings on his/her behalf.

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

Committee are present at shareholders’ meetings to assist the Directors in addressing any queries by shareholders.

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

the Singapore Exchange Securities Trading Limited are disclosed in the section “SGX Listing Manual Requirements” on

page 86.

Internal Code on Dealing in Securities

The Company has devised and adopted its own Internal Code on Securities Transaction. 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.


Directors’ Attendance from the Date of Last Annual Report to the Date of this Annual Report

Board Committees

Employees’

Share Option

Audit Nominating Remuneration Scheme

Directors Board Committee Committee Committee Committee

Total number of meetings held 4 4 1 1 1

Chadwick Mok Cham Hung (appointed on 13.12.2004) 3 – – – –

Sammy Leung Tin Po (appointed on 18.1.2005) 3 – – – –

Cheung Kwok Wa (appointed on 13.12.2004) 1 – – – –

Li Muk Kam (appointed on 18.1.2005) 3 – – – –

Philip Chan Sai Kit (appointed on 18.1.2005) 3 – – – –

Claudia Heng Nguan Leng 4 – – – –

Cheung Kwok Wing (appointed on 13.12.2004) 2 – – – 1

Chan Wing Kwan (appointed on 13.12.2004) 2 – – – 1

Chang Wing Yiu (appointed on 13.12.2004) 1 – – – 1

Philip Wong Yu Hong (appointed on 26.2.2005) 1 2 1 1 –

Ann Chiang Lai Wan (appointed on 26.2.2005) 2 2 1 1 –

Larry Lai Chong Tuck (appointed on 26.2.2005) 2 2 1 1 –

Thomas Tang Koon Yiu (resigned on 3.2.2005) 2 – – – –

Canice Chung Tai Keung (resigned on 31.3.2005) 2 – – – –

David So Cheung Sing (resigned on 25.12.2004) 1 – – – –

Marcus Tsang Ming Pui (resigned on 25.12.2004) 1 – – – –

Wilson Tam Kam Ho (resigned on 25.12.2004) – – – – –

Johnny Ng Ho Kin (resigned on 25.12.2004) 1 – – – –

Au Eng Kok (resigned on 1.3.2005) 2 2 – – –

Keith Tay Ah Kee (resigned on 1.3.2005) 2 2 – – –

Eugene Lee (resigned on 28.2.2005) 2 2 – – –

Kenneth Shim Hing Choi (resigned on 1.3.2005) 2 – – – –

On behalf of the Board

Chadwick Mok Cham Hung Sammy Leung Tin Po

Vice-Chairman Chief Executive Officer

23 August 2005

Profiles of Board of Directors and Core Management


Structure vs Management



BOARD OF DIRECTORS

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 responsible for developing overall business directions and management

strategies of the Elec & Eltek Group.

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. Sammy Leung Tin Po

Mr. Sammy Leung Tin Po joined the Elec & Eltek Group in 1988 and served in various senior positions in the

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

Chief Executive Officer of the Company on 18 January 2005 responsible for the overall operations of the Elec & Eltek

Group’s printed circuit board business. He has over 20 years’ experience in the electronics industry.

Mr. Leung holds a Diploma in Business Management from The Hong Kong Polytechnic University.

Mr. Cheung Kwok Wa

Mr. Cheung Kwok Wa has been the Executive Director of the Company since 13 December 2004 responsible for

developing overall business directions and management strategies of the Elec & Eltek Group. Mr. Cheung has over 19

years’ experience in the marketing of a wide range of industrial products.

Mr. Cheung 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 and sales. He was appointed the Executive Director of the Company on 18 January

2005 and is responsible for all activities in relation to market penetration and development, procurement and sourcing,

technology advancement, information technology, financial and administration of the Elec & Eltek 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 University of Warwick.



BOARD OF DIRECTORS (continued)

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 sales, logistics and procurement of the Elec & Eltek Group.

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

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 is

responsible for the full spectrum of financial, management, cost accounting, and statutory compliance functions

pertaining to the Group.

Ms. Heng holds a MBA Degree from Manchester Business School and 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. 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 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”. Mr. Cheung has

over 13 years’ experience in the sales and distribution of electronic components including laminates prior to the

establishment of the Kingboard Group.

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



Mr. Chan Wing Kwan

Mr. Chan Wing Kwan has been the Non-executive Director of the Company since 13 December 2004. He is a

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

Mr. Chan acquired a Degree of Doctor of Business Science from Pacific Western University, L.A.. Prior to the setting up

of the Kingboard Group, Mr. Chan had over 22 years’ experience in the sales and distribution of electronic components,

industrial chemicals and printed circuit boards.

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

Mr. Chang Wing Yiu

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

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

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

over 15 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 is 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 Treasurer 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.




Ms. Ann Chiang Lai Wan

Ms. Ann Chiang Lai Wan was appointed the Independent Non-executive Director of the Company on 26 February

2005. She is a member of the Audit Committee, the Nominating Committee and the Remuneration Committee of

the Company.

She graduated from Canada Concordia University with Bachelor Degree of Arts and received an Honorary Fellowship

from the Professional Validation Council of Hong Kong Industries in 2002.

Ms. Chiang has been the committee member of National Committee of Political Consultative Conference of PRC

since 1993. She is the Chartered Chairperson of Hong Kong Young Industrialists Council. She has been appointed by

the HKSAR Government as member in many government councils. She is currently the Chairman of C & L Holdings

Ltd.

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.

He graduated with a Bachelor of Arts (Social Science-Economics, Sociology, Business Studies and Philosophy) from

the National University of Singapore in 1981 and obtained a Graduate Diploma in Financial Management from the

Singapore Institute of Management in 1992.

Mr. Lai is a veteran senior banker with over 20 years of corporate banking, structured finance and investment banking

experience gained primarily with multinational banks and is well versed and knows intimately the intricacies of the

operating and business environments of the Asian markets. He was a bank Country Manager in Vietnam and China

between 1996 and 2002.

Mr. Lai is currently the Managing Partner of Eximius Consulting International Pte Ltd, an MRI Worldwide Company,

principally engaged in providing executive search services as well as a wide range of HR consulting services in

Singapore and beyond.


CORE MANAGEMENT

Vice President – Sales, South Asia and Pacific

Mr. Joey Fung Ying Wah joined the Elec & Eltek Group as Assistant Engineer in 1979. Since 1994, Mr. Fung has been

involved in the plant management of the Group’s PCB and Material plants in Hong Kong and Thailand. He is currently

the Vice President – Sales, South Asia and Pacific region, responsible for sales development in Southeast Asia

markets.

Mr. Fung holds a Diploma in Mechanical Engineering from The Hong Kong Polytechnic University and a Master

Degree in Engineering Business Management from University of Warwick.

Vice President – Sales, Europe and America

Mr. Simon Michael Geeson first joined the Elec & Eltek Group as a Sales Engineer in 1992. He had 8 years 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 – Sales, Europe and America, he is responsible for sales development in

European and American markets.

Vice President – Sales, Taiwan Business

Mr. Sparkey Wu Neng Chi has more than 25 years’ relevant experience in the electronics industry, 10 years of which

was with PCB industry. He joined the Elec & Elteck Group in 2003 as the Vice President – Sales, Taiwan Business,

responsible for sales development in Taiwanese market.

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

General Manager – Hong Kong and Guangzhou plants

Mr. Clement Sun joined the Elec & Eltek Group as Quality Assurance Engineer in 1983. He was the Vice President –

Group Quality Assurance since 2001 before taking up plant management function in 2004. In his current capacity as

General Manager – Hong Kong and Guangzhou plants, Mr. Sun is responsible for the overall operational management

of the PCB plants located in Hong Kong and Guangzhou.

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



CORE MANAGEMENT (continued)

General Manager – Material

Mr. Chan Chi Yin joined the Elec & Eltek Group as Process Engineer in 1988. Since 1992, Mr. Chan has been involved

in plant management and is now the General Manager – Material responsible for the overall management of the

Material division of the Group, including the operation of the laminate manufacturing plants in Shenzhen and Thailand.

Mr. Chan holds a Degree in Applied Science from Hong Kong Baptist University and a Master Degree in Information

Systems Management from University of Stirling School of Management.

Vice President – Thailand Operations

Mr. Somkit Naksinehapon joined the Elec & Eltek Group as Production Manager in 1989. He is now the Vice President

and Director of Thailand Operations responsible for the overall operations of the fabrication plant and material plant

in Thailand.

Prior to joining the Elec & Eltek Group, Mr. Somkit possessed 10 years of experience in engineering, quality management

and production in the electronics industry. He holds a Degree in Telecommunication from King Mongkut Institute of

Technology and a Master Degree in Business Administration from National Institute of Development & Administration.

General Manager – Kaiping plants

Mr. Jim Ho Chien Lung joined the Elec & Eltek Group in 2003 as the Vice President – Group Quality Assurance

responsible for the development and implementation of the Group’s quality system and policy and overseeing

quality assurance function of all plants. In July 2004, Mr. Ho was assigned to take charge of the operations of Kaiping

phases I & II as Deputy General Manager and became the General Manager for Kaiping plants in January 2005.

Mr. Ho has over 11 years of experience in manufacturing, engineering and quality management and holds a Bachelor

of Science Degree in Electrical Engineering from University of Utah and a Master of Science Degree in Electrical

Engineering from University of Portland in the US.


CORE MANAGEMENT (continued)

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 has over 11 years of experience in financial planning and general

management in manufacturing and trading enterprises, out of which, 7 years were with publicly listed companies.

Ms. Cheung holds a Bachelor of Science Degree from the University of East Anglia in the U.K. and is a fellow member

with the Institute of Chartered Accountants of England and Wales.

Vice President – Group Technology

Ms. Condia Yu Yuk Ying first joined the Elec & Eltek Group as Process Engineer in 1984 and served in various positions

relating to production and engineering over the years. She is currently the Vice President – Group Technology and is

responsible for the research and development of new products and new technology leading to capability and reliability

enhancement for both PCB fabrication and Material divisions.

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 Electrical Engineers in the U.K.

Vice President – Legal & Secretarial Services

Ms. Monica Tso Hon Yuk joined the Elec & Eltek Group in 1998 and is the Vice President – Legal & Secretarial Services

in charge of all legal and secretarial matters of the Group.

Ms. Tso is a qualified solicitor in Hong Kong and graduated from the University of Hong Kong with a Bachelor of Laws

Degree and Postgraduate Certificate in Laws. She also holds a Master Degree in Business Administration from

Manchester Business School and a Master Degree in Chinese Laws from Renmin University.

Report of the Directors


The Directors of Elec & Eltek International Company Limited (the “Company”) are pleased to present their report to

the members together with the audited consolidated financial statements of the Company and its subsidiary companies

(the “Group”) and audited balance sheet and statement of changes in equity of the Company for the financial year

ended 30 June 2005.

DIRECTORS OF THE COMPANY

The names of the Directors of the Company are:

At the date of this report

Chadwick Mok Cham Hung (appointed on 13.12.2004)

Sammy Leung Tin Po (appointed on 18.1.2005)

Cheung Kwok Wa (appointed on 13.12.2004)

Li Muk Kam (appointed on 18.1.2005)

Philip Chan Sai Kit (appointed on 18.1.2005)

Claudia Heng Nguan Leng

Cheung Kwok Wing (appointed on 13.12.2004)

Chan Wing Kwan (appointed on 13.12.2004)

Chang Wing Yiu (appointed on 13.12.2004)

Philip Wong Yu Hong (appointed on 26.2.2005)

Ann Chiang Lai Wan (appointed on 26.2.2005)

Larry Lai Chong Tuck (appointed on 26.2.2005)

Resigned during the current financial year

Thomas Tang Koon Yiu (resigned on 3.2.2005)

Canice Chung Tai Keung (resigned on 31.3.2005)

David So Cheung Sing (resigned on 25.12.2004)

Marcus Tsang Ming Pui (resigned on 25.12.2004)

Wilson Tam Kam Ho (resigned on 25.12.2004)

Johnny Ng Ho Kin (resigned on 25.12.2004)

Au Eng Kok (resigned on 1.3.2005)

Keith Tay Ah Kee (resigned on 1.3.2005)

Eugene Lee (resigned on 28.2.2005)

Kenneth Shim Hing Choi (resigned on 1.3.2005)


DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES

The following Directors who held office at the end of the financial year have, according to the register required to be

kept under Section 164 of the Companies Act (Chapter 50, Singapore Statutes) (the “Act”), interests in the share

capital of the Company, its ultimate holding company, Kingboard Chemical Holdings Limited (“Kingboard”), and

related corporations (other than wholly owned subsidiary companies) as stated below:

Shareholdings registered Shareholdings in which

in the name of or directors are deemed

beneficially held by directors to have an interest

At 1.7.2004 or At 1.7.2004 or

date of date of

appointment At 30.6.2005 appointment At 30.6.2005

The Company

Name of Director Ordinary shares of S$0.80 each

Chadwick Mok Cham Hung – 44,000 – –

Sammy Leung Tin Po 30,000 80,000 – –

Cheung Kwok Wa – 162,000 – –

Li Muk Kam 703,230 703,230 – –

Philip Chan Sai Kit 70,401 90,401 – –

Claudia Heng Nguan Leng 229,000 229,000 – –

Cheung Kwok Wing – 50,000 – –

The Company

Options to subscribe for unissued

ordinary shares of S$0.80 each

At subscription price of US$2.44

Chadwick Mok Cham Hung – 811,000 – –

Sammy Leung Tin Po – 1,000,000 – –

Cheung Kwok Wa – 811,000 – –

Li Muk Kam – 800,000 – –

Philip Chan Sai Kit – 800,000 – –

Claudia Heng Nguan Leng – 200,000 – –

Cheung Kwok Wing – 811,000 – –

Chan Wing Kwan – 811,000 – –

Chang Wing Yiu – 811,000 – –



DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (continued)

Shareholdings registered Shareholdings in whichin the name of or directors are deemed

beneficially held by directors to have an interestAt 1.7.2004 or At 1.7.2004 or

date of date ofappointment At 30.6.2005 appointment At 30.6.2005

KingboardName of Director Ordinary shares of HK$0.10 each

Chadwick Mok Cham Hung 600,000 600,000 – –Sammy Leung Tin Po 30,000 – – –Cheung Kwok Wa 1,473,700 1,126,600 – –Cheung Kwok Wing 1,805,060 2,151,060 234,635,800 234,635,800 #

Chan Wing Kwan 1,608,400 1,480,600 – –Chang Wing Yiu 987,500 1,266,100 – –

KingboardOptions to subscribe for unissuedordinary shares of HK$0.10 each

Cheung Kwok Wa 4,263,000 3,781,200 – –Cheung Kwok Wing 3,055,000 2,091,400 – –Chan Wing Kwan 3,981,000 3,499,200 – –Chang Wing Yiu 4,598,000 4,116,200 – –

KingboardWarrants to subscribe for unissued

ordinary shares of HK$0.10 each

Chadwick Mok Cham Hung 60,000 60,000 – –Cheung Kwok Wa 194,920 194,920 – –Cheung Kwok Wing 371,506 371,506 23,463,580 23,463,580 #

Chan Wing Kwan 210,840 210,840 – –Chang Wing Yiu 98,750 98,750 – –

Kingboard Copper Foil Holdings LimitedOrdinary shares of US$0.10 each

Cheung Kwok Wing – – 441,072,000 441,072,000 #

# These shares/warrants are held by Hallgain Management Limited (“HML”)


DIRECTORS’ INTERESTS IN SHARES AND DEBENTURES (continued)

At the balance sheet date, HML holds approximately 30.49% interests in the issued share capital of Kingboard and

the following directors are interested in the shares of HML, namely Mr. Cheung Kwok Wa (10% of the issued share

capital), Mr. Cheung Kwok Wing (22% of the issued share capital), Mr. Chan Wing Kwan (15% of the issued share

capital) and Mr. Chang Wing Yiu (5% of the issued share capital).

There was no change in the above-mentioned interests between the end of the financial year and 21 July 2005

except as disclosed below:

(i) Mr. Chadwick Mok Cham Hung’s direct interest in the Company increased to 60,000 ordinary shares.

(ii) Mr. Cheung Kwok Wing’s direct interest in the Company increased to 108,000 ordinary shares.

ARRANGEMENTS FOR DIRECTORS TO ACQUIRE SHARES AND DEBENTURES

Except as disclosed above, neither at the end of the financial year, nor at any time during the financial year, did there

subsist any arrangement to which the Company was a party whose object was to enable the Directors to acquire

benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

DIRECTORS’ INTERESTS IN CONTRACTS

Except as disclosed in the financial statements, since the end of the previous financial year, no Director has received

or has become entitled to receive benefits by reason of contracts made by the Company or a related body corporate

with the Director, or with a firm of which the Director is a member, or with a company in which the Director has a

substantial financial interest required to be disclosed under Section 201(8) of the Act.



SHARE OPTIONS

At the end of the financial year, there were in aggregate 9,780,000 (2004: 1,400,400) outstanding options issued

under the 1999 Elec & Eltek Employees’ Share Option Scheme (the “1999 Scheme”) and the 2002 Elec & Eltek

Employees’ Share Option Scheme (the “2002 Scheme”) (collectively the “Schemes”) to subscribe for a total of

9,780,000 (2004: 1,400,400) unissued ordinary shares of S$0.80 each in the Company.

During the current financial year, the Company granted the following share options pursuant to the 2002 Scheme:

(a) 1,400,000 share options granted to a former director of the Company, to subscribe for 1,400,000 ordinary

shares of S$0.80 each in the Company at a Discounted Subscription Price of US$2.250 per share. The options

were granted at a 20% discount to the Subscription Price and the amount of options granted represents more

than 5% of the total number of the options available under the 2002 Scheme; and

(b) 9,800,000 share options granted to Directors and full-time employees of the Company, to subscribe for 9,800,000

ordinary shares of S$0.80 each in the Company at a Subscription Price of US$2.440 per share, of which

6,855,000 share options were granted to Directors (please refer to note 22 to the financial statements) and

the remaining 2,945,000 share options were granted to other executives of the Group.

Saved as disclosed, there have been no other share options granted to the eligible participants, directors and substantial

shareholders of the Company pursuant to the 2002 Scheme.

The details of the outstanding options are as follows:

Balance Balance

Date of as at as at Subscription Expiry

grant 1 July 2004 Granted Exercised Lapsed 30 June 2005 price date

US$

25 May 2000 400 – – (400) – 1.308 24 May 2005

7 May 2003 700,000 – (700,000) – – 1.450 6 May 2006

7 May 2003 700,000 – (700,000) – – 1.450 6 May 2007

19 July 2004 – 700,000 (700,000) – – 2.250 18 July 2007

19 July 2004 – 700,000 (700,000) – – 2.250 18 July 2008

25 May 2005 – 9,800,000 – (20,000) 9,780,000 2.440 24 May 2010

1,400,400 11,200,000 (2,800,000) (20,400) 9,780,000


SHARE OPTIONS (continued)

The Schemes are administered by the Employees’ Share Option Scheme Committee comprising Mr. Cheung Kwok

Wing, Mr. Chan Wing Kwan and Mr. Chang Wing Yiu.

AUDIT COMMITTEE

The members of the Audit Committee (the “Committee”) at the date of this report are as follows:

Larry Lai Chong Tuck (Chairman)

Philip Wong Yu Hong

Ann Chiang Lai Wan

The members of the Committee are independent of management.

The Committee performed the functions specified in Section 201B of the Act. In performing its functions, the Committee

reviewed the overall scope of the audit and the assistance given by the Group’s officers to the statutory and internal

auditors. It met with the statutory and internal auditors to discuss the results of their examinations and their evaluation

of the Group’s system of internal accounting controls.

The Committee also reviewed the financial statements of the Company and the consolidated financial statements of

the Group for the financial year ended 30 June 2005 as well as the statutory auditors’ report thereon before their

submission to the Board of Directors (the “Board”) for approval.

The Committee reviewed the procedures set up by the Group and the Company to identify, report and, where

necessary, seek appropriate approval for interested person transactions.

The Committee has reviewed the non-audit fees paid to the statutory auditors and are of the opinion that the fees

paid would not impair their independence.

The Committee recommends to the Board the re-appointment of Ernst & Young as statutory auditors at the forthcoming

Annual General Meeting of the Company.



STATUTORY AUDITORS

Ernst & Young, Certified Public Accountants, have expressed their willingness to accept re-appointment as statutory

auditors of the Company.



Vice-Chairman

Sammy Leung Tin Po


23 August 2005


Statement by Directors Pursuant to Section 201(15) of theCompanies Act (Chapter 50, Singapore Statutes)

We, Chadwick Mok Cham Hung and Sammy Leung Tin Po, being two of the Directors of Elec & Eltek International

Company Limited, do hereby state that, in the opinion of the Directors:

(a) the balance sheets, consolidated profit and loss account, statements of changes in equity and consolidated

statement of cash flow together with the notes thereto, are drawn up so as to give a true and fair view of the

state of affairs of the Group and of the Company as at 30 June 2005, and of the results of the business of the

Group, and changes in equity of the Group and the Company, and cash flow of the Group for the financial year

then ended; and

(b) at the date of this statement there are reasonable grounds to believe that the Company will be able to pay its

debts as and when they fall due.



Vice-Chairman

Sammy Leung Tin Po


23 August 2005

Spreading vs Expansion


Statutory Auditor’s Report

To the Members of

Elec & Eltek International Company Limited

We have audited the accompanying financial statements of Elec & Eltek International Company Limited (the “Company”)

and its subsidiary companies (the “Group”) set out on pages 42 to 83 for the financial year ended 30 June 2005.

These financial statements are the responsibility of the Company’s Directors. 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 plan

and perform the audit to obtain reasonable assurance about whether the financial statements are free of material

misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the

financial statements. An audit also includes assessing the accounting principles used and significant estimates made

by the directors, as well as evaluating the overall financial statement presentation. We believe that our audit provides

a reasonable basis for our 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 Companies Act (Chapter 50,

Singapore Statutes) (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 30 June 2005, and the results of the Group, changes

in equity of the Group and of the Company and cash flows of the Group for the financial year ended on that

date; and

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

companies incorporated in Singapore of which we are the auditors have been properly kept in accordance with

the provisions of the Act.

ERNST & YOUNG

Certified Public Accountants

Singapore

23 August 2005

for the financial year ended 30 June 2005Consolidated Profit and Loss Account


2005 2004

Note US$’000 US$’000

Sale of goods 4 437,510 354,388

Cost of sales (342,316) (270,808)

Gross profit 95,194 83,580

Other revenue

Interest income 117 162

Costs and expenses

Distribution and selling costs (16,820) (15,150)

Administrative costs (21,074) (19,968)

Other operating expenses (1,362) (1,063)

Profit from operating activities 5 56,055 47,561

Interest expense 6 (3,488) (1,155)

Exceptional items 7 (1,657) –

Profit before taxation 50,910 46,406

Taxation 8 (5,193) (3,403)

Profit after taxation 45,717 43,003

Minority interests (3,103) (2,408)

Profit attributable to shareholders 42,614 40,595

Earnings per share: 9 United States United States

cents cents

– basic 28.83 27.79

– diluted 28.73 27.67

The accounting policies and explanatory notes on pages 47 to 83 form an integral part of the financial statements.

as at 30 June 2005Balance Sheets


Group Company

2005 2004 2005 2004

Note US$’000 US$’000 US$’000 US$’000

Non-current assets

Property, plant and equipment 10 300,120 274,287 17 26

Intangible assets 11 11 71 – –

Subsidiary companies 12 – – 22,186 22,186

Deferred tax assets 13 2,771 2,111 – –

Current assets

Inventories 14 51,450 42,364 – –

Trade and other receivables 15 149,706 122,008 4 15,505

Due from subsidiary companies 16 – – 138,892 116,461

Fixed and call deposits 17 27 5,221 27 418

Cash at bank and in hand 26,592 24,409 59 180

227,775 194,002 138,982 132,564

Current liabilities

Trade and other payables 18 (127,899) (124,641) (158) (129)

Due to subsidiary companies 16 – – (614) (1,346)

Due to bankers 19 (74,251) (41,390) – (3,300)

Provision for taxation (2,355) (1,442) (2) (1)

(204,505) (167,473) (774) (4,776)

Net current assets 23,270 26,529 138,208 127,788

Non-current liabilities

Due to bankers 19 (48,937) (48,501) – –

Deferred tax liabilities 13 (2,761) (2,440) – –

274,474 252,057 160,411 150,000

Equity

Share capital 20 75,435 74,065 75,435 74,065

Reserves 21 183,594 164,229 84,976 75,935

259,029 238,294 160,411 150,000

Minority interests 15,445 13,763 – –

274,474 252,057 160,411 150,000


for the financial year ended 30 June 2005


Statements of Changes in Equity

Foreign Total

currency share-

Share Share Capital Statutory Revenue translation holders’

Group capital premium reserve reserve reserve reserve equity

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

Balance at 30 June 2003

– As previously stated 66,507 12,614 2,490 70 141,847 (1,951) 221,577

– Effect of adopting INT

FRS 19 7,475 4,745 107 – 17,177 (29,504) –


– As restated 73,982 17,359 2,597 70 159,024 (31,455) 221,577

Shares issued pursuant to

the exercise of options 83 457 – – – – 540

Transfer from revenue

reserve to statutory reserve – – – 506 (506) – –

Profit for the financial year – – – – 40,595 – 40,595

Dividends paid (Note 23)

– in respect of previous

financial year – – – – (14,349) – (14,349)

– in respect of current

financial year – – – – (10,405) – (10,405)

Foreign currency translation – – – (9) – 345 336

Balance at 30 June 2004 74,065 17,816 2,597 567 174,359 (31,110) 238,294

Shares issued pursuant to

the exercise of options 1,370 3,810 – – – – 5,180

Transfer from revenue

reserve to statutory reserve – – – 1,346 (1,346) – –

Profit for the financial year – – – – 42,614 – 42,614


– in respect of previous

financial year – – – – (15,674) – (15,674)

– in respect of current

financial year – – – – (11,909) – (11,909)

Foreign currency translation – – – 17 – 507 524

Balance at 30 June 2005 75,435 21,626 2,597 1,930 188,044 (30,603) 259,029


Total

share-

Share Share Revenue holders’

Company capital premium reserve equity

US$’000 US$’000 US$’000 US$’000


– As previously stated 66,507 12,614 45,510 124,631

– Effect of adopting INT FRS19 7,475 4,745 (10,158) 2,062


– As restated 73,982 17,359 35,352 126,693

Shares issued pursuant to the exercise

of options 83 457 – 540

Profit for the financial year – – 47,521 47,521


– in respect of previous financial year – – (14,349) (14,349)

– in respect of current financial year – – (10,405) (10,405)

Balance at 30 June 2004 74,065 17,816 58,119 150,000

Shares issued pursuant to the exercise

of options 1,370 3,810 – 5,180

Profit for the financial year – – 32,814 32,814


– in respect of previous financial year – – (15,674) (15,674)

– in respect of current financial year – – (11,909) (11,909)

Balance at 30 June 2005 75,435 21,626 63,350 160,411


for the financial year ended 30 June 2005Consolidated Statement of Cash Flow


2005 2004

US$’000 US$’000

Cash flow from operating activities:Operating profit before interest and taxation 54,281 47,399Adjustments for:

Amortisation of intangible assets 60 103Depreciation of property, plant and equipment 31,638 22,646Loss on disposal of plant and equipment 245 159

Operating income before reinvestment in working capital 86,224 70,307Increase in inventories (9,086) (15,063)Increase in trade and other receivables (27,698) (26,875)Increase in trade and other payables 3,258 62,164

Cash generated from operations 52,698 90,533Interest income received 117 162Interest paid (3,488) (1,155)Income taxes paid (4,619) (2,445)

Net cash provided by operating activities 44,708 87,095

Cash flow from investing activities:Proceeds from disposal of plant and equipment 230 128Plant and equipment acquired (58,159) (92,179)

Net cash used in investing activities (57,929) (92,051)

Cash flow from financing activities:Bank borrowings obtained 28,095 39,936Repayment of loan to minority shareholders – (4,375)Proceeds from share issue pursuant to the exercise of share options 5,180 540Capital injection from minority interests 1,562 178Dividends paid by the Company (27,583) (24,754)Dividends paid by subsidiaries to minority shareholders (3,034) (1,200)

Net cash provided by financing activities 4,220 10,325

Net (decrease)/increase in cash and cash equivalents (9,001) 5,369Cash and cash equivalents at beginning of financial year 29,630 22,374Effect of foreign exchange rate changes, net 788 1,887

Cash and cash equivalents at end of financial year (Note 25) 21,417 29,630


30 June 2005Notes to the Financial Statements


1. CORPORATE INFORMATION

Elec & Eltek International Company Limited (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 refers to entities with

common directors or shareholders of the ultimate holding company and its subsidiary companies.

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

the design, development, manufacture and distribution of high-density, double-sided and multi-layer printed

circuit boards. There have been no significant changes in the nature of these activities during the financial year.

The Company’s principal office is located at 8 Shenton Way, #37-03 Temasek Tower, Singapore 068811 and its

registered office is located at 80 Raffles Place, #25-01 UOB Plaza 1, Singapore 048624.

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

The Group, comprising the Company and its subsidiary companies, and the Company had 11,588 employees

and 10 employees (2004: 10,982 and 7) as at 30 June 2005, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The financial statements have been prepared in accordance with Singapore Financial Reporting Standards

(“FRS”) as required by the Companies Act (Chapter 50, Singapore Statutes).

The financial statements have been prepared on a historical cost basis.

The accounting policies have been consistently applied by the Group and the Company and are consistent

with those used in the previous financial year.

The financial statements are presented in United States Dollars (“US$”).



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

(b) Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group

and the Company and that the revenue can be reliably measured. The following specific recognition

criteria must also be met before revenue is recognised:

Sale of goods

Revenue from the sale of manufactured products is recognised upon their delivery which is taken to be

the point of acceptance when the significant risks of ownership have been transferred to the customer

and the Group maintains no effective control over the goods delivered.

Dividend income

Dividend income from subsidiary companies is recognised on the date the right to receive payment has

been established.

Interest income

Interest income is recognised on a time apportionment basis.

(c) Interest expense

Interest expense, other than those incurred in relation to the acquisition of plant and equipment during

the construction phase, is recognised on a time apportionment basis.

Interest expense incurred in relation to the acquisition of plant and equipment during the construction

phase, is capitalised as part of the cost of plant and equipment in the period in which they are incurred

and recognised as an expense in the same way as the underlying plant and equipment.



(d) Depreciation

Depreciation is calculated on the straight-line basis to write off the cost of the assets over their estimated

useful economic lives.

The useful lives used for depreciating assets are as follows:

Years

Freehold buildings – 20

Leasehold land and buildings – over the lease terms

Leasehold improvements – lower of 10 or lease terms

Furniture and fixtures – 5

Plant and equipment

– manufacturing plant and equipment – 10

– office equipment – 5

Motor vehicles and yacht – 5 – 7

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

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

further charge for depreciation is made in respect of these assets.

(e) Foreign currencies

Transactions in currencies other than US$ are treated as transactions in foreign currencies and are recorded

at exchange rates approximating those ruling at the transaction dates. Foreign currency monetary assets

and liabilities are measured using the exchange rates ruling at balance sheet date. Non-monetary assets

and liabilities are measured using the exchange rates ruling at the transaction dates or, in the case of items

carried at fair value, the exchange rates that existed when the values were determined. All resultant

exchange differences are recognised in the profit and loss account.

For inclusion in the consolidated financial statements, all assets and liabilities of foreign subsidiary companies

are translated into US$ at the exchange rates ruling at the balance sheet date and the results of foreign

subsidiary companies are translated into US$ at the average exchange rates. Exchange differences due to

such currency translations are included in foreign currency translation reserve.




(f) Income tax

Income tax in the profit or loss account for the year comprises current and deferred income tax. Income

tax is recognised in the profit and loss account except to the extent that it relates to items recognised

directly to equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the financial year, using tax rates

enacted or substantially enacted at the balance sheet date and any adjustment to tax payable in respect

of previous years.

Deferred income tax is provided, using the liability method, on all temporary differences at the balance

sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting

purposes.

Deferred tax liabilities are recognised for all taxable temporary differences associated with investments in

subsidiary companies, except where the timing of the reversal of the temporary differences can be controlled

and it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax

assets and unused tax losses, to the extent that it is probable that taxable profit will be available against

which the deductible temporary differences, carry-forward of unused tax assets and unused tax losses can

be utilised.

For deductible temporary differences associated with investments in subsidiary companies, deferred tax

assets are only recognised to the extent that it is probable that the temporary differences will reverse in

the foreseeable future and taxable profit will be available against which the temporary differences can be

utilised.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period

when the asset is realised or the liability is settled, based on tax rates and tax laws that have been enacted

or substantively enacted by the balance sheet date.



(g) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses.

The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset

to working condition for its intended use. Expenditure for additions, improvements and renewals are

capitalised and expenditure for maintenance and repairs are charged to the profit and loss account. When

assets are sold or retired, their cost and accumulated depreciation are removed from the financial statements

and any gain or loss resulting from their disposal is included in the profit and loss account.

(h) Intangible assets

Technical know-how

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

unless there has been an impairment in value at which it is written down to reflect the recoverable value.

Amortisation is computed based on an estimated economic useful life of 5 years.

Pre-production expenditure

Pre-production expenditure, comprising costs incurred in the development and pilot testing of new

manufacturing plants and processes, are expensed directly to the profit and loss account in the period in

which they are incurred.

Research and development costs

Research and development costs are expensed directly to the profit and loss account in the period in

which they are incurred.

(i) Subsidiary companies

Interests in subsidiary companies are stated at cost unless, in the opinion of the Directors, there has been

an impairment in value at which they are written down to reflect their recoverable value. Details of the

subsidiary companies are set out in Note 3 to the financial statements.

(j) Inventories

Inventories are stated at the lower of cost and net realisable value. Cost comprises direct materials on a

first-in, first-out basis and, in the case of finished products and work-in-progress, includes direct labour

and attributable production overheads based on normal levels of activity. Net realisable value represents

the estimated selling price less anticipated cost of disposal and after making allowance for damaged,

obsolete and slow moving items.




(k) Receivables

Trade receivables, which generally have 30 – 120 day terms, are recognised and carried at original

invoiced amount less an allowance for any uncollectible amounts. An allowance for doubtful debts is

made when collection of the full amount is no longer probable. Bad debts are written off to the profit and

loss account in the period in which they incurred.

Amounts due from subsidiary companies and related parties are carried at cost less an allowance for any

uncollectible amounts.

(l) Payables

Liabilities for trade and other payables, which are normally settled on 30 – 120 day terms, are carried at

cost which is the fair value of the consideration to be paid in the future for goods and services received,

whether or not billed to the Group.

Amounts owing to subsidiary companies are carried at cost.

(m) Loans and borrowings

Loans and borrowings are recognised at cost, being the consideration received and including acquisition

charges associated with the loans and borrowings.

(n) Provisions

Provisions are recognised when the Company and the Group have a present obligation (legal or constructive)

as a result of a past event, it is probable that an outflow of resources embodying economic benefits will

be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.

(o) Cash and cash equivalents

Cash and cash equivalents comprise cash in hand and at bank and fixed and call deposits.

For the purpose of the cash flow statement, cash and cash equivalents are shown net of outstanding bank

overdraft.



(p) Impairment of assets

An assessment is made at each balance sheet date to determine whether there is objective evidence that

an asset may be impaired. Whenever the carrying amount of an asset exceeds its recoverable amount, an

impairment loss is recognised in the profit and loss account.

Except for impairment loss arising from intangible assets, the reversal of impairment losses recognised in

prior years is recorded when there is an indication that the impairment losses recognised for the asset no

longer exist or have decreased. The reversal is recorded in the profit and loss account. However, the

increased carrying amount of an asset due to a reversal of an impairment loss is recognised to the extent

it does not exceed the carrying amount that would have been determined (net of amortisation or

depreciation) had no impairment loss been recognised for that asset in prior years.

(q) Employee benefits

(i) Employees’ share option scheme

The Company has in place an employee share option scheme for the granting of share options to

eligible employees of the Group to subscribe for ordinary shares in the Company.

When the option is exercised, the nominal value of the shares subscribed for is credited to the share

capital account and the balance of the proceeds, net of any transaction costs, is credited to the

share premium account. Details of the employee share option scheme and the number of outstanding

share options granted are disclosed in Note 22 to the financial statements.

(ii) Defined contribution plans

Contributions to post-employment benefits under defined contribution plans made in accordance

to the statutory regulations in the countries in which the Group’s companies operate are recognised

as compensation expenses in the same period as the employment that gives rise to the contributions.

(iii) Employee entitlements

Liabilities for paid leave are recognised and are measured as the amount unpaid at the balance

sheet date at current pay rates in respect of employees’ services up to that date.



3. GROUP COMPANIES

The subsidiary companies as at 30 June 2005 are:

Place of Percentage of

incorporation Registered equity held Principal

Name of company and operations capital 2005 2004 activities

% %

Subsidiary companies

@ Elec & Eltek Company Hong Kong HK$98,123,732 100.0 100.0 Trading of printed

Limited circuit boards

(“PCBs”)

* Elec & Eltek Huangpu Singapore S$2 100.0 100.0 Investment holding

(Singapore) Pte. Ltd.


(Singapore) No. 2

Pte. Ltd.


(Singapore) No. 3

Pte. Ltd.


(Singapore) No. 4

Pte. Ltd.


(Singapore) No. 5

Pte. Ltd.


(Singapore) No. 6

Pte. Ltd.

* Elec & Eltek Kaiping Singapore S$2 100.0 100.0 Investment holding



3. GROUP COMPANIES (continued)




% %

Subsidiary companies (continued)


(Singapore) No. 2

Pte. Ltd.


(Singapore) No. 3

Pte. Ltd.


(Singapore) No. 4

Pte. Ltd.

# Elec & Eltek Kaiping (BVI) British Virgin Islands US$1 100.0 – Investment holding

No. 5 Limited

@ Elec & Eltek International Hong Kong HK$14,000 100.0 100.0 Dormant

Procurement Services

(PCB) Limited

(formerly known as

Elec & Eltek Multi-Language

Systems Limited)

@ Elec & Eltek Multilayer Hong Kong HK$5,000,000 100.0 100.0 Manufacturing and

PCB Limited distribution of

PCBs

* Elec & Eltek Nanjing Singapore S$2 100.0 100.0 Investment holding


# Elec & Eltek Printed Circuit United States US$75,000 100.0 100.0 Liaison office

Board Corporation of America







% %

Subsidiary companies (continued)

* Elec & Eltek Shenzhen Singapore S$2 100.0 100.0 Investment holding


* Elec & Eltek Technology Singapore S$2 100.0 100.0 Technology research

Research & Marketing and marketing

Pte. Ltd.

* Elec & Eltek Thai Singapore S$2 100.0 100.0 Investment holding


* Elec & Eltek Thai (Singapore) Singapore S$2 100.0 100.0 Investment holding

No. 2 Pte. Ltd.

@ PIC Corporate Services Hong Kong HK$10,000 100.0 100.0 Trading of copper

Limited clad laminate

Subsidiary company of Elec & Eltek Company Limited

@ Elec & Eltek International Hong Kong HK$150,000 100.0 100.0 Provision of

Limited marketing and

corporate services

# E&E Hong Kong Properties British Virgin Islands – 100.0 – Dormant

Investment (BVI) Ltd.

Subsidiary company of Elec & Eltek Huangpu (Singapore) Pte. Ltd.

@ Elec & Eltek (Guangzhou) The People’s US$51,200,000 98.0 98.0 Manufacturing and

Electronic Company Republic of distribution of

Limited China PCBs






% %

Subsidiary company of Elec & Eltek Huangpu (Singapore) No. 2 Pte. Ltd.

@ Elec & Eltek (Guangzhou) The People’s US$6,000,000 98.0 98.0 Research and

Technology Company Republic of development,

Limited China manufacturing

and distribution

of PCBs


@ Guangzhou Elec & Eltek The People’s US$24,800,000 98.0 98.0 Manufacturing and

Microvia Technology Republic of distribution of

Limited China PCBs


@ Guangzhou Elec & Eltek The People’s US$25,000,000 98.0 98.0 Manufacturing and

High Density Interconnect Republic of distribution of

Technology No.1 Company China PCBs

Limited


@ Guangzhou Elec & Eltek The People’s US$12,000,000 98.0 98.0 Dormant

Printed Circuit Board Republic of

Company Limited China

Subsidiary company of Elec & Eltek Kaiping (Singapore) Pte. Ltd.

@ Kai Ping Elec & Eltek The People’s US$16,650,000 90.1 90.1 Manufacturing and

Company Limited Republic of distribution of

China PCBs







% %

Subsidiary company of Elec & Eltek Kaiping (Singapore) No. 2 Pte. Ltd.

@ Kaiping Elec & Eltek The People’s US$15,250,000 90.1 90.1 Manufacturing and

No.2 Company Limited Republic of distribution of

China PCBs


@ Kaiping Elec & Eltek No.3 The People’s US$45,850,000 90.1 90.1 Manufacturing and


China PCBs


@ Kaiping Elec & Eltek No.5 The People’s US$12,000,000 90.1 90.1 Manufacturing and


China PCBs

Subsidiary company of Elec & Eltek Kaiping (BVI) No. 5 Limited

@ Kaiping Pacific Insulating The People’s US$15,000,000 100.0 – Manufacturing

Material Company Limited Republic of and distribution

China of high-end

PCB raw materials

(setting up stage)

Subsidiary company of Elec & Eltek Nanjing (Singapore) Pte. Ltd.

@ Nanjing Elec & Eltek The People’s US$8,752,000 74.1 74.1 Manufacturing and

Electronic Co., Ltd. Republic of distribution of

China PCBs






% %

Subsidiary company of Elec & Eltek Shenzhen (Singapore) Pte. Ltd.

@ Shenzhen Pacific Insulating The People’s RMB67,491,458 93.5 93.5 Manufacturing and

Material Co., Ltd. Republic of distribution

China of PCB raw

materials

Subsidiary company of Elec & Eltek Thai (Singapore) Pte. Ltd.

ß Elec & Eltek (Thailand) Thailand Baht 780,000,000 100.0 100.0 Manufacturing and

Limited distribution of

PCBs

Subsidiary company of Elec & Eltek Thai (Singapore) No. 2 Pte. Ltd.

ß Pacific Insulating Material Thailand Baht 650,000,000 100.0 100.0 Manufacturing and

(Thailand) Limited distribution of

PCB raw

materials

Subsidiary company of PIC Corporate Services Limited

@ Elec & Eltek Management British Virgin US$1 100.0 100.0 Dormant

Services Limited Islands

* Audited by Ernst & Young Singapore.

@ Audited by Ernst & Young Hong Kong.

ß Audited by Ernst & Young Thailand.

# Exempt from preparing audited statutory financial statements by the laws of its country of incorporation.




Increases in the registered capital of subsidiary companies during the financial year were as follows:

Increase in

registered Purpose of Percentage

Subsidiary companies capital increase interest held

Guangzhou Elec & Eltek Microvia US$8,000,000 To allow for the 98.0%

Technology Limited increase in

working capital

Kaiping Pacific Insulating US$15,000,000 To fund plant 100.0%

Material Company Limited construction

4. SALE OF GOODS

This represents invoiced value of goods supplied.


5. PROFIT FROM OPERATING ACTIVITIES

Profit from operating activities is arrived at after charging:

Group

2005 2004

US$’000 US$’000

Staff costs (excluding Directors’ emoluments)

– Salaries and employees benefits 50,044 43,215

– Contributions to defined benefit plans 2,649 1,952

Depreciation of property, plant and equipment 31,638 * 22,646 *

Directors’ emoluments

– Remuneration 1,094 1,017

– Consultancy fees – 382 @

– Fees 410 449

– Contributions to defined benefit plans 34 44

Operating lease rentals in respect of land and buildings 870 739

Statutory auditors’ emoluments

– Non-audit fees paid to statutory auditors 72 73

Amortisation of intangible assets 60 * 103 *

Loss on disposal of plant and equipment 245 159

Allowance for doubtful debts 578 678

Allowance for inventory obsolescence 248 81

Loss on foreign exchange 723 289

* US$30,464,000 (2004: US$21,606,000) of depreciation and amortisation expense has been included in the cost of sales

and the remaining balance has been included in the administrative costs.

@ Consultancy fees refer to fees paid to the former directors, Mr. David So Cheung Sing, Mr. Marcus Tsang Ming Pui, Mr. Wilson

Tam Kam Ho and Mr. Johnny Ng Ho Kin, in addition to their Directors’ fees for their provision of industry specific advice and

guidance.

The Directors’ emoluments by bands is disclosed in Note 1 of the SGX Listing Manual Requirements on page

84.



6. INTEREST EXPENSE

Group

2005 2004

US$’000 US$’000

Interest on bank loans 3,292 1,080

Interest on overdraft 196 75

3,488 1,155

7. EXCEPTIONAL ITEMS

The exceptional items relate primarily to redundancy payment of US$1,351,000 made to streamline the Group’s

manufacturing plant in Hong Kong and the remaining US$306,000 was for non-recurrent professional fees

incurred in respect of the takeover offer made by Kingboard Chemical Holdings Limited.

8. TAXATION

Group

2005 2004

US$’000 US$’000

Major components of income tax expense:

Current:

Singapore 6 12

Foreign 5,526 3,331

Deferred:

Foreign (reversal) (339) 60

5,193 3,403

The taxation charge for the Group materially differs from the amount determined by applying the Singapore

income tax rate of 20.0% (2004: 20.0%) to pre-tax profits because the tax charge for the Group mainly relates

to Hong Kong profits which are taxed at a lower rate in Hong Kong. Furthermore, certain subsidiary companies

in mainland China have been granted tax privileges and are only liable for 50% of normal corporate profits tax

and a subsidiary company in Thailand has also been granted tax privileges and is exempted from corporate

profits tax for between three to seven years with effect from the date the operating income is first earned.


8. TAXATION (continued)

A reconciliation of the statutory tax rate to the Group’s effective tax rate applicable to income before minority

interests for the financial years ended 30 June is as follows:

Group

2005 2004

% %

Domestic statutory tax rate 20.0 20.0

Lower statutory tax rates and tax incentives in other

countries (8.5) (5.8)

Tax benefits not recognised 0.8 1.1

Utilisation of tax losses brought forward (4.3) (6.3)

Others, net 2.2 (1.7)

Effective tax rate 10.2 7.3

The Group has tax losses of US$15,866,000 (2004: US$17,230,000) available for offset against future taxable

profits of the subsidiary companies in which the losses arose.

The use of these tax losses is subject to the agreement of the tax authorities and compliance with local tax

legislations.



9. EARNINGS PER SHARE

Basic earnings per share is calculated by dividing the Group’s profit attributable to shareholders by the weighted

average number of ordinary shares in issue during the financial year.

Diluted earnings per share is calculated by dividing the Group’s profit attributable to shareholders by the weighted

average number of ordinary shares in issue, adjusted for the effect of dilutive options during the financial year.

The following reflects the income and share data used in the basic and diluted earnings per share computations

for the financial year:

Group

2005 2004

US$’000 US$’000

Profit attributable to shareholders 42,614 40,595

Number of Number of

ordinary ordinary

shares shares

(in thousands) (in thousands)

Number of ordinary shares in issue at the

beginning of financial year 146,237 146,063

Weighted average number of ordinary shares

issued pursuant to the exercise of share options 1,581 32


applicable to basic earnings per share 147,818 146,095

Effect of dilutive share options 487 637


applicable to diluted earnings per share 148,305 146,732

United States United States

cents cents

Earnings per share – basic 28.83 27.79

– diluted 28.73 27.67


10. PROPERTY, PLANT AND EQUIPMENT

Leasehold Leasehold Furniture Motor

Freehold Freehold land and improve- and Plant and vehicles Construction-

land buildings buildings ments 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

Group

Cost

At beginning of

financial year 6,716 11,414 76,215 30,959 11,786 321,511 2,410 3,642 464,653

Currency realignment (96) (163) 827 734 88 (2,052) – (216) (878)

Reclassifications – 1,335 8,250 (7,120) 307 955 87 (3,814) –

Additions – 642 2,971 2,820 757 48,292 312 2,365 58,159

Disposals – – (169) (26) (593) (2,534) (335) – (3,657)

At end of financial year 6,620 13,228 88,094 27,367 12,345 366,172 2,474 1,977 518,277

Accumulated depreciation

At beginning of

financial year – 6,131 11,802 18,395 6,283 146,015 1,740 – 190,366

Currency realignment – (125) 171 436 60 (1,207) – – (665)

Reclassifications – – – (6,362) 3,278 3,084 – – –

Charge for the

financial year – 886 1,842 1,765 1,126 25,783 236 – 31,638

Disposals – – (44) (26) (591) (2,246) (275) – (3,182)

At end of financial year – 6,892 13,771 14,208 10,156 171,429 1,701 – 218,157

Charge for 2004 – 658 1,426 1,414 1,138 17,812 198 – 22,646

Net book value

At 30 June 2005 6,620 6,336 74,323 13,159 2,189 194,743 773 1,977 300,120

At 30 June 2004 6,716 5,283 64,413 12,564 5,503 175,496 670 3,642 274,287



10. PROPERTY, PLANT AND EQUIPMENT (continued)

Furniture Office

and fixtures equipment Total

US$’000 US$’000 US$’000

Company

Cost

At beginning of financial year 28 128 156

Additions – 3 3

Disposals – (7) (7)

At end of financial year 28 124 152

Accumulated depreciation

At beginning of financial year 27 103 130

Charge for the financial year 1 9 10

Disposals – (5) (5)

At end of financial year 28 107 135

Charge for 2004 1 18 19

Net book value

At 30 June 2005 – 17 17

At 30 June 2004 1 25 26

Notes

(a) The Group’s major properties are as follows:

Freehold

(i) 3 factories and 9 ancillary buildings at No. 134 Moo 2 Soi Sriyothin Pakred-Pathumthani Road, Bang-Khayang, Muang

District, Thailand on freehold land area of 82,080 sq. m.

(ii) 2 factories and various offices at Rojana Industrial Park No. 1/68 Moo 5, Pranakorn, Sri Ayutthaya, Thailand on freehold

land area of 17,180 sq. m.

Leasehold

(iii) A factory and various offices located at New Technology Development Zone, Kai Ping, Guangdong Province, the

People’s Republic of China, on leasehold land area of 122,877 sq. m. The land is leased for 50 years commencing

from 30 July 1997.

(iv) Leasehold land at New Technology Development Zone, Kai Ping, Guangdong Province, the People’s Republic of China.

The site has a land area of 158,500 sq. m. The land is leased for 50 years commencing from 15 March 2004.

(v) Leasehold land at lot BW-5, Guangzhou Economic & Technological Development District, the People’s Republic of China.

The site has a land area of 25,907 sq. m. The land is leased for 50 years commencing from 31 December 1993.


10. PROPERTY, PLANT AND EQUIPMENT (continued)

Leasehold (continued)

(vi) Factories and office units in Merit Industrial Centre, Hong Kong, occupying a total floor area of 13,764 sq. m. Merit

Industrial Centre is held under a Government lease for a term of 75 years commencing from 5 October 1953,

renewable for a further 75 years.

(vii) Leasehold land at Eastern Park of Guangzhou Economic & Technological Development District, the People’s Republic of

China. The site has a land area of 160,554 sq. m. The land is leased for 50 years commencing from 16 August 2000.

(viii) Leasehold land at Nanjing Economic & Technological Development Zone, Jiangsu Province, the People’s Republic of

China. The site has a land area of 13,661 sq. m. The land is leased for 50 years commencing from 28 November 2000.

(ix) Leasehold land at New Technology Development Zone, Kai Ping, Guangdong Zone, PRC. The site has a land area of

134,792 sq. m. The land is leased for 50 years commencing from 16 March 2004.

(b) During the financial year, US$612,000 (2004: US$398,000) of interest cost was capitalised and included in the cost of

leasehold land and buildings, plant and equipment.

11. INTANGIBLE ASSETS

Intangible assets represent technical know-how stated at purchase cost less accumulated amortisation.

Group

2005 2004

US$’000 US$’000

Cost

At beginning and end of financial year 515 515

Accumulated amortisation

At beginning of financial year 444 341

Charge for the financial year 60 103

At end of financial year 504 444

Net book value

At end of financial year 11 71



12. SUBSIDIARY COMPANIES

Company

2005 2004

US$’000 US$’000

Unquoted shares, at cost 22,186 22,186

Details of the subsidiary companies are set out in Note 3 to the financial statements.

13. DEFERRED TAXATION

Deferred taxes pertain to the following:

Group

2005 2004

US$’000 US$’000

Deferred tax assets

Difference in depreciation of property, plant and

equipment for accounting and for tax purposes 812 766

Accumulated tax losses 2,211 2,353

Others 101 –

3,124 3,119

Deferred tax assets not recognised (353) (1,008)

2,771 2,111

Deferred tax liabilities

Difference in depreciation of property, plant and

equipment for accounting and for tax purposes (2,541) (2,440)

Others (220) –

(2,761) (2,440)


14. INVENTORIES

Group

2005 2004

US$’000 US$’000

Raw materials 22,291 22,173

Work-in-progress 24,058 15,974

Finished goods 6,158 5,523

52,507 43,670

Less: Allowance for obsolescence

Raw materials (306) (470)

Work-in-progress (387) (362)

Finished goods (364) (474)

(1,057) (1,306)

51,450 42,364

Inventories on hand at balance sheet date are as follows:

Cost 50,040 40,359

Net realisable value 1,410 2,005

51,450 42,364



15. TRADE AND OTHER RECEIVABLES

Group Company

2005 2004 2005 2004

US$’000 US$’000 US$’000 US$’000

Trade receivables, net

– third parties 134,035 102,394 – –

– related party/company 227 217 – –

Value added tax claims 6,773 7,136 – –

Deposits 2,186 6,104 – –

Prepaid expenses 2,474 2,995 3 3

Bills receivable 1,781 1,021 – –

Dividends receivable – – – 15,500

Others 2,230 2,141 1 2

149,706 122,008 4 15,505

Trade receivables are stated after allowance for doubtful debts of US$5,742,000 (2004: US$5,622,000).

The trade receivables from a related party and a related company are unsecured, interest-free and are subject

to credit term of 90 to 120 days.

16. DUE FROM/(TO) SUBSIDIARY COMPANIES

The amounts due from/(to) subsidiary companies arise from the Group’s internal funding activities and are

unsecured, interest free and is repayable on demand.

17. FIXED AND CALL DEPOSITS

Fixed and call deposits are placed with financial institutions for periods between 1 to 2 weeks at weighted

average effective interest rate of 0.62% (2004: 0.70%) per annum.


18. TRADE AND OTHER PAYABLES

Group Company

2005 2004 2005 2004

US$’000 US$’000 US$’000 US$’000

Trade payables

– third parties 84,507 91,214 60 22

– related companies 11,375 – – –

Accrued operating expenses 29,506 28,762 98 107

Bills payable 2,511 4,665 – –

127,899 124,641 158 129

The trade payables to related companies are unsecured, interest-free and are subject to credit term of 90 to

120 days.

19. DUE TO BANKERS

Group Company

2005 2004 2005 2004

US$’000 US$’000 US$’000 US$’000

Bank loans – unsecured 117,986 89,891 – 3,300

Bank overdrafts – unsecured (Note 25) 5,202 – – –

123,188 89,891 – 3,300

Comprising amounts falling due:

– within one year 74,251 41,390 – 3,300

– more than one year 48,937 48,501 – –

123,188 89,891 – 3,300

The Group’s unsecured bank loans are repayable in quarterly instalments commencing from 2001 and ending

in 2009 and bear weighted average effective interest rate at 3.44% (2004: 2.25%) per annum.

The above credit facilities are provided under:

(a) corporate guarantees from the Company;

(b) a letter of under taking from the Company to maintain a minimum consolidated net worth of

HK$600,000,000 (equivalent to US$77,207,000) at all times; and

(c) a negative pledge from the Company.

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



20. SHARE CAPITAL

Group and Company

2005 2004

US$’000 US$’000

Authorised

500,000,000 ordinary shares of S$0.80 each 262,494 262,494

Issued and fully paid

At beginning of financial year

– 146,237,397 (2004: 146,063,397) ordinary shares of

S$0.80 each 74,065 73,982

Issued during the financial year

– 2,800,000 (2004: 174,000) ordinary shares of S$0.80

each issued pursuant to the exercise of options 1,370 83

At end of financial year

– 149,037,397 (2004: 146,237,397) ordinary shares of

S$0.80 each 75,435 74,065

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All

ordinary shares carry one vote per share without restriction. The new shares issued during the financial year rank

pari passu to existing ordinary shares.

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

22 to the financial statements.


21. RESERVES

Group Company

2005 2004 2005 2004

US$’000 US$’000 US$’000 US$’000

Non-distributable reserves

Share premium 21,626 17,816 21,626 17,816

Capital reserve 2,597 2,597 – –

Statutory reserve 1,930 567 – –

26,153 20,980 21,626 17,816

Distributable reserves

Revenue reserve 188,044 174,359 63,350 58,119

Foreign currency translation reserve (30,603) (31,110) – –

157,441 143,249 63,350 58,119

183,594 164,229 84,976 75,935

The share premium reserve comprises the premium received by the Company on its shares issued over their

par value. The utilisation of the share premium is governed by Section 69-69F of the Act.

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.

The statutory reserve relates to the legal accumulation fund set aside by subsidiary companies operating in

China as required under the laws of the People’s Republic of China.

22. SHARE OPTIONS

The Company has granted share options to eligible employees under the 1999 Elec & Eltek Employees’ Share

Option Scheme (the “1999 Scheme”) and the 2002 Elec & Eltek Employees’ Share Option Scheme (the

“2002 Scheme”) (collectively the “Schemes”). The 1999 Scheme were subsequently terminated without affecting

the rights of holders of options granted thereunder. The 2002 Scheme was approved by the shareholders at

the Extraordinary General Meeting held on 8 November 2002 and was adopted and took effect from 12

November 2002 upon fulfilment of all the conditions precedent as set out in Rule 3 of the 2002 Scheme.

The 2002 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.



22. SHARE OPTIONS (continued)

The 2002 Scheme entitles the option holders to exercise their options and subscribe for new ordinary shares in

the Company either at a “Subscription Price”, equal to the average of the last dealt price of the Company’s

shares for the last 5 market days immediately preceding the relevant date of grant, or at a “Discounted Subscription

Price”, whereby the discount shall not exceed 20% of the Subscription Price as defined earlier.

Options granted at the Subscription Price may be exercised commencing on a date not earlier than the first

anniversary date of the date of grant and ending on a date not later than 5 years after the date of grant. Options

granted at the Discounted Subscription Price may only be exercised commencing on a date not earlier than the

second anniversary date of the date of grant and ending on a date not later than 5 years after the date of grant.

The duration of the 2002 Scheme is 5 years and the total number of shares that may be issued shall not

exceed 10% of the issued share capital of the Company as at the adoption date or subject to certain conditions

being satisfied, 15% of the issued share capital of the Company as at the adoption date.

During the current financial year, the Company granted the following options pursuant to the 2002 Scheme:

(a) 1,400,000 share options granted to a former director of the Company, to subscribe for 1,400,000 ordinary

shares of S$0.80 each in the Company at a Discounted Subscription Price of US$2.250 per share. The

options were granted at a 20% discount to the Subscription Price and the amount of options granted

represents more than 5% of the total number of the options available under the 2002 Scheme; and

(b) 9,800,000 share options granted to Directors and full-time employees of the Company, to subscribe for

9,800,000 ordinary shares of S$0.80 each in the Company at a Subscription Price of US$2.440 per

share, of which 6,855,000 share options were granted to Directors and the remaining 2,945,000 share

options were granted to other executives of the Group.



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

Date of Balance as at Balance as at Subscription

grant 1 July 2004 Granted Exercised Lapsed 30 June 2005 price Expiry date

US$

25 May 2000 400 – – (400) – 1.308 24 May 2005

7 May 2003 700,000 – (700,000) – – 1.450 6 May 2006

7 May 2003 700,000 – (700,000) – – 1.450 6 May 2007

19 July 2004 – 700,000 (700,000) – – 2.250 18 July 2007

19 July 2004 – 700,000 (700,000) – – 2.250 18 July 2008

25 May 2005 – 9,800,000 – (20,000) 9,780,000 2.440 24 May 2010

1,400,400 11,200,000 (2,800,000) (20,400) 9,780,000

Information in respect of share options granted to and exercised by Directors and former Director of the

Company are as follows:

Aggregate optionsOptions outstanding

granted during Aggregate Aggregate Aggregate as at end ofName of financial year options options options financial year

Name of participant scheme under review granted exercised lapsed under review

Chadwick Mok 2002 Scheme 811,000 811,000 – – 811,000

Cham Hung

Sammy Leung Tin Po 2002 Scheme 1,000,000 1,000,000 – – 1,000,000

Cheung Kwok Wa 2002 Scheme 811,000 811,000 – – 811,000

Li Muk Kam 2002 Scheme 800,000 800,000 – – 800,000

Philip Chan Sai Kit 2002 Scheme 800,000 800,000 – – 800,000

Claudia Heng 1997 Scheme – 72,000 – (72,000) –

Nguan Leng 1999 Scheme – 228,000 (228,000) – –

2002 Scheme 200,000 200,000 – – 200,000

Cheung Kwok Wing 2002 Scheme 811,000 811,000 – – 811,000

Chan Wing Kwan 2002 Scheme 811,000 811,000 – – 811,000

Chang Wing Yiu 2002 Scheme 811,000 811,000 – – 811,000

Thomas Tang Koon Yiu 2002 Scheme 1,400,000 2,800,000 (2,800,000) – –




None of the participants under the 2002 Scheme have received more than 5% of the total number of the

options available under the 2002 Scheme, save for Mr. Chadwick Mok Cham Hung, Mr. Sammy Leung Tin Po,

Mr. Li Muk Kam, Mr. Philip Chan Sai Kit, Mr. Cheung Kwok Wa, Mr. Cheung Kwok Wing, Mr. Chan Wing Kwan,

Mr. Chang Wing Yiu and Mr. Thomas Tang Koon Yiu, as disclosed above.

Saved as disclosed, there have been no other options granted to the eligible participants, directors and substantial

shareholders of the Company pursuant to the 2002 Scheme.

The Schemes are administered by the Employees’ Share Option Scheme Committee comprising Mr. Cheung

Kwok Wing, Mr. Chan Wing Kwan and Mr. Chang Wing Yiu.

23. DIVIDENDS, TAX EXEMPT

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

Group and Company

2005 2004

US$’000 % US$’000 %

In respect of previous financial year

Ordinary dividends:

– Final (one-tier/SI3E tax exempt) 5,225 7.50 4,220 6.25

Special dividends:

– Final (one-tier/SI3E tax exempt) 10,449 15.00 10,129 15.00

15,674 22.50 14,349 21.25

In respect of current financial year

Ordinary dividends:

– Interim (one-tier tax exempt) 11,909 16.25 10,405 15.00

The Directors have proposed a one-tier tax exempt final dividend of 8.75% (equivalent to 7 Singapore cents

per share) and a one-tier tax-exempt final special dividend of 16.25% (equivalent to 13 Singapore cents per

share), totalling S$29,807,479 (equivalent to US$17,688,950), to be paid in respect of the current financial

year. This dividend will be recorded as a liability on the balance sheets of the Company and of the Group upon

approval by the shareholders of the Company at the forthcoming Annual General Meeting of the Company.


24. OPERATING LEASES

The Group leases certain properties under lease agreements that are non-cancellable within a year. The leases,

which do not have purchase or renewal options, expire at various dates till 2007 and contain provisions to

restrict the Group to further leasing and sub-leasing.

Future minimum rentals under non-cancellable leases are as follows:

Group

2005 2004

US$’000 US$’000

Within one year 609 532

After one year but not later than five years 107 286

716 818

25. CASH AND CASH EQUIVALENTS

For the purpose of consolidated statement of cash flow, cash and cash equivalents comprise the following:

Group

2005 2004

US$’000 US$’000

Fixed and call deposits 27 5,221

Cash at bank and in hand 26,592 24,409

26,619 29,630

Bank overdrafts-unsecured (Note 19) (5,202) –

21,417 29,630



26. INFORMATION BY SEGMENT ON GROUP’S OPERATIONS

The Group operates principally in one business segment, the manufacture and distribution of printed circuit

boards. All the Group’s productive assets are employed in Asia with plants located in Hong Kong, Thailand and

mainland China. 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.

The sale of goods and the results of the Group by geographical area segments, which is based upon the

shipment locations, are provided below.

Given the global nature of the Group’s business, operating profit before interest and taxation is analysed in

proportion to revenue by geographical segmentation and has no correlation between the location of the profit

and the assets being employed.

Geographical area segment

Operating

profit before

Turnover interest and tax

2005 2004 2005 2004

US$’000 US$’000 US$’000 US$’000

Asia 322,627 247,419 39,726 35,373

Europe 79,439 80,524 10,478 9,156

North & Central America 33,010 23,390 3,735 2,548

Others 2,434 3,055 342 322

437,510 354,388 54,281 47,399

A further analysis of turnover and operating profit before interest and tax for Asia is as follows:

Operating

profit before

Turnover interest and tax

2005 2004 2005 2004

US$’000 US$’000 US$’000 US$’000

Hong Kong 83,947 51,411 10,432 7,346

Singapore and Malaysia 82,584 60,413 8,654 8,079

Others 156,096 135,595 20,640 19,948

322,627 247,419 39,726 35,373


27. CONTINGENT LIABILITIES

Group Company

2005 2004 2005 2004

US$’000 US$’000 US$’000 US$’000

Bank guarantees given to third parties 787 1,127 – –

Corporate guarantees given by the

Company to secure credit facilities

utilised by subsidiary companies – – 52,386 52,474

28. FUTURE COMMITMENTS

(a) Capital commitments

Group

2005 2004

US$’000 US$’000

Capital expenditure not provided for in the financial statements:

Commitments for capital contributions in subsidiary companies 79,265 36,496

Commitments in respect of contracts placed for plant expansion 16,990 8,244

96,255 44,740

(b) Other commitments

The Group had no (2004: one) outstanding foreign exchange contract for the purpose of hedging against

currency fluctuations in connection with payments to overseas suppliers as follows:

Forward exchange rate Group

2005 2004 2005 2004

US$’000 US$’000

To sell:

United States dollars

– for Japanese Yen – 110 – 1,580

Unrealised foreign exchange gains arising

on outstanding forward exchange

contracts not accounted for in the

financial statements as at the end of

the financial year – 31



29. RELATED PARTY TRANSACTIONS

The significant transactions between the Group and its related parties and the effects of these transactions on

terms agreed among the companies are as follows:

Group Company

2005 2004 2005 2004

US$’000 US$’000 US$’000 US$’000

Income

Sales to related companies 177 – 8 8

Sales to a related party 100 208 – –

Dividend income from subsidiary companies – – 34,308 46,549

Expenses

Purchases from related companies (14,192) – – –

Purchases from a related party (236) (324) – –

Consultation fees paid to related parties (587) (60) – –

Construction fees paid to a related party (1,827) (8,405) – –

Management fee paid to a related company (143) – – –

Management fee paid to a subsidiary company – – (50) (49)

30. FINANCIAL INSTRUMENTS

Financial risk management objectives and policies

The Group is exposed to interest rate, foreign currency, credit and liquidity risks. The Group’s risk management

approach seeks to minimise any potential adverse impact of these exposures. The Board reviews and agrees

policies for managing each of these risks and they are summarised below:

Interest rate risk

The Group’s exposure to market risk for changes in the interest rate environment principally relates to its

investments in financial products and debt obligations.

The investment in financial products mainly represent surplus funds placed with reputable financial institutions

as short-term deposits at the most favourable interest rates available.

The debt obligations pertain to its borrowings from banks and other financial institutions in Hong Kong, the

People’s Republic of China, Singapore and Thailand. The Group does not hedge interest rate risk. The Group

ensures that it obtains borrowings at competitive interest rates under the most favourable terms and conditions.


30. FINANCIAL INSTRUMENTS (continued)

Foreign currency risk

The Group is exposed to the effects of foreign currency exchange rate fluctuations, primarily in relation to the

Hong Kong Dollars, Chinese Renminbi, Thai Baht and Singapore Dollars.

Whenever possible, the Group seeks to maintain a natural hedge through the matching of liabilities, including

borrowings, against assets in the same currency or against the entity’s functional currency, in particular its future

revenue stream. Transactional exposures in currencies other than the entity’s functional currency are kept to a

minimal level.

When necessary, foreign exchange forward contracts are used by the Group to manage its foreign currency

exposure arising from its operating activities. The outstanding forward exchange contracts at the financial year

end are disclosed in Note 28(b) to the financial statements.

As further disclosed in Note 2(e) to the financial statements on foreign currencies, exchange differences on the

Group’s net investment in the foreign subsidiary companies are dealt with through the foreign currency translation

reserve. This currency translation risk is regularly monitored.

Credit risk

Credit 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.

Liquidity risk

The 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.



30. FINANCIAL INSTRUMENTS (continued)

Fair value

The carrying amounts of trade and other receivables, cash and bank balances, short-term borrowings and trade

and other payables approximate their fair values due to their short-term maturity.

In the opinion of the Directors, it is impractical to determine the fair values of the amounts due from and to

subsidiary companies as they do not have fixed repayment terms.

The fair value of the long term financial liabilities are not materially different from their carrying values as at 30

June 2005.

31. SUBSEQUENT EVENTS

(a) On 12 July 2005, the Group contributed US$1,200,000 of capital in Guangzhou Elec & Eltek Microvia

Technology Limited for additional working capital.

(b) On 20 July 2005 and 26 July 2005, the Group contributed US$1,217,505 and US$2,000,000, totalling

US$3,217,505 of capital in Kaiping Elec & Eltek No.3 Company Limited for additional working capital.

(c) The Group acquired additional equity interest of the following subsidiary companies:

(i) 4.9% equity interest in Kai Ping Elec & Eltek Company Limited for a consideration of US$815,850;

(ii) 4.9% equity interest in Kaiping Elec & Eltek No.2 Company Limited for a consideration of US$747,250;

(iii) 4.9% equity interest in Kaiping Elec & Eltek No.3 Company Limited by increasing its registered

capital whereby Elec & Eltek Kaiping (Singapore) No. 3 Pte. Ltd. shall contribute US$26,139,150;

and

(iv) 4.9% equity interest in Kaiping Elec & Eltek No.5 Company Limited by increasing its registered

capital whereby Elec & Eltek Kaiping (Singapore) No. 4 Pte. Ltd. shall contribute US$17,759,345.

(d) Subject to the approval of the Singapore Exchange Securities Trading Limited for the listing and quotation

of the Bonus Shares (as defined herein), the Company is proposing a bonus issue of up to 29,807,479

new ordinary shares of S$0.80 each (“Shares”) on the basis of one (1) Share credited as fully paid

(“Bonus Share”) for every five (5) existing Shares held in the capital of the Company.


32. AUTHORISATION OF FINANCIAL STATEMENTS FOR ISSUE

These financial statements were authorised for issue in accordance with a resolution of the Directors on 23

August 2005.

SGX Listing Manual Requirements


30 June 2005

1. DIRECTORS’ REMUNERATIONThe following information relates to remuneration of directors of Elec & Eltek International Company Limited:

Number of Directors in remuneration bands

Group

2005 2004

S$500,000 to S$749,999 1 2

S$250,000 to S$499,999 2 3

Below S$250,000 14 6

Total 17 11

The number of directors disclosed above includes the outgoing directors. In addition, the five directors nominated

from Kingboard Chemical Holdings Limited, namely, Mr. Chadwick Mok Cham Hung, Mr. Cheung Kwok Wa, Mr.

Cheung Kwok Wing, Mr. Chan Wing Kwan and Mr. Chang Wing Yiu did not receive any remuneration from the

Company or from any of its subsidiaries.


1. DIRECTORS’ REMUNERATION (continued)Summary of Directors’ remuneration (in percentage terms) for the financial year ended 30 June 2005

Other

Name of Director Salary Bonus Fees# Benefits Total*

% % % % %

Chadwick Mok Cham Hung – – – – –

Sammy Leung Tin Po 74 22 – 4 100

Cheung Kwok Wa – – – – –

Li Muk Kam 74 22 – 4 100

Philip Chan Sai Kit 74 22 – 4 100

Claudia Heng Nguan Leng 72 11 4 13 100

Cheung Kwok Wing – – – – –

Chan Wing Kwan – – – – –

Chang Wing Yiu – – – – –

Philip Wong Yu Hong – – 100 – 100

Ann Chiang Lai Wan – – 100 – 100

Larry Lai Chong Tuck – – 100 – 100

Thomas Tang Koon Yiu 97 – 2 1 100

David So Cheung Sing – – 100 – 100

Marcus Tsang Ming Pui – – 100 – 100

Wilson Tam Kam Ho – – 100 – 100

Canice Chung Tai Keung 18 37 1 44 100

Johnny Ng Ho Kin – – 100 – 100

Keith Tay Ah Kee – – 100 – 100

Eugene Lee – – 100 – 100

Au Eng Kok – – 100 – 100

Kenneth Shim Hing Choi – – 100 – 100

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

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

2. REMUNERATION DATAThe remuneration paid to the top five key executives who are not Directors of the Company fall within the

remuneration band of S$200,000 to S$280,000.

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.

30 June 2005SGX Listing Manual Requirements


3. INTERESTED PERSON TRANSACTIONSThe 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 30 June 2005 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’

shareholders’ mandate mandate pursuant

Name of interested person pursuant to Rule 920 to Rule 920

2005 2004 2005 2004

US$’000 US$’000 US$’000 US$’000

Purchase of goods and services

Hong Kong Copper Foil Limited – – (3,636) –

Hong Kong Fibre Glass Company Limited – – (2,437) –

Kingboard Laminates Limited (1,296) – (6,753) –

Top Faith PCB Co. Ltd. – – (56) –

Elec & Eltek Corporate Services Limited (143) – – –

Elec & Eltek e-Business Technology Limited (4) – – –

Guangzhou Express Logistics Limited (10) – – –

(1,453) – (12,882) –

Provision of goods and services

Techwise (Macao Commercial Offshore)

Circuits Limited – – 144 –

Elec & Eltek Display Technology Limited 30 – – –

E & E Magnetic Products Limited 3 – – –

33 – 144 –


4. STATISTICS OF SHAREHOLDINGS AS AT 23 AUGUST 2005

Authorised Share Capital : S$400,000,000

Issued Share Capital : S$119,229,918

Class of Shares : Ordinary Shares of S$0.80 each

Voting Rights : One vote per share

No. of

Size of Shareholdings Shareholders % No. of Shares %

1 – 999 155 7.12 85,142 0.06

1,000 – 10,000 1,781 81.77 5,429,151 3.64

10,001 – 1,000,000 233 10.70 10,280,257 6.90

1,000,001 and above 9 0.41 133,242,847 89.40

Total 2,178 100.00 149,037,397 100.00

As at 23 August 2005, 20.831% of the Company’s total issued share capital 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)

Name of substantial shareholders No. of shares held

Hallgain Management Limited (1) 104,604,305

Kingboard Chemical Holdings Limited (“Kingboard”) (2) 104,604,305

Ease Ever Investments Limited (“Ease Ever”) (3) 75,617,959

Elec & Eltek International Holdings Limited (“EEIH”) 75,617,959

Elitelink Holdings Limited (“Elitelink”) 28,601,346

Value Partners Limited 11,954,000

(1) Hallgain Management Limited’s deemed interest arises from its direct shareholding interest in Kingboard of 30.33%.

(2) Kingboard’s deemed interest arises from its direct shareholding interest in Elitelink and Kingboard Investments Limited of 100%,

direct shareholding interest of 11.59% in EEIH and deemed interest of 88.41% in EEIH by virtue of its shareholding interest in Ease

Ever, Hong Kong Copper Foil Limited, Kingboard Investments Limited and Kingboard Laminates Limited.

(3) Ease Ever’s deemed interest arises from its direct shareholding interest in EEIH of 72.36%.

30 June 2005SGX Listing Manual Requirements


TWENTY LARGEST SHAREHOLDERS

No. Name of shareholder No. of shares %

1 Elec & Eltek International Holdings Limited 75,617,959 50.74

2 Elitelink Holdings Limited 28,601,346 19.19

3 HSBC (Singapore) Nominees Pte Ltd 13,219,059 8.87

4 DBS Nominees Pte Ltd 4,764,543 3.20

5 Raffles Nominees Pte Ltd 4,570,550 3.07

6 Citibank Nominees Singapore Pte Ltd 2,855,328 1.92

7 Merrill Lynch (S'pore) Pte Ltd 1,389,850 0.93

8 Morgan Stanley Asia (Singapore) Securities Pte Ltd 1,144,500 0.77

9 UOB Kay Hian Pte Ltd 1,079,712 0.72

10 DBS Vickers Securities (S) Pte Ltd 759,287 0.51

11 Li Muk Kam 703,230 0.47

12 United Overseas Bank Nominees Pte Ltd 490,110 0.33

13 CLSA Singapore Pte Ltd 388,000 0.26

14 OCBC Securities Private Ltd 362,740 0.24

15 Cosmic Insurance Corporation Limited - SIF 229,760 0.15

16 Heng Nguan Leng 229,000 0.15

17 Wong Ngit Liong @ Wong Geok Kiong 204,600 0.14

18 Leap International Pte Ltd 200,000 0.13

19 Tok Ching Ka 155,000 0.10

20 Tan Ah Chai 150,000 0.10

Total 137,114,574 91.99

www.eleceltek.com

Annual Report 2004/2005


(Incorporated in the Republic of Singapore)Company Registration Number 199300005H


Elec & Eltek International C

ompany Lim

itedA

nnual Report

2004/2005

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